2023 (12) TMI 340 - AT - Income Tax

Revision u/s 263 - as per CIT assessee has been assessed on the lower amount which is erroneous and causing prejudice to the interest of the revenue - mismatch between the income of the assessee shown in form 26AS and Audited Financial Statement and this fact has nowhere been inquired by the AO during the assessment proceedings - HELD THAT - There is no loss to the revenue as far as income shown by the assessee from M/s Shivam Construction provided the same has been declared in two different AYs as demonstrated by the ld. AR for the assessee. As such, on aggregation of income of the assessee from M/s Shivam Construction in 2 different AYs i.e. 2012- 13 and 2013-14, it is transpired that the assessee has shown excess income as evident from the reconciliation statement filed by the assessee before the Ld. PCIT As decided in Gujarat Engineering Co. vs CIT 2017 (3) TMI 383 - ITAT AHMEDABAD return of income filed by the assessee in not offering the job work charges in the assessment year 2006-07 when the income has already been offered in the earlier assessment year cannot be said to be erroneous by any stretch of imagination - one of the two conditions, as noted above, is clearly not satisfied. The order u/s 263 is, therefore, liable to be struck down this on score alone. Be that as it may be, what we find from the preceding discussion is this that the veracity of the contention raised by the assessee before the Ld. PCIT has nowhere been verified either by the AO during the assessment proceedings or by the Ld. PCIT and accordingly no finding is thereon of such contention of the ld. AR. As referred to the reply made by the assessee in response to the notice u/s 142(1) we find that the AO has not enquired the aspect highlighted by the Ld. PCIT in his order during the assessment proceedings. Accordingly, it appears to us that the AO in the given case has not conducted any inquiry qua to difference between income shown in form 26AS vis-a-vis Financial Statement. There remain no ambiguity that the assessment order is erroneous in so far prejudicial to the interest of revenue if it has been passed without making inquiries during the assessment proceedings. Accordingly, we do not find any reason to interfere in the finding of the Ld. PCIT. Decided against assessee.

Summary

Issues involved:
The only issue in this case is whether the assessment framed under section 143(3) of the Income Tax Act, 1961, is erroneous and prejudicial to the interest of the revenue.

Details of the Judgment:

Issue 1: Assessment under section 143(3) deemed erroneous:
The appeal was filed by the Assessee against the order of the Principal Commissioner of Income Tax, Ahmedabad, regarding the assessment order passed under section 263 of the Income Tax Act, 1961, for the Assessment Year 2013-2014. The Assessee, a limited company engaged in providing Dredger and Infrastructure facilities, was found to be following the mercantile system of accounting. The Principal Commissioner observed a discrepancy in the income declared by the Assessee from M/s Shivam Construction, leading to the issuance of a notice under section 263. The Assessee contended that the income from M/s Shivam Construction had already been taxed in the earlier assessment year, providing a reconciliation to support this claim. However, the Principal Commissioner disagreed with the Assessee's explanation, stating that the Assessing Officer failed to verify the TDS credit claimed and did not conduct a thorough inquiry during the assessment proceedings. The Principal Commissioner held that the assessment was erroneous and prejudicial to the revenue's interest, directing the Assessing Officer to conduct a fresh assessment after proper inquiry.

Issue 2: Tribunal's Analysis and Decision:
The Tribunal, after hearing both parties, noted that there was no loss to the revenue if the income declared by the Assessee from M/s Shivam Construction in two different assessment years was aggregated. Referring to a previous Tribunal decision, the Tribunal emphasized the importance of verifying the Assessee's contentions, which was not done by the Assessing Officer or the Principal Commissioner in this case. The Tribunal found that the assessment order lacked proper inquiries and verifications, supporting the Principal Commissioner's decision that the assessment was prejudicial to the revenue's interest. Consequently, the Tribunal upheld the Principal Commissioner's order, dismissing the Assessee's appeal. The Tribunal directed the Assessing Officer to conduct a fresh assessment in line with the law.

Conclusion:
In conclusion, the Tribunal dismissed the Assessee's appeal, upholding the Principal Commissioner's order that the assessment under section 143(3) was erroneous and prejudicial to the revenue's interest. The Tribunal emphasized the need for proper verification and inquiry during assessment proceedings to ensure a fair assessment of the Assessee's income. The decision was pronounced in the Court on 06/12/2023 at Ahmedabad.