Revision u/s 263 can be Invoked When the Assessment was Completed without Proper Enquiry: ITAT [Read Order]

The Pune Bench of Income Tax Appellate Tribunal (ITAT) has held that the revisional jurisdiction conferred under Section 263 of the Income Tax Act could be invoked even when the assessment order was completed without proper enquiry.

The appellant Kute Sons Dairys Ltd was a company formed under the provisions of the Companies Act and was engaged in the business of manufacturing homogenised and pasteurised milk and milk products and trading in cattle feed.

The Return of Income for the assessment year 2017-18 was filed on 29.10.2017 declaring total income, in the said return of income; the assessment was completed by the Assessing Officer passed order under Section 143(3) of the Income Tax Act, 1961 accepting the returned income. 

Subsequently, on review of the assessment records, the Principal Commissioner of Income Tax (PCIT) formed an opinion that the assessment order passed by the Assessing Officer was erroneous and prejudicial to the interests of the Revenue the reason that the Assessing Officer had failed to verify the genuineness of sundry creditor’s outstanding.

He also held that the Assessing Officer had allowed the additional depreciation without verifying whether the activities of the assessee company amount to manufacture or not in view of the decision of the ITAT, in B. G. Chitale vs. DCIT and held that non-verification of these two items rendered the assessment order erroneous and prejudicial to the interests of the Revenue.  

N. K. Rander on behalf of the assessee submitted that the very basis of the revision order passed by the PCIT was bad in law, inasmuch as, even for a moment, the contention of the PCIT was accepted that the sundry creditors were bogus, the same could not be brought to tax under Section 41(1) of the Income Tax Act but could be brought to tax under Section 68 of the Income Tax Act only in the year in which the credit was made.

He further submitted that every error would not render the assessment order erroneous. Keyur Patel on behalf of the revenue submitted that the order of revision should be sustained.

The two-member Bench of Inturi Rama Rao, (Accountant Member) and S. S. Viswanethra Ravi, (Judicial Member) held that the error in the assessment order should be one which was not debatable or plausible.

The Bench observed that the Assessing Officer had not enquired into the genuineness of the sundry creditors and eligibility of the assessee to additional depreciation.

It was the settled position of law that where the assessment was completed without proper enquiry, it would competent to invoke the revisional jurisdiction, the bench added.

To Read the full text of the Order CLICK HERE

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