Revisional jurisdiction can be invoked for Lack of enquiry by Assessing Officer: ITAT [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT), comprising Shri Om Prakash Kant AM and M S Kavitha Rajagopal, JM has held that lack of enquiry by the assessing officer invokes the jurisdiction of PCIT u/s 263 of the Income Tax Act, 1961.

The assessee company was engaged in the business of operation and management of hospitals and filed its return of income declaring a total loss of Rs. (-) 7,19,33,633/-. The assessee company entered into an operation and management agreement for acquiring the Operation & Management Rights of “M/s Nanavati Hospital” for 29 years and paid an amount of Rs.25 crores as a non-refundable deposit and capitalized the said amount as an intangible asset eligible for depreciation u/s 32 of the Income Tax Act, 1961.

The appellant contended that PCIT failed to appreciate that the Assessing Officer has issued specific questions in the course of assessment proceedings in respect of valuation of shares/charging of premium depreciation on operation and management rights during assessment proceedings.

The revenue contended assessment order was passed by the Assessing Officer’s lack of enquiry as envisaged in Explanation 2 to section 263. PCIT held that there was a lack of inquiry by the Assessing Officer on the issue of share premium received by the assessee and depreciation on the deposit. The appellant contended that during assessment proceedings u/s 143(3), the Assessing Officer had issued notice u/s 142(1) and raised specific queries on the issue of details of the large share premium received by the assessee and introduction addition on intangible assets during the year.

It was observed that the amendment introduced by the Parliament by way of Explanation-2 states that if the Assessing Officer failed in carrying out the enquiry which ought to have been carried out in the fact and circumstances of the case, then the assessment order would be erroneous.  

The Tribunal observed that the AO has merely asked for filing information in respect of the grounds on which the case was selected without meaningful enquiry and dismissed the appeal filed by the assessee. Dr K Shivaram & Mr Rahul Hakani appeared on behalf of the assessee and Mr Prabhat Kumar Gupta on behalf of the revenue.

To Read the full text of the Order CLICK HERE

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