2012 (11) TMI 1120 - AT - Income Tax

Summary

Issues Involved:
1. Legality and jurisdiction of the order u/s 263 of the Act.
2. Erroneous and prejudicial nature of the assessment order.
3. Attribution of property transactions to the assessee.
4. Validity of the directions issued by the CIT.
5. Double taxation concerns.
6. Proper conduct of enquiries by the AO.

Summary:

1. Legality and Jurisdiction of the Order u/s 263:
The assessees contended that the order u/s 263 of the Act, passed by the CIT (Central), was "illegal & without jurisdiction." They argued that the CIT's action in invoking the provisions of section 263 was "illegal & bad in law."

2. Erroneous and Prejudicial Nature of the Assessment Order:
The CIT held that the assessment order passed by the AO was "erroneous and prejudicial to the interest of revenue." The CIT's conclusion that property transactions made by Sh. Jeetu Keshi and Sh. Mithlesh Kumar belonged to the assessees was challenged as being without material on record and thus "illegal and bad in law."

3. Attribution of Property Transactions to the Assessee:
The assessees argued that the CIT's conclusion that property transactions made by Sh. Jeetu Keshi and Sh. Mithlesh Kumar belonged to them was "illegal and bad in law." During the assessment proceedings, both individuals had admitted that all property transactions belonged to them only, and the assessees had nothing to do with those transactions.

4. Validity of the Directions Issued by the CIT:
The CIT's directions to set aside the assessment and make a fresh assessment de-novo were contested. The assessees argued that the non-issuance of specific directions for the assessment to be framed indicated that it was a case of only a change of opinion, and the assessment framed was neither erroneous nor prejudicial to the interest of the revenue.

5. Double Taxation Concerns:
The directions of the CIT were argued to be contrary to the judgments of various High Courts, which held that action u/s 263 resulting in double taxation is not permitted under the law.

6. Proper Conduct of Enquiries by the AO:
The CIT's observation that the AO had not conducted proper enquiries with respect to the increase in sundry creditors & provisions and advances against plots/depositors was challenged. It was argued that the AO had conducted all necessary enquiries, and the assessments were completed after considering all the relevant facts and submissions.

Judgment:
The Tribunal found that the AO had conducted all necessary enquiries and had considered all relevant facts and submissions during the assessment proceedings. The Tribunal observed that the CIT had not come to a firm decision on whose hands the transactions were to be taxed and which transactions were to be taxed. The Tribunal concluded that the order passed by the AO was neither erroneous nor prejudicial to the interest of the revenue, and thus, the provisions of section 263 of the Act were not attracted. Consequently, the appeals in the case of all the assessees were allowed, and the orders passed u/s 263 by the CIT were quashed.