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2023 (4) TMI 806 - AT - Income TaxRevision u/s 263 - C.I.T. sustained on the principle of erroneous nature of the order of the A.O - As per CIT there is increase in sales without increase in fixed assets, and there is increase in salary expenses also, which the assessing officer has not verified properly - Also there were two VAT returns filed by the assessee, and the assessing officer did not apply his mind as at why the assessee has filed two VAT returns - HELD THAT - As during the assessment proceedings, the assessee has submitted justification of increase in sale, and increase in salary expenses. Assessee also submitted the justification of VAT returns and explanation about fixed assets - the Monthly VAT returns for the Month of July and October, the annual VAT return, the acknowledgement of Return of Income and Computation of total income, tax audit report along with audited Balance Sheet and Profit and Loss account, the ledger account of advertisement expenses, the justification for increased sale due to Diwali festival etc. We note that AO made sufficient enquiry and applied his mind also. Hence, assessment order passed by the assessing officer should not be erroneous and prejudicial to the interest of Revenue. AO was satisfied, after making an enquiry and examining the evidence produced by the assessee. The PCIT in his order of Revision does not indicate any doubts in respect of the examination of evidences and documents and to conduct further enquiry by the assessing officer. The satisfaction of the AO on the basis of the documents produced is not shown to be erroneous. This is a case where a view has been taken by the Assessing Officer on enquiry. Even if this view, in the opinion of the PCIT is not correct, it would not permit him to exercise power u/s 263 of the Act. The exercise aimed at ascertaining the correct income of the assessee has been fulfilled by the Ld. A.O. by exercising his quasi-judicial functions vis-a-vis passing the assessment order u/s.143(3) of the Act. Therefore, certainly it is not a case wherein adequate enquiries at the assessment stage were not carried out or assessment was made in haste. What is an opinion formed as a result of these enquiries and verification of the materials is something which is in exclusive domain of the AO and even if Ld. Pr. Commissioner does not agree with the results of such enquiries, the resultant order cannot be subjected to revision proceedings. Provisions of section 263 of the Act do not permit substituting one opinion by another opinion. Therefore, the order of the C.I.T. cannot be sustained on the principle of erroneous nature of the order of the A.O., as it is not erroneous. Decided in favour of assessee.
Issues Involved:
1. Validity of the order passed under section 263 by the Principal Commissioner of Income-Tax (PCIT). 2. Examination of the assessment order under section 143(3) of the Income Tax Act, 1961. 3. Adequacy of inquiries conducted by the Assessing Officer (AO) during the assessment proceedings. Summary: Validity of the Order Passed Under Section 263 by the PCIT: The assessee challenged the correctness of the order dated 03.03.2022 passed by the PCIT under section 263 of the Income-Tax Act, 1961, for the assessment year 2017-18. The PCIT exercised jurisdiction under section 263, noting that the assessee firm made significant cash deposits during the demonetization period, which were claimed to be from cash sales. The PCIT found an inordinate increase in sales and salary expenses, and discrepancies in VAT returns, which were not properly verified by the AO. Examination of the Assessment Order Under Section 143(3): The AO finalized the scrutiny assessment under section 143(3) on 19.12.2019, accepting the returned income. The PCIT observed that the AO did not conduct a detailed investigation into the significant increase in sales and salary expenses, and the issue of two VAT returns filed with different PANs. The PCIT deemed the assessment order erroneous and prejudicial to the interest of the Revenue and directed the AO to re-frame the assessment after proper inquiries. Adequacy of Inquiries Conducted by the AO: The assessee contended that the AO had issued notices under section 142(1) and conducted sufficient inquiries. The assessee provided explanations for the increase in sales due to the Diwali festival and the recruitment of additional workers, justifying the increase in salary expenses. The assessee also submitted details regarding VAT returns and fixed assets. The Tribunal noted that the AO made sufficient inquiries, applied his mind, and took a plausible view. The Tribunal emphasized that the revisional power under section 263 is quasi-judicial and must be exercised within its scope and ambit, based on objective facts. Conclusion: The Tribunal concluded that the AO conducted adequate inquiries and the assessment order was not erroneous or prejudicial to the interest of the Revenue. The Tribunal quashed the order under section 263 of the Act, allowing the appeal of the assessee. The Tribunal highlighted that substituting one opinion with another is not permissible under section 263, and the AO's order cannot be revised merely because the PCIT disagrees with the conclusions drawn by the AO. Result: The appeal filed by the assessee was allowed, and the order under section 263 was quashed.
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