Reassessment merely because AO didn’t carried independent enquiries of confirmation from creditors unsustainable

Ravi Sher Singh Toor Vs PCIT (ITAT Chandigarh)

ITAT Chandigarh held that initiation of reassessment proceeding merely on the fact that AO has not carried out independent enquiries of confirmations from the creditors, without pointing out any deficiency or inaccuracy, cannot be a base to hold that order was erroneous in so far as prejudicial to the interest of revenue. Accordingly, reassessment unsustainable.

Facts- The assessee is engaged in operating a Petrol Filling Station under the name and style of M/s Toor HP Centre and has filed his return of income, declaring a total income of Rs. 10,90,270. The case of the assessee was selected for scrutiny through CASS and notices u/s 143(2) and 142(1) were issued, and assessment was completed u/s 143(3).

Subsequently, the assessment records were called for and examined by the ld. Pr. CIT and as per observations of the ld. PCIT, the AO omitted to conduct basic enquiries that were necessary to ascertain the true facts of the case with regard to the reasons for selection of the assessee’s case for scrutiny as well as other facts of the case holistically and the various claims made by the assessee to explain the source of cash deposits in his bank account and thereafter, a Show Cause u/s 263 was issued dated 02.03.2022 wherein the ld. Pr. CIT has listed the major omissions on the part of the AO and it was held that in view of the same, the assessment order passed u/s 143(3) was prima facie erroneous in so far as prejudicial to the interests of the Revenue within the meaning of Explanation 2A to Section 263(1) of the Act as the order has been passed without making enquiries or verification which should have been made and the assessee was granted an opportunity to explain why the assessment order so passed u/s 143(3) may not be cancelled and the AO be directed to make a fresh assessment.

Conclusion- Held where the ld PCIT examines the matter and comes to a conclusion that the confirmation so filed is half-baked and incomplete and further, there is no explanation regarding the source of cash gift to the assessee and the AO didn’t mount further examination and accepted the said incomplete confirmation on face value, we find that the ld PCIT has rightly exercised his discretion in setting aside the assessment order to examine the matter a fresh after providing reasonable opportunity to the assessee.

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