2010 (7) TMI 606 - AT - Income Tax

Revision - Time barred - Block assessment - Concealment of income - whether ld. CIT was justified in cancelling the order passed under section 158BC of the Assessing Officer, under section 263 and directing him to pass fresh assessment by examining all the bank transactions - Prima facie the withdrawal of the money from bank account was much after the date when change in constitution of firm Ekta Corporation had taken place and accordingly Mukesh M. Kelawala and assessee were required to make payment for acquiring higher shares of profit in the firm Chapter XIV-B is undisputedly enacted within Income-tax Act and order passed by the Assessing Officer under section 158BC or 158BD is without any dispute an order under Income-tax Act - Once provisions of section 263 are applicable to block assessment then thereafter question of restricting completion of fresh assessment by provisions of section 158BE would not arise - the revision under section 263 is independent and different from completion of fresh assessment after revision - The only condition for invoking provisions of section 263 is that order of the Assessing Officer is erroneous insofar as it is prejudicial to the interest of Revenue and no more - In the result, the appeal filed by the assessee is dismissed

Issues Involved:
1. Jurisdiction under section 263(1) of the Income-tax Act, 1961.
2. Error in mentioning the assessing officer in the order.
3. Direction for fresh assessment.
4. Original order not being erroneous and prejudicial to the interest of revenue.

Issue-wise Detailed Analysis:

1. Jurisdiction under section 263(1) of the Income-tax Act, 1961:
The main issue in the appeal was whether the Commissioner of Income Tax (CIT) was justified in canceling the order passed under section 158BC by the Assessing Officer under section 263 and directing him to pass a fresh assessment by examining all the bank transactions. The CIT called for the assessment record and noticed undisclosed investments by the assessee and her husband in M/s. Ekta Corporation. The CIT issued a show-cause notice under section 263, indicating that the order was erroneous and prejudicial to the interest of revenue. The assessee argued that section 263 would not apply to orders passed under section 158BC, as Chapter XIV-B is a self-contained code. However, the CIT rejected this argument, stating that section 158BH makes all other provisions of the Income-tax Act applicable to block assessments. The Tribunal upheld the CIT's jurisdiction under section 263, citing the Supreme Court's ruling in Malabar Industrial Co. Ltd. v. CIT, which allows the CIT to revise orders where the Assessing Officer did not make proper inquiries.

2. Error in mentioning the assessing officer in the order:
The assessee contended that the CIT erred in mentioning that the order under section 158BC was passed by the Assessing Officer, Ward 1, Bharuch, whereas it was actually passed by the Dy. CIT, Cen. Cir.1, Baroda. However, this issue was not elaborated upon in the judgment, indicating that it was not a significant factor in the Tribunal's decision.

3. Direction for fresh assessment:
The CIT directed the Assessing Officer to make a fresh assessment by thoroughly examining all the bank transactions. The Tribunal noted that the Assessing Officer had not carried out any inquiry regarding the investment in M/s. Ekta Corporation or the period when the money was withdrawn from the bank accounts. The Tribunal upheld the CIT's direction for a fresh assessment, emphasizing that proper inquiries were not made by the Assessing Officer, making the original order erroneous and prejudicial to the interest of revenue.

4. Original order not being erroneous and prejudicial to the interest of revenue:
The assessee argued that the original order was not erroneous and prejudicial to the interest of revenue, as the Assessing Officer had accepted the returned income after thorough examination. However, the Tribunal found that the Assessing Officer had not made proper inquiries regarding the undisclosed investment in M/s. Ekta Corporation. The Tribunal cited several cases where the courts held that failure to make proper inquiries justifies the CIT's revision under section 263. The Tribunal concluded that the CIT was justified in canceling the assessment and directing a fresh assessment.

Conclusion:
The Tribunal dismissed the appeal, upholding the CIT's jurisdiction under section 263, the direction for a fresh assessment, and the finding that the original order was erroneous and prejudicial to the interest of revenue. The Tribunal emphasized the necessity of proper inquiries by the Assessing Officer and the applicability of section 263 to block assessments under Chapter XIV-B.

← Previous Next →