Income Tax Act, 1961

--Revision under section 263--Erroneous and prejudicial order Lack of proper enquiry--It was incumbent upon assessing officer to have examined cash credit entries appearing in accounts of assessee in details keeping in view explanation furnished by assessee and having failed to do so, it is obvious that assessment order was erroneous and prejudicail to the interest of revenue.

Evidently, the assessment order is completely silent and is bereft of any discussion on material points with regard to the creditors and trade creditors in particular. Assuming what the petitioner says is correct, that query was raised by the assessing officer and it was replied by the petitioner. In absence of any discussion in the assessment order, the raising of query is meaningless. It is one thing to say that the reply has been considered and has been accepted, but it is altogether a different thing to say that since the reply has been filed and in absence of any discussion it shall be deemed to have been taken as correct. This is one of the instances to demonstrate that the view taken by the Commissioner that the assessment order is erroneous and prejudicial to the interest of revenue is perfectly justified. Similarly, on other points touching the merits of the case were argued by the counsel for the petitioner at length and the court was taken through the questionnaire raised by the Commissioner and 'the reply filed by the petitioner but in view of the order proposing to pass, it is not necessary to consider them in detail. [Para 8] The Income Tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparent in the order but call for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word 'erroneous' in section 263 emerges out of this context. It is because it is incumbent on the Income Tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word 'erroneous' in section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are - assumed to be correct. [Para 13] It was incumbent upon the assessing officer to have examined the cash credit entries appearing in the accounts of the petitioner assessee in detail keeping in view the explanation furnished by the petitioner. Having failed to do so, it is but obvious that the assessment order is erroneous and prejudicial to the interest of the Revenue. Mere filing of the reply by the assessee to which the attention of the Court was invited is not sufficient. Court finds that with regard to the trade creditors, copies of their account books were filed vide letter dated 9-11-2010, that is all. There is no application of mind by the assessing authority with regard to the genuineness of the credit entries including that of trade creditors. Reference was made by the counsel for the respondents to the assessment order for the assessment year which is enclosed in the connected writ petition (has been dismissed on 15-5-2013 on the ground of availability of statutory remedy) wherein on examination, it was found by the assessing authority that the assessee was not able to prove the genuineness of certain cash credits. Be that as it may, in view of the order which court is proposing to pass, it is not necessary to dwell upon the merits of the case. Prima facie findings have been recorded just to meet the argument of the petitioner. [Para 16]