2016 (1) TMI 1159 - HC - Income Tax

Vadity of revision order u/s 263 - unexplained deposits made in the savings bank account - Held that - There were reasons enough to revise the assessment order dated 27th December, 2011. The assessing officer did, in fact, accept the deposits made in the savings bank account of the assessee without making the slightest of enquiry with regard to the claims and contentions put forward by the assessee. There was, as such, reason enough to think that the assessment order was erroneous and prejudicial to the interest of the revenue. But the proper procedure was not followed; nor was the notice issued under section 263 of the Act satisfactory. The notice did not disclose any reasons as to why was the order dated 27th December, 2011, passed by the assessing officer erroneous and prejudicial. But we are unable to attach much importance to the aforesaid infirmity because the assessee never pressed that question. The CIT, on his part, did not give a fair deal to the assessee and rushed to the conclusions not only with respect to the assessment year 2009-2010 but also issued directions with respect to the assessment years 2008- 2009 and 2010-2011. This was made in gross abuse of the power by the CIT. Thus Tribunal was not justified in setting aside the order under section 263 of the Act as a whole and that too finally. - Decided in favour of revenue

Summary

Issues involved:
1. Validity of notice issued under section 263 of the Income-tax Act.
2. Jurisdiction of the Commissioner of Income Tax.
3. Revision of assessment order dated 27th December, 2011.

Analysis:
1. Validity of notice under section 263: The case involved a notice issued by the Income Tax Officer (ITO) Technical proposing to revise the assessment order dated 27th December, 2011 under section 263 of the Income-tax Act. The notice did not provide reasons for deeming the original order erroneous or prejudicial to revenue. The High Court acknowledged the lack of proper procedure in issuing the notice and the absence of valid reasons therein. However, the Court noted that the assessee did not raise this issue, and therefore, the infirmity in the notice was not given much weight in the final decision.

2. Jurisdiction of the Commissioner of Income Tax: The Commissioner of Income Tax (CIT) had passed an order deeming an amount as unexplained income of the assessee for the Assessment Year 2009-10. The CIT not only directed actions for that year but also for the preceding and subsequent assessment years, which the Court deemed as an abuse of power. The High Court found that the CIT did not provide a fair opportunity to the assessee and acted hastily in making conclusions, extending beyond the scope of the specific assessment year in question. Despite this, the Court did not entirely agree with the Tribunal's decision to set aside the CIT's order under section 263.

3. Revision of assessment order: The assessing officer had accepted deposits in the savings bank account of the assessee without proper inquiry into the claims made. This lack of investigation led to doubts about the correctness of the assessment order dated 27th December, 2011. The High Court recognized the potential errors in the original assessment and agreed that there were grounds for revising the order. Consequently, the Court remanded the matter to the assessing officer to reassess the income for the Assessment Year 2009-10, considering the objections raised by the CIT specifically for that year.

In conclusion, the High Court allowed the appeal, directing a reassessment for the specific assessment year based on the CIT's objections, while highlighting the need for proper procedure and fairness in tax assessments to protect the interests of both the revenue and the assessee.