2003 (5) TMI 48 - HC - Income Tax

The assessee has filed this appeal under section 260A, against the order of the Income-tax Appellate Tribunal whereby its appeal against the order of the Commissioner of Income-tax, Rohtak, has been dismissed - Once the assessment order had been passed with the approval of the Commissioner of Income-tax, we are afraid that the successor Commissioner of Income-tax could not possibly say that the matter had been decided without application of mind by the Assessing Officer. Consequently, the appeal is allowed, the findings of the Tribunal are reversed and the order of the Commissioner, set aside.

Issues Involved:

1. Whether the Assessing Officer properly examined the issue of the surrendered amount of Rs. 10,50,000 during the assessment.
2. Whether the Assessing Officer made proper inquiries to ascertain the genuineness of the purchases.
3. Whether the Commissioner of Income-tax's order under section 263 was justified.
4. Whether the assessment order was passed with the approval of the Commissioner of Income-tax.

Issue-wise Detailed Analysis:

1. Examination of the Surrendered Amount:

The Commissioner of Income-tax issued a notice under section 263(1) of the Income-tax Act, 1961, stating that the assessment order dated March 31, 2000, was erroneous and prejudicial to the interests of the Revenue because the Assessing Officer failed to properly examine the surrendered amount of Rs. 10,50,000 during a survey operation under section 133A. However, the assessee contended that the Assessing Officer had made detailed inquiries regarding this issue, as evidenced by various notices and replies exchanged during the assessment proceedings. The High Court found that the Assessing Officer had indeed examined the issue thoroughly, noting discrepancies in stock and cash, and had accepted the assessee's explanation regarding the stock discrepancy after verification. The assessment order included an office note explaining why the addition of Rs. 10 lakhs was not made, indicating that the Assessing Officer had applied his mind and conducted proper inquiries.

2. Inquiries into the Genuineness of Purchases:

The Commissioner also noted that the Assessing Officer did not make proper inquiries to ascertain the genuineness of the purchases. The assessee argued that the Assessing Officer had verified purchases from various parties and placed certified copies from such parties on record. The High Court reviewed the assessment records and confirmed that the Assessing Officer had made full inquiries and was satisfied with the genuineness of the purchases. The Tribunal's finding that the assessment order did not mention specific inquiries was deemed insufficient to conclude that proper inquiries were not made, as the entire assessment record should be examined, not just the order itself.

3. Justification of the Commissioner's Order under Section 263:

The High Court criticized the Commissioner's order under section 263 for being non-speaking and lacking specific reasons for finding the assessment order erroneous. The Commissioner failed to discuss the detailed reply filed by the assessee or specify how the Assessing Officer's inquiries were inadequate. The Tribunal's reliance on the absence of specific mentions in the assessment order was also found to be misplaced. The High Court emphasized that the Commissioner must examine the entire assessment record before concluding that an order is erroneous and prejudicial to the interests of the Revenue.

4. Approval of the Assessment Order by the Commissioner of Income-tax:

The assessee contended that the assessment order was passed under the effective monitoring and approval of the Commissioner of Income-tax, Rohtak. The High Court found supporting evidence in letters from the Assessing Officer to the Commissioner, indicating that the case was selected for monitoring, discussed with the Commissioner, and the draft order was submitted for approval. Given this context, the High Court held that the successor Commissioner could not claim that the assessment was made without application of mind by the Assessing Officer. Consequently, the High Court allowed the appeal, set aside the Commissioner's order dated October 31, 2000, and reversed the Tribunal's findings.

Conclusion:

The High Court concluded that the Assessing Officer had made proper inquiries and applied his mind while framing the assessment order. The Commissioner's order under section 263 was set aside due to lack of specific reasons and failure to consider the entire assessment record. The Tribunal's findings were also reversed, and the appeal was allowed.

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