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TMI Blog2020 (1) TMI 783X X X X Extracts X X X X X X X X Extracts X X X X ..... AO in the assessment completed under section 143(3) without making any inquiry, which was warranted in the facts and circumstances of the case and this lack of inquiry on the part of the Assessing Officer, in our opinion, made his order passed under section 143(3) erroneous as well as prejudicial to the interest of the Revenue as rightly held by the ld. Principal CIT. The very fact that the assessment was made by the Assessing Officer without proper and sufficient inquiries, as warranted in the facts and circumstances of the case, makes it erroneous and also causes prejudice to the interest of the revenue giving jurisdiction to the ld. Principal CIT under section 263 to revise the same. As already noted, the claim of the assessee for the Terminal Excise Duty Refund in the present case was accepted by the Assessing Officer without making any inquiry whatsoever and such lack of inquiry made his order passed under section 143(3) on this issue erroneous as well as prejudicial to the interest of the Revenue. We accordingly uphold the impugned order passed by the ld. Principal CIT under section 263 setting aside the order of the Assessing Officer only on the issue relating to Termina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e A.Y. 2013-14 was ₹ 1,67,16,014/-. This resulted in excess credit of VAT refund receivable in the balance sheet by ₹ 30,19,963/- (1.67.16.014/- - ₹ 1,36,96,051/-) during the year without any corresponding credit entry in the P L accounts. This excess credit of VAT refund receivable in the balance sheet by ₹ 30,19.963/- resulted in under assessment of total income by ₹ 30,19,963/-. (ii) Again, there was an increase in Terminal Excise Duty refund receivable in the balance sheet for the F.Y. 2012-13 corresponding to A.Y, 2013 14 by ₹ 70,63,536/-(1,32,92,086 - 62,28,550) without any corresponding credit entry although debit of excise duty of ₹ 1,75,60,778/- was made in the P . L a/c. This either resulted in excess debit of excise duty by ₹ 70,63,536/- or non-credit of Terminal Excise Duty refund by ₹ 70,63,536/- in the P L A/c for the year ended 31.03.2013. This resulted in under assessment of total income by Rs,70,63,536/-consequent at tax effect of ₹ 11,00,299/-. He accordingly issued a notice under section 263 to the assessee pointing out the above errors and asking the assessee to sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recoverable as refund/adjustable with Output VAT incurred on domestic sales and not any income earned by them, the question of any under assessment of income on this account does not arise, ii) Alleged under assessment of income to the extent of ₹ 70,63,536/- on account of Terminal Excise Duty refund receivable appearing in the Balance Sheet of our clients without any corresponding credit entry in their Profit Loss Account: The amount included under this head represents excise-duty paid by our clients on those manufactured goods, which were exported out of India. Since excise duty is not chargeable on the goods exported out of India, the amount so paid becomes refundable to them. Accordingly, the amount of excise duty paid on the goods exported out of India by our clients is not considered by them as expenditure and is, accordingly, not charged to the profit loss account. This amount is treated by our clients as an asset and the amount receivable at the year end is shown in the balance sheet under the head Other Current Assets as Terminal Excise Duty Refund Receivable. As the payment of excise duty in respect of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding of the actual facts and that no escapement of income is involved. Be that as it may, the task of a taxing authority is to marshal all facts and come to a clean finding so that proper and correct income is brought to tax. In this endeavour, the onus is on the assessee to satisfy the AO by furnishing all material facts supported by relevant documents. As regards, unutilised VAT of ₹ 1,36,96,051/-, it appears that separate deduction was taken by assessee in its computation of income while the increase in VAT refund receivable is ₹ 1,67,16,014/-, thereby the correctness of excess credit by ₹ 30,19,963/- without corresponding credit entry in P L Account required to e examined. Similarly, the refundable terminal excise duty on account of export sales pf ₹ 70,63,536/- should have been credited on P L Account too as the right to receive the refund had accrued to the assessee during the year. Thus evidently there has been lack of enquiry on both the issues on the part of the AO who has merely accepted the assertions of the assessee, thereby making an assessment which is erroneous and prejudicial to the interest of revenue. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erroneous on the ground that in the circumstances of the case the Income Tax Officer should have made further inquiries before accepting the statements made by the assessee in his return. The reason is obvious. The position and function of the Income-tax Officer is very different from that of civil court. The statements made in. the pleading proved by the minimum amount of evidence may be adopted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence iohicl: come before it. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such us to provoke an inquiry. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word erroneous in section 263 includes the failure to make such all enquiry. The order becom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued by the Assessing Officer during the course of assessment proceedings placed at page no. 6 of the paper book to point out that a specific query was raised by the Assessing Officer in respect of claim of VAT Refund as made by the assessee in the computation of total income. He also invited our attention to the explanation offered by the assessee-company in this regard vide letter dated 10.07.2015 (copy placed at page no. 7 8 of the paper book) to show that the accounting treating given by the assessee in case of VAT Refund was duly explained by the assessee and having satisfied the same, the claim of the assessee of VAT Refund was accepted by the Assessing Officer. He also invited our attention to the copy of relevant order-sheet entries placed at page no. 11 of the paper book to show that the books of account regularly maintained by the assessee were produced for verification before the Assessing Officer and on verification of the same, the claim of the assessee for VAT Revision and Terminal Excise Duty Refund was accepted by the Assessing Officer. He contended that it was thus not a case of lack of inquiry by the Assessing Officer on these two issues as alleged by the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Excise Duty Refund was accepted by him without making any inquiry. As demonstrated by the ld. Counsel for the assessee at the time of hearing before us on the basis of the letter issued by the Assessing Officer and the reply filed by the assessee during the course of assessment proceedings, the inquiry on the issue of VAT Refund was specifically made by the Assessing Officer and after having satisfied himself with the submission made by the assessee explaining the accounting of VAT Refund, which was duly verified by him from the books of account produced by the assessee, the claim of the assessee for VAT Refund was accepted by the Assessing Officer. On this issue, it was thus not a case of lack of inquiry or lack of proper and sufficient inquiry by the Assessing Officer as alleged by the ld. Principal CIT in his impugned order and this position is not disputed even by the ld. D.R. at the time of hearing before us. 8. As regards the second error allegedly pointed out by the ld. Principal CIT in his impugned order, the ld. D.R. has submitted that there is nothing available on record to show that any inquiry was made by the Assessing Officer before accepting the clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in the case of Rampyari Devi Saraogi (supra) and Tara Devi Aggarwal (supra), it was observed by the Hon ble Delhi High Court in the case of Gee Vee Enterprise vs.- Addl. CIT (supra) that the ITO is not only an adjudicator but also an investigator and cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry and the order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. 10. Following the decisions of the Hon ble Supreme Court in the case of Rampyari Devi Saraogi (supra) and in the case of Tara Devi Aggarwal (supra), it was held by the Hon ble Allahabad High Court in the case of Smt. Lajja Wati Singhal vs.- CIT (226 ITR 527) that an assessment made on income surrendered by the assessee without making any inquiry whether the same was, in fact, taxable in the hands of the assessee, was erroneous and prejudicial to the interest of the revenue. A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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