AO Fails to Properly Enquire Year-End Provisions, TDS on Dealer Discounts: ITAT upholds Revision Order in Bajaj Auto Matter [Read Order]
The ITAT held that this was a case of no enquiry, not inadequate enquiry, and therefore clearly fell within Explanation 2 to Section 263, justifying revision by the PCIT even if the issue could otherwise admit two views on merits.
In a recent ruling IncomeTax Appellate Tribunal (ITAT) upheld a revision order under Section 263 of theIncome Tax Act, 1961, in the case of Bajaj Auto Ltd., holding that the Assessing Officer had failed to conduct necessary enquiries into key high-value claims.
The appeal was filed by Bajaj Auto Ltd., challenging the order passed by the principal commissioner of income tax (PCIT), who had set aside the assessment completed under section 143(3)read with section 144C(3), directing the AO to pass a fresh assessment after proper verification.
The assessee argued that the AO had raised queries during assessment proceedings and had taken a plausible view after considering the material on record. It was argued that the PCIT was merely substituting his own opinion for that of the AO, which amounted to an impermissible change of opinion.
The revenue argued that the assessment records clearly demonstrated that no meaningful inquiry was conducted by the AO on the major claims involving substantial tax impact. It was submitted that mere issuance of a questionnaire, without examination or verification of the replies, could not be treated as a proper enquiry, and therefore the assessment order was rightly revised.
The tribunal observed that the AO had failed to examine crucial aspects of the assessee’s claims,
including examination of the nature and allowability of substantial year-end provisions, the applicability of Section 194H to dealer discounts, and whether expenditure on dies and moulds was capital or revenue.
The Tribunal emphasised that it was not adjudicating the taxability of the disputed claims on merits and that the assessee would have a full opportunity to present its case during the fresh assessment proceedings. The scope of the present proceedings was confined to examining the validity of the PCIT’s jurisdiction under Section 263.
The bench Narender Kumar Choudhry (judicial member), OmPrakash Kant ( account member ) that the conditions under Explanation 2 to Section 263 were satisfied, rendering the assessment order erroneous and prejudicial to the interests of the Revenue.
Accordingly, the appeal of the assessee was dismissed
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