Sec. 263 revision justified as AO passed order without examining financial statements: ITAT

Case Details: L.A. Developers v. CIT - [2022] 142 taxmann.com 280 (Cuttack-Trib.)

Judiciary and Counsel Details

• • George Mathan, Judicial Member & Arun Khodpia, Accountant Member
  • P.C. Sethi, AR for the Appellant.
  • M.K. Gautam, CIT (DR) for the Respondent.

Facts of the Case

Assessee filed its return of income under section 153C and the same was completed under section 143(3). Thereafter, the assessment was reopened by the issue of a notice under section 148 and a reassessment order was passed by the Assessing Officer.

The Commissioner noted that there was a glaring difference in the valuation of current assets and current liabilities as shown in assessee’s balance sheet as compared to its cash flow statement. AO didn’t consider this during reassessment proceedings. Thus, he invoked the provision of section 263 in order to set aside/modify the assessment order passed by AO. Assessee approached tribunal against such revision.

ITAT Held

The Tribunal has ruled that AO had called for details regarding differences arising in books of account. However, he had not applied his mind to the issue or formed any opinion towards the same. Thus, there was failure on part of AO to examine or make addition in respect of the difference between cash flow and balance sheet. This had made the assessment order erroneous and consequently prejudicial to the interest of revenue. Accordingly, the Commissioner was right in invoking his powers under section 263.

List of Cases Referred to

• • Sesa Starlite Ltd. v. CIT [2021] 123 taxmann.com 217/277 Taxman 443/430 ITR 121 (Bom.) (para 8).