2008 (1) TMI 902 - AT - Income Tax

Summary

Issues Involved:
1. Justification of CIT's order u/s 263.
2. Adequacy of inquiry and investigation by the Assessing Officer.
3. Validity of the assessment order being erroneous and prejudicial to the interest of revenue.
4. Legitimacy of CIT's reliance on the report from the Investigation Wing, Gurgaon.
5. Scope and jurisdiction of CIT u/s 263.

Summary:

1. Justification of CIT's order u/s 263:
The assessee contended that the CIT was not justified in holding the assessment order as erroneous and prejudicial to the interest of revenue within the meaning of section 263 of the Income Tax Act, 1961, and in canceling the order and directing the Assessing Officer to reframe the assessment. The Tribunal upheld the CIT's order, stating that the CIT was correct in invoking jurisdiction u/s 263 as the order of the Assessing Officer was erroneous and prejudicial to the interest of revenue due to lack of proper inquiry.

2. Adequacy of inquiry and investigation by the Assessing Officer:
The assessee argued that due inquiry and investigation were made by the Assessing Officer, evident from the material on record. However, the Tribunal found that the Assessing Officer accepted the revised income declared by the assessee without undertaking any inquiry regarding the facts and figures or the affidavit supplied by the assessee. The CIT noted that no inquiries were conducted to verify the veracity of the gross commission received, the nature/genuineness of the expenses incurred, or the details of beneficiaries.

3. Validity of the assessment order being erroneous and prejudicial to the interest of revenue:
The Tribunal agreed with the CIT that the assessment order was erroneous and prejudicial to the interest of revenue. The CIT's order highlighted that the Assessing Officer failed to examine and verify the facts and did not obtain details of beneficiaries from the respective banks to cross-check the nature of transactions and the quantum of income earned from the alleged beneficiaries.

4. Legitimacy of CIT's reliance on the report from the Investigation Wing, Gurgaon:
The assessee claimed that the CIT erred in passing an order u/s 263 based on the report from the Investigation Wing, Gurgaon, which was vague. The Tribunal found that the CIT's reliance on the report was justified as it revealed bogus transactions and lack of proper inquiry by the Assessing Officer.

5. Scope and jurisdiction of CIT u/s 263:
The assessee argued that the impugned order u/s 263 was beyond the scope and jurisdictional authority of the CIT. The Tribunal held that the CIT was justified in assuming jurisdiction u/s 263 as the order of the Assessing Officer was erroneous and prejudicial to the interest of revenue due to the lack of proper inquiry.

Conclusion:
The Tribunal dismissed the appeals of the assessee for all three assessment years, upholding the CIT's order u/s 263. The Tribunal emphasized that the lack of proper inquiry by the Assessing Officer rendered the assessment order erroneous and prejudicial to the interest of revenue, justifying the CIT's intervention.