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2014 (2) TMI 1210 - AT - Income TaxRevision u/s 263 - Held that - In the present case, from para 3 of the impugned order, it is noticed that the notice dt. 9th Jan., 2013 under s. 263 of the Act was issued only on receipt of the proposal under s. 263 of the Act from the ITO, Ward-1(2), Kota and the assessee explained, vide written submission which has been reproduced in para 4 of the impugned order, each and every objection raised by the ITO, Ward-2, Sawai Madhopur. It is well-settled that the learned CIT while exercising the revisionary powers under s. 263 of the Act may call for and examine the records of any proceedings and thereafter if he considers that any order passed therein is erroneous insofar as it is prejudicial to the interest of the Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. Therefore, before taking any action, learned CIT himself shall apply his mind after examining the record of any proceedings and his satisfaction is must. However, in the present case, the satisfaction was of the ITO (Tech.) who proposed action under s. 263 of the Act, but not of the learned CIT. Therefore, issuance of notice under s. 263 of the Act on the basis of the proposal made by the ITO was void ab initio; We, therefore, set aside the same. - Decided in favour of assessee
Issues Involved:
1. Limitation of the order under Section 263 of the IT Act. 2. Invocation of provisions of Section 263. 3. Jurisdiction under Section 263 due to lack of proper enquiries. 4. Ignoring facts and submissions regarding cash creditors. 5. Erroneous and prejudicial assessment order under Section 143(3). Detailed Analysis: 1. Limitation of the Order under Section 263: The assessee contended that the impugned order passed by the learned CIT, Kota, under Section 263 of the IT Act was barred by limitation and should be quashed. However, the judgment did not specifically address this issue in detail, implying that the primary focus was on the procedural and substantive aspects of the CIT's order. 2. Invocation of Provisions of Section 263: The main grievance of the assessee was the action of the learned CIT under Section 263 of the IT Act, 1961, in quashing the assessment order dated 29th October 2010, considering it erroneous and prejudicial to the interest of the Revenue. The CIT invoked Section 263 based on the proposal from the ITO, Ward-3, Sawai Madhopur, which highlighted discrepancies in the assessment regarding cash creditors. The CIT held that the AO completed the assessment in a routine manner without proper verification, making the order erroneous and prejudicial to the Revenue. 3. Jurisdiction under Section 263 Due to Lack of Proper Enquiries: The CIT assumed jurisdiction under Section 263, stating that the AO failed to make concrete inquiries about the creditworthiness of five cash creditors. The AO had recorded statements and obtained bank account copies but did not verify the source of cash deposits adequately. The CIT directed the AO to frame the assessment de novo after proper verification and inquiry. The assessee argued that the AO had already examined the creditworthiness and genuineness of the transactions during the assessment, supported by confirmations, bank accounts, IT returns, affidavits, and statements of the creditors. 4. Ignoring Facts and Submissions Regarding Cash Creditors: The assessee submitted that the AO had duly examined all transactions relating to the fresh credits, including obtaining necessary documents and recording statements of the creditors. The assessee cited several judicial precedents to argue that the revision under Section 263 should not be initiated merely to cause further inquiries if the AO had already applied their mind to the facts. The CIT, however, found that the AO's inquiries were insufficient and that the assessment order lacked proper verification. 5. Erroneous and Prejudicial Assessment Order under Section 143(3): The CIT held that the assessment order dated 29th October 2010, under Section 143(3), was erroneous and prejudicial to the interest of the Revenue due to inadequate inquiries into the creditworthiness of the cash creditors. The assessee contended that the CIT's action was based on the ITO's proposal rather than the CIT's own examination of the records, which is contrary to the requirements of Section 263. Conclusion: The Tribunal concluded that the CIT had not applied his mind independently but had relied on the proposal from the ITO to initiate proceedings under Section 263. The Tribunal emphasized that the CIT must call for and examine the records himself and form his own satisfaction before invoking Section 263. Since the CIT's action was based on the ITO's suggestion and not his own examination, the issuance of the notice under Section 263 was deemed void ab initio. Consequently, the Tribunal set aside the CIT's order, allowing the appeal of the assessee.
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