2024 (3) TMI 519 - AT - Income Tax

Revision u/s 263 - Bogus expenditure towards sub-contract payments made to persons who were previously employed in the assessee s company as supervisors / garage in-charge for monthly salaries - as per CIT no inquiries or verification regarding genuineness of subcontractors made by AO thus making order passed u/s 143(3) erroneous nor prejudicial to the interest of the revenue - HELD THAT - It is an admitted fact that the AO has not examined the payments made to the sub contractors during the assessment proceedings. PCIT observed that the details of the sub-contracts given by the assessee company have not been called for by the AO to verify the genuineness of the sub-contractors and the claims of the assessee in this regard were accepted by the AO in a perfunctory manner without any inquiry or verification. Therefore, we have no hesitation to come to a conclusion that the Ld.PCIT has rightly initiated the proceedings u/s 263, saying that the assessment order passed by the AO is erroneous and prejudicial to the interest of the revenue. Appeal of the assessee is dismissed.

Summary

Issues involved:
The judgment involves the assessment order passed by the AO under section 143(3) of the Act, the initiation of revision proceedings under section 263 by the Ld.PCIT, and the subsequent appeal before the Tribunal challenging the order of the Ld.PCIT.

Assessment Order under Section 143(3):
The assessee filed its return of income for the A.Y. 2012-13, declaring total income. The assessment was completed by assessing the total income. The Ld.PCIT, upon examination of the assessment records, noted that the assessee had booked bogus expenditure towards sub-contract payments made to individuals who were previously employed by the assessee. The Ld.PCIT observed discrepancies in the transactions and lack of verification by the AO regarding the genuineness of the sub-contractors. Consequently, the Ld.PCIT held that the assessment order was prima facie erroneous and prejudicial to the interest of revenue, leading to the initiation of revision proceedings under section 263.

Revision Proceedings under Section 263:
The Ld.PCIT issued a show cause letter to the assessee, asking for details of alleged sub-contractors and their PAN. The assessee provided a list of sub-contractors but failed to furnish credible evidence to prove their genuineness. The Ld.PCIT found the order passed by the AO to be erroneous and prejudicial to the interest of revenue, satisfying the conditions for invoking jurisdiction under section 263. Consequently, the Ld.PCIT set aside the assessment and directed the AO to verify the correctness and genuineness of the sub-contract charges before redoing the assessment.

Appeal Before the Tribunal:
The assessee appealed before the Tribunal, challenging the jurisdiction of the Ld.PCIT under section 263 and the direction to redo the assessment. The Ld.AR contended that the AO had initiated inquiries on the issues in question, making the assessment order not erroneous or prejudicial. On the other hand, the Ld.DR argued that the AO had not verified the sub-contract payments, leading to a lack of proper inquiry. The Tribunal, after hearing both parties and examining the assessment order, upheld the initiation of proceedings under section 263 by the Ld.PCIT. The Tribunal dismissed the appeal filed by the assessee, affirming the decision of the Ld.PCIT.