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| The Tax Publishers2020 TaxPub(DT) 2766 (Ind-Trib) INCOME TAX ACT, 1961
Section 263
Merely accepting few liner reply of assessee could not be held to be sufficient or minimum enquiry in case of limited scrutiny. Thus, AO had not conducted any enquiry with regard to High ratio of refund of TDS and Low Net profit or loss shown for large gross receipts and Pr.CIT was justified in setting aside assessment order by invoking section 263.
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Revision under section 263 - Erroneous and prejudicial order - Lack of enquiry on AO's part as regards High ratio of refund to TDS and low net profit or loss shown from large gross receipts being the subject-matters of limited scrutiny -
Assessee's case was selected for limited scrutiny on account of High ratio of refund to TDS and low net profit or loss shown from large gross receipts. CIT held that AO had accepted claim of assessee regardless of reasons of selection of case for scrutiny without any investigation or bringing anything on record to substantiate assessee's claim, and, therefore, order passed by AO was erroneous and prejudicial to the interest of revenue. Held: In limited scrutiny case focus of AO should be more sharp but in the instant case it did not seem so. As regards the high ratio of refund to TDS and low net profit or loss from large gross receipts, assessee had submitted financial statement and mentioned few lines in his reply mentioning that 'reasons for these low profits is decrease in turnover certified by the contractee but expenditure could not be reduced due to their nature. Lower turnover with set up of higher turnover was the reason of lower profit. Due to lower profit, tax liability was less hence refund was more. On perusal of audited financial statement, Profit and Loss Account and balance-sheet it was clear that in the preceding assessment year turnover of the assessee was 39.89 crores which decreased to Rs. 27 crores and cost of material consumed decreased from 18 crores (approx) to Rs. 16 crores. The percentage of decrease in turnover was not in consonance with percentage of decrease in cost of material purchased. Percentage of cost of material purchased which was approximately 45 in assessment year 2013-14 had increased to 60% for assessment year 2014-15 but interestingly salary, wages expenses has come down from 7.5% of turnover to 7%. Now once these figures were in front AO. Merely accepting few liner reply of assessee could not be held to be sufficient or minimum enquiry in case of such limited scrutiny. Thus, AO had not conducted any enquiry with regard to High ratio of refund of TDS and Low Net profit or loss shown for large gross receipts and Pr.CIT was justified in setting aside assessment order by invoking section 263.
REFERRED :
FAVOUR : Against the assessee.
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