No Revision by CIT to make Sec 68 income tax addition

 

NO REVISION BY CIT TO MAKE SEC. 68 ADDITION IF AO HAD OBTAINED CONFIRMATION OF PARTIES IN SUPPORT OF RECEIPTS/PAYMENTS

Section 68, read with section 263, of the Income-tax Act– Cash credits (Onus to prove)[2015](Delhi) -HIGH COURT OF DELHI Commissioner of Income-tax, Circle-II v. Ankit Garments Manufacturing Co.

Where in assessment proceedings, assessee furnished confirmations from all debtors and creditors having balance in excess of Rs. One lakh in their bank account as directed and said fact was duly verified by Assessing Officer, Commissioner was not justified in passing revisional order setting aside assessment with a direction to consider issue of addition to be made under section 68 afresh in respect of amount received from aforesaid parties – Held, yes [PARA 14][IN FAVOUR OF ASSESSEE]

FACTS

The assessee was a partnership firm engaged in the business of readymade garments. Search and seizure proceedings were carried out under section 132 in the case of ‘D’ Group and search had also taken place in the business and residential premises of the respondent-assessee.

Subsequently, a notice under section 142(1) was issued and the assessee filed return declaring the same income as was declared in its original return.

The Assessing Officer issued a notice under section 142(1), enclosing therewith a questionnaire asking for information on various points. One such direction was to furnish copies of accounts duly confirmed by all TRADE debtors and creditors, whose balances at the end of the year, were in excess of Rs. 1 lakhs.

Subsequently, the Assessing Officer having considered confirmations filed by the assessee received from various parties, accepted return of income.

The Commissioner passed a revisional order holding that since the assessee had failed to furnish the confirmed copy of accounts till the fag end of the proceedings, inspite of specific request made by the Assessing Officer in the questionnaire annexed to notice under section 142(1), the provisions of section 68 were attracted.

The Tribunal accepted the assessee’s contention that they had furnished confirmations of all the creditors and debtors having a balance of Rs. 1 lakh and above. Accordingly, the impugned revisional order was set aside.

On revenue’s appeal, it was held by High Court

The revenue had submitted that confirmations were filed on the last day and, therefore, they were not verified. Thus, Commissioner was justified in holding that the assessment order was erroneous and prejudicial to the interest of the revenue. The said contention must fail for a number of reasons. Firstly, with regard to the confirmations already submitted, the office note is relevant. It records that copy of the accounts of the confirming parties had been verified from their respective assessment records with the said Assessing Officer.

It is not the allegation of the revenue that on verification any of the confirmation given by the creditors or debtors was found to be wrong or incorrect. Secondly, this is not the ground or reason why the Commissioner had invoked his power under section 263 and passed the said order.

The power and order under the said section is predicated that confirmations from all debtors and creditors were not furnished. The order does not proceed or hold that the Assessing Officer had failed to carry out required verification of the confirmations furnished and, therefore, the assessment order was erroneous and prejudicial to the interest of the revenue.

By accepting the arguments of the revenue, one would be creating a new case, which was not the basis of the notice and the order under section 263.

It is unfortunate that in the present case, the Assessing Officer waited till the end and took up the assessment proceedings only three months before the end of the limitation period. A detailed questionnaire was only issued in October, 2009 and the first effective hearing was fixed on 26-10-2009.

Surprisingly, even the order sheets between 26-10-2009 till 23-11-2009 are not on record and have not been shown. A reading of the questionnaire would indicate that enormous and magnitudes of details/information were asked for. This would have required time for compilation, affirmation and clarification.

The queries were answered by several letters on record. For confirmations, the assessee had to write letters to the creditors and debtors all over the India and wait for their response. The Tribunal has noted that the assessee had submitted bill, invoices, vouchers etc. to the Assessing Officer.

Normally, scrutiny assessment order under section 143(3) should be presumed and hypothesised as made after due verification and ascertainment of facts. Principle of finality has sound and salutatory basis, but can be disturbed as per the statute and within confines of the provision applicable. Therefore, it has to be ensured administratively that the Assessing Officer acts and proceeds promptly, keeping in mind the limitation period and also the factum that the assessee may require time to furnish details, confirmations etc.

In view of the finding of the Tribunal that the assessee had furnished confirmations from all debtors and creditors, with balances in excess of Rs. 1 lakh; a finding of fact for which no reason was found to disturb, the appeal filed by the revenue has to be dismissed.

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