2015 (3) TMI 1190 - AT - Income Tax

Validity of order passed u/s 263 - agricultural income undisclosed - Held that - It was noted by CIT from the assessment records so far as agricultural income is concerned that during the course of assessment proceedings document to substantiate the agricultural return like khasra / Girdawari document were neither called for by the assessing officer nor filed by the assessee. Before the CIT the assessee has taken a plea that his father owns 15 acres of agricultural land and his brother has carried out cultivation and he has received sum of ₹ 88,185/- as gift by his father on account of his share in agriculture income. Agriculture income earned by the father of the assessee cannot be the agriculture income of the assessee. We ask the Ld. A.R in the open court whether any query has been raised by the assessing officer about the earning of the agricultural income or whether you have filed any reply in this regard which may prove that the issue regarding the earning of the agricultural income was examined by the assessing officer. The Ld. A.R was fair enough to concede that the assessing officer has not raised any query in this regard. This itself prove that this is a case of no inquiry. Cash in hand, cash deposited in bank and investment in immovable assets - Held that - The assessee does not have any leg to stand as in the case of the assessee, the assessing officer has not made inquiries on most of the issues as pointed out by us and even the Ld. A.R also agreed that no questionnaire issued or query was raised by the assessing officer during the course of assessment in respect of these issues. This is not a case of inadequacy of inquiry but a case of no inquiry being conducted by the assessing officer where it was incumbent upon the assessing officer to examine and verify the facts for determining the correct income of the assessee in each of the assessment years. It is not a case where the A.O has accepted the income of the assessee by taking one of the possible views. It is also not a case of inadequate inquiry on all the issues but a case where no inquiry has been conducted by the A.O in three issues out of the five issues on which show cause notice was issued by the CIT u/s 263. Non application of mind on the part of the Assessing Officer and accepting the income of the assessee without making an enquiry will tantamount that the order is erroneous and prejudicial to the interest of the Revenue. In view of aforesaid discussion, the order passed u/s 263 has to be upheld as, in our opinion, it has passed through test of fulfilment of both the conditions by the CIT that the order passed by the A.O is erroneous as well as prejudicial to the interest of the revenue. We, therefore, dismiss the ground nos. 1 to 3 by upholding the order passed u/s 263. - Decided against assessee.

Summary

Issues Involved:
1. Validity of proceedings initiated under Section 263.
2. Consideration of assessment orders as erroneous and prejudicial to the interest of revenue on various grounds including agricultural income, cash in hand, cash deposits, investments in immovable assets, examination of seized material, and non-examination of loan transactions.

Detailed Analysis:

1. Validity of Proceedings Initiated Under Section 263:

The appeals challenge the validity of the order passed under Section 263 of the Income Tax Act. The assessee argued that the assessments were framed after comprehensive inquiries and deliberations, citing various case laws to support that an assessment order framed after conducting inquiries cannot be subject to revision under Section 263. However, the Commissioner of Income Tax (CIT) invoked Section 263, noting that the Assessing Officer (AO) failed to make necessary inquiries and verifications, rendering the orders erroneous and prejudicial to the interest of revenue.

2. Consideration of Assessment Orders as Erroneous and Prejudicial to the Interest of Revenue:

a) Agricultural Income:
The CIT observed that the assessee declared agricultural income but did not own any agricultural land. The AO accepted the agricultural income without verifying the necessary documents like khasra/girdawari. The assessee claimed the income was received as a share from his father's agricultural income, which was not substantiated with proper evidence. The CIT concluded that the AO's acceptance of the agricultural income without proper verification was erroneous and prejudicial to the revenue.

b) Cash in Hand as on 01/04/2000:
The assessee claimed a cash balance of Rs. 2,92,192 as on 01/04/2000, which the AO accepted without verifying the source and genuineness. The CIT noted that the AO failed to inquire about the purpose of small withdrawals from the bank if such a huge cash balance was available. The CIT held that the AO's failure to verify the source of the initial capital was erroneous and prejudicial to the revenue.

c) Cash Deposited in Bank Accounts:
The CIT noted that the AO did not inquire about the source of various cash deposits made by the assessee during the year. The AO also failed to notice the missing bank statement of ICICI Bank, Pondichery, which was mentioned in the covering letter but not filed. The CIT concluded that the AO's acceptance of the deposits without proper verification was erroneous and prejudicial to the revenue.

d) Investments in Immovable Assets:
The CIT observed that the AO did not examine the various properties held by the assessee, the source of investments, or the purpose for which the properties were used. The AO also failed to follow up on a letter written to the Government of Mizoram regarding the source of investment. The CIT held that the AO's non-verification of the investments was erroneous and prejudicial to the revenue.

e) Examination of Seized Material:
The CIT noted that the AO did not properly examine the seized materials, including a diary, laptop, and other documents. The AO's observation that nothing incriminating was found in the laptop was deemed insufficient as other files and their financial implications were not examined. The CIT concluded that the AO's failure to properly examine the seized material was erroneous and prejudicial to the revenue.

f) Non-Examination of Loan Transactions:
In some appeals, the CIT noted that the AO did not examine the loan transactions, which was necessary to ascertain the correct income of the assessee. The CIT held that the AO's failure to examine these transactions was erroneous and prejudicial to the revenue.

Conclusion:
The Tribunal upheld the CIT's order under Section 263, agreeing that the AO failed to make necessary inquiries and verifications, rendering the assessment orders erroneous and prejudicial to the interest of revenue. The Tribunal dismissed the appeals filed by the assessee, emphasizing that the CIT's direction to the AO to reframe the assessment after proper inquiries was justified.

Separate Judgments:
There were no separate judgments delivered by the judges in this case. The order was a common one for all the appeals involved.