2011 (6) TMI 908 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the order passed u/s 263 of the Act by the ld. C.I.T.
2. Examination of gifts and unsecured loans.
3. Deduction u/s 80-IB of the Act.
4. Adequacy of the A.O.'s enquiry and verification.

Summary:

1. Validity of the order passed u/s 263 of the Act by the ld. C.I.T.:
The appeal by the assessee challenges the order dated 31/03/08 of ld. C.I.T., Guwahati, passed u/s 263 of the Act for the assessment year 2003-04, which set aside the assessment order passed u/s 143(3) dated 02/03/2006. The ld. C.I.T. found the assessment order erroneous and prejudicial to the interests of revenue due to inadequate examination by the A.O.

2. Examination of gifts and unsecured loans:
The ld. C.I.T. directed the A.O. to re-examine the issue of making gifts and taking unsecured loans from the same persons. The assessee made gifts totaling Rs. 1,40,61,791/- to various individuals, which the ld. C.I.T. believed were not properly verified by the A.O. The assessee provided bank statements and other documents to support the gifts, but the ld. C.I.T. observed discrepancies in cash deposits and transfers.

3. Deduction u/s 80-IB of the Act:
The ld. C.I.T. initially questioned the deduction u/s 80-IB allowed by the A.O. without proper examination. However, the assessment order extensively dealt with this issue, denying 75% of the deduction claimed and computing the income at Rs. 1,40,42,960/- against Rs. 3,45,586/- shown by the assessee. The ld. C.I.T. eventually dropped this point, indicating satisfaction with the A.O.'s enquiry.

4. Adequacy of the A.O.'s enquiry and verification:
The assessee argued that the A.O. conducted detailed enquiries, as evidenced by multiple hearings and the approval of the Addl. C.I.T. The Tribunal observed that the A.O. had examined all relevant issues and materials, and the ld. C.I.T.'s direction for re-examination was based on suspicion rather than a clear error. The Tribunal emphasized that the power u/s 263 should not be used to substitute the C.I.T.'s opinion for that of the A.O. if the A.O. had taken a possible view after proper enquiry.

Conclusion:
The Tribunal concluded that the ld. C.I.T. was not justified in setting aside the assessment order dated 02/03/2006. The appeal by the assessee was allowed, and the order passed by ld. C.I.T. u/s 263 of the Act was quashed.