In a recent ruling the Indore bench of the Income Tax Appellate Tribunal ( ITAT ) ruled that the assessee not liable for payee’s non-response to Assessing Officer Notice, quashed the revision order. The assessee filed return of income of relevant AY 2018-19 declaring a total income of Rs. Nil. The return was selected under scrutiny-assessment for “verification of genuineness of expenses” and statutory notices under Section 143(2)/142(1) of Income Tax Act, 1961 were issued. Ultimately, the AO completed assessment under Section 143(3) vide order dated 24.03.2021 accepting the returned income declared by assessee The Principal Commissioner of Income Tax examined the record of assessment proceeding and viewed that the assessment-order passed by AO is erroneous in so far it is prejudicial to the interest of revenue which attracts revisionary-jurisdiction under Section 263 of Income Tax Act. Accordingly, the PCIT issued a show-cause notice dated 04.03.2023 and finally passed a revision-order dated 27.03.2023. Mr. Simran Bhullar representing the revenue supported the revision-order. He submitted that the PCIT has noted certain vital aspects in revision-order, namely

(i) Smt. Nilima proprietor of M/s AD Enterprises has not filed any income-tax return of AY 2018-19, (ii) The AO issued notice under Section 133(6) to Smt. Nilima but no response was received. Therefore, the expenses made by M/s AD Enterprises for job work remained unverified, and (iii) The AO could have referred matter to the Verification Unit for physical verification but it was not done. Further emphasized that the AO could have made further enquiries for ascertaining genuineness of the claim made by assessee. Since the AO has not stepped further, the PCIT was very much correct in holding that the assessment-order is erroneous-cum-prejudicial to the interest of revenue. Mr. Rajesh Mehta representing the assessee submitted that the AO was very much concerned with the genuineness of payments made to M/s AD Enterprises and that is why made repeat enquiries from assessee through series of notices under Section 142(1) and the assessee also filed complete point-wise replies to AO; that all payments to M/s AD Enterprises were made through banking channel and the bank statements were duly filed; that the assessee deducted TDS and filed copies of TDS returns/challans; that the assessee filed PAN,

current address and phone number of Smt. Nilima, proprietor of M/s AD Enterprises enabling the AO to issue notice under Section 133(6) of the Income Tax Act  The two member bench of the tribunal comprising Vijai Pal Rao ( Judicial member ) and B.M.Biyani ( Accountant member ) observed that the non-response by the payee to the statutory notice directly issued by AO, is not within the reach and control of assessee. Hence, we are unable to understand how the assessment-order of assessee can be considered as erroneous for no fault of assessee. Therefore, the revision-order passed by PCIT was not a valid order. ITAT, thus, quashed the revision-order and restored the original assessment-order passed by AO. The assessee succeeds in this appeal.