2003 (11) TMI 45 - HC - Income Tax

Whether, Tribunal is legally justified in quashing the order of the CIT passed u/s 263? - Whether Tribunal is legally justified in holding that the order of the Assessing Officer was not erroneous and prejudicial to the interests of the Revenue? - Simply because the Commissioner of Income-tax does not agree with the view, it cannot be said that the order passed by the Assessing Officer is an erroneous order prejudicial to the interests of the Revenue - We are of the view that no question of law, much less any substantial question of law arises out of the order of the Tribunal and hence the present tax appeal is dismissed

Summary

Issues Involved:

1. Legality of the Income-tax Appellate Tribunal's decision to quash the order of the Commissioner of Income-tax under section 263 of the Income-tax Act.
2. Whether the order of the Assessing Officer was erroneous and prejudicial to the interests of the Revenue.
3. Reliance on the affidavit retracting the confession versus the voluntary confession made on oath.

Issue-wise Detailed Analysis:

1. Legality of the Income-tax Appellate Tribunal's Decision:

The Commissioner of Income-tax, Jamnagar, filed a Tax Appeal under section 260A of the Income-tax Act, 1961, questioning the legality of the Income-tax Appellate Tribunal's decision to quash his order under section 263 of the Act. The Tribunal had ruled that the order of the Assessing Officer was neither erroneous nor prejudicial to the interests of the Revenue. The Tribunal reasoned that there was no substantial gap between the declaration under the Voluntary Disclosure of Income Scheme (VDIS) and the date of the search, and there was no evidence that the cash declared was converted into any other assets or used for expenses by the date of the search.

2. Erroneous and Prejudicial to the Interests of the Revenue:

The Commissioner of Income-tax initiated proceedings under section 263, arguing that the Assessing Officer's order was erroneous and prejudicial to the interests of the Revenue. The Commissioner highlighted that the affidavit retracting the confession was filed late, and there was no proper inquiry into why the respondent-assessee was carrying such a large amount of cash. The Commissioner directed that the seized cash of Rs. 20 lakhs be treated as undisclosed income and subjected to tax. However, the Tribunal found that the Assessing Officer had considered all relevant facts and circumstances, including the affidavit, and concluded that the seized cash was part of the Rs. 40 lakhs disclosed under VDIS. The Tribunal held that the Assessing Officer's order was not erroneous or prejudicial to the interests of the Revenue.

3. Affidavit Retracting Confession vs. Voluntary Confession:

During the search at Santa Cruz Airport, the respondent-assessee was found with Rs. 20 lakhs in cash and confessed on oath that it was undisclosed income. However, the respondent-assessee later retracted this confession through an affidavit, claiming the cash was part of the Rs. 40 lakhs disclosed under VDIS and that the confession was made under pressure. The Tribunal accepted the affidavit, noting the short time between the VDIS declaration and the search, and the lack of evidence that the cash was used or converted into other assets. The Tribunal ruled that the confession made during the search should not be given undue importance, especially considering the circumstances under which it was made.

Conclusion:

The High Court dismissed the appeal, agreeing with the Tribunal that the Assessing Officer's order was not erroneous or prejudicial to the interests of the Revenue. The court endorsed the Tribunal's view that the affidavit retracting the confession could not be dismissed and that the Assessing Officer had properly considered all relevant facts. The court emphasized that the Tribunal's findings were based on a thorough appreciation of evidence and did not raise any substantial question of law. The court also referenced the Supreme Court's decision in Malabar Industrial Co. Ltd. v. CIT, which clarified that not every loss of revenue due to an Assessing Officer's order is prejudicial to the interests of the Revenue, especially if the order is a permissible legal view.