2022 (12) TMI 1003 - AT - Income Tax

Revision u/s 263 by CIT - unexplained credits/investment - HELD THAT - Only assessment order is available and no other details have been filed by the assessee, which could indicate that whether any enquiry has been conducted by the Ld. AO regarding the issues raised/referred in the show cause notice issued u/s. 263 of the Act. Perusal of the assessment order shows that the Ld. AO rejected the book results and estimated the profits. Estimation of profit is an exercise, which is confined to the P L account, but if there are any other credits in the bank account or any expenditure debited to the P L account, which are not in the nature of expenditure then necessary enquiry has to be done about such unexplained credits/investment. Under these given facts and circumstances of the case, we find that since the Ld. AO failed to make any such enquiry in this regard, therefore, we do not find any infirmity in the finding of the Ld. PCIT setting aside the assessment orde u/s. 143(3) to be framed afresh considering the finding given in the impugned order. Thus, all the grounds raised by the assessee are dismissed.

Summary

Issues:
1. Validity of order passed under section 263 of the Income-tax Act, 1961.
2. Proper examination of issues by the assessing officer.
3. Assessment based on estimation of profits.
4. Failure to conduct necessary enquiry by the assessing officer.
5. Compliance with Rule 34 of ITAT Rules, 1963.

Analysis:
1. The appeal challenged the order passed under section 263 of the Income-tax Act, 1961, by the Principal Commissioner of Income-tax. The appellant contended that the assessment order under section 143(3) was wrongly deemed erroneous. The Tribunal proceeded ex parte due to the absence of the appellant and the Departmental Representative.

2. The Principal Commissioner invoked section 263 based on two issues: discrepancies in bank account credits and misallocation of expenses in the Profit & Loss account. The appellant responded with clarifications regarding the credited amounts, including security deposits and contractual receipts. However, the Principal Commissioner found the explanations unsatisfactory, leading to the setting aside of the assessment order for a fresh assessment.

3. The Tribunal noted that the assessing officer had estimated profits without proper enquiry into the discrepancies highlighted by the Principal Commissioner. While profit estimation is acceptable, any unexplained credits or expenses should be thoroughly investigated. As the assessing officer failed to conduct such inquiries, the Tribunal upheld the Principal Commissioner's decision to set aside the assessment order for a fresh assessment.

4. The Tribunal dismissed all grounds raised by the appellant, emphasizing the necessity of a thorough investigation into unexplained credits and expenses. The failure of the assessing officer to conduct such inquiries justified the setting aside of the assessment order. Additionally, the Tribunal acknowledged a delay in pronouncing the order due to unavoidable circumstances.

5. Despite the delay, the Tribunal ensured compliance with Rule 34 of ITAT Rules, 1963. The appeal was ultimately dismissed, affirming the decision to set aside the assessment order for a fresh assessment.

This detailed analysis covers the issues raised in the legal judgment comprehensively, outlining the arguments presented and the Tribunal's decision regarding each issue involved.