By TIOL News Service

MUMBAI, FEB 05, 2019: THE issue is - Whether Sec 263 madates that before revising an assessment, the CIT is obligated to conduct own inquiry and not just rely on the report of the investigation wing. YES is the answer.

Facts of the case

The assessee company is engaged in the business of manufacturing and trading of loose, cut and polished demands and demands studded jewellery. The assessee company filed its return which was processed u/s 143(1) and the assessment was completed u/s 143(3). Subsequently, after receiving information from the investigation wing, the CIT issued a SCN to the assessee stating that during the year under consideration assessee had not made any purchase but has taken accommodation entries of bogus purchases from one Daksh Diamond & Jewel Diamond. The assessee furnish all the details as required by the SCN but the CIT without going into the details and upon the details filed during the original assessment, passed a revision order directing the AO to examine the purchases. The direction was on the ground that non-examination of the claim of purchases, makes the assessment order erroneous and prejudicial to the interest of the Revenue.

On hearing the appeal, the Tribunal held that,

++ the only issue in this appeal is against the order of revision u/s 263 by the CIT revising the assessment order by holding that alleged bogus purchases are not examined or enquired into. The CIT in his order has simply based his reliance on the report of the investigation wing of income tax department without providing the same to the assessee or providing an opportunity to cross examine the same or the alleged bogus parties. This indicates that the order of CIT revising the assessment is without application of mind. Before revising the assessment u/s 263, the CIT ought to have made some inquiry of his own and for instance, the CIT should have issued noticed u/s 133(6) to the concerned parties or the CIT should have examine whether the said parties are declared as hawala parties by Sales Tax Authorities. Moreover, the assessee has submitted/produced all the documents before the AO during the course of assessment proceedings namely invoices, given details of stocks, payments were made through the banking channels and subsequently the parties were confirmed the said transaction. Even the assessee has shown sales affected from these purchases and stock tally is matching. In such circumstances the parties cannot be held non-genuine. Thus, the revision order passed by CIT is without any basis and the assessment order does not point out that the same is erroneous or prejudicial to the interest of the Revenue.

(See 2019-TIOL-570-ITAT-MUM)