INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Erroneous and prejudicial order - No lack of enquiry as alleged by Pr.CIT -

Pr.CIT held assessment order as erroneous and prejudicial to the interest of revenue since verification of audited profit and loss account, Pr.CIT noticed that assessee had claimed expenditure of Rs. 5,87,407 towards incentive to nine persons of Rs. 5.87,407 in procuring orders from Government Hospital and Municipal offices, however, as per Pr.CIT payment to above persons as incentive was not correct as they were not employees of assessee. Held: From the relevant part of the assessment order it was clearly discernible that AO had made enquiry on the issue of incentive and had also made part disallowance of Rs. 58,570 as assessee could not be able to produce self-supporting bills and vouchers agianst Shri Pravin Kumar Samant. Pr. CIT personally examined and verified the issue of payment of incentives but did not show caused the assessee to explain as to whether persons listed at Sl.. No. 1 to 5 were his employees. Only because these persons have not been included in Annexure-1, the revenue authorities could not safely presume that actually incentive has not been paid to them and it was a calculative attempt of the Pr.CIT to make addition of incentive without show causing assessee. When any doubt arose in the mind of the revenue authorities, then they are empowered to call upon the assessee or to show cause the assessee to explain the facts and only a valid presumption and conclusive fact could be extorted from the record otherwise it would amount to violation of natural justice. Thus, AO had made enquiry on the issue of payment of incentive and had also made partial disallowance on this issue. Therefore, action of Pr.CIT could not be held as sustainable and tenable.

REFERRED :

FAVOUR : In assesse's favour.

A.Y. : 2014-15

INCOME TAX ACT, 1961

Section 263 Section 40A(2)(b)

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