Section 263 Inadequate inquiry by AO, cannot be considered as lack of inquiry

Fusion Voice Solutions India (P) Ltd. Vs ITO (ITAT Visakhapatnam) 

Evidently there was no principal agent relation, which warranted compliance of section 194H. Moreover, AO had called details of ledger accounts and salaries paid to employees during assessment under section 143(3); therefore, he had made inquiry in this regard. Not examining the entire transaction and sales by the assessee company to its retail dealers at best could be treated as inadequate enquiry but not lack of enquiry. Lack of enquiry is a reason for taking up the case for revision under section 263 but the inadequate enquiry cannot be a reason for taking up the case for revision.

FULL TEXT OF THE ITAT JUDGMENT

This appeal filed by the assessee is directed against order of the Principal Commissioner of Income Tax, Vijayawada dated 28.3.2017 for the assessment year 2012-13.

2. The assessee filed return of income on 8.9.2012 admitting total income of Rs.4,53,760/-. The assessee is engaged in the business of purchase and sale of mobiles and accessories. The assessee is a wholesale distributor for Nokia mobiles and accessories. The case is selected for scrutiny and the assessment was completed u/s 143(3) of the Act on total income of Rs.7,74,178/-. Subsequently, the CIT(A) has taken up the case for revision u/s 263 of the Act and found that the assessee had debited a sum of Rs.4,46,924/- towards incentives and and the assessee required to deduct the TDS as per the provisions of section 194H of the Act. Since the assessee has not deducted the TDS from the above payments, the said expenditure required to be disallowed u/s 40(a)(ia) of the Act. The assessee neither deducted the TDS nor the A.O. made the addition u/s 40(a)(ia) of the Act, hence the CIT held that the assessment is erroneous and prejudicial to the interest of the revenue and accordingly, set aside the assessment order passed by the A.O. with a direction to redo the assessment do-novo.

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