2010 (6) TMI 563 - AT - Income Tax

Condonation of delay - Revision - Search and seizure - notice under section 148 of the Income-tax Act, 1961 was issued on 5-1-1995 calling upon the assessee to file his return of income - whether the investments in the properties including deposits in the bank accounts standing in the names of his family members were made by the assessee himself in their names and if so to consider them for assessment in the hands of the assessee alone - It is well settled by a catena of decisions that an order, which is erroneous as well as prejudicial to the interest of the revenue, can alone be subjected to revision proceedings under section 263 - whether the order sought to be revised under section 263 is erroneous and prejudicial to the interest of the revenue is essentially a question of fact and therefore would have to be decided on the facts of each case - CIT had sufficient materials before him to come to the conclusion that the assessment orders passed by the Assessing Officer were erroneous and prejudicial to the interest of the revenue - Appeal is dismissed

Issues Involved:
1. Condonation of delay in filing the appeals.
2. Legitimacy of the order under section 263 of the Income-tax Act, 1961.
3. Examination of whether the assessment orders were erroneous and prejudicial to the interest of the revenue.
4. Adequacy of inquiries and verifications made by the Assessing Officer.
5. Validity of re-assessment of income already assessed in the hands of other assessees.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeals:
The appeals filed by the assessee were barred by a limitation of 14 days. The delay was attributed to the assessee being in jail due to involvement in the AHD scam, which prevented timely signing of the appeal memos. The Tribunal condoned the delay, citing the nominal period of delay and referencing the Supreme Court judgment in Collector, Land Acquisition v. Mst. Katiji [1987] 167 ITR 471, which advocates a liberal approach in matters involving condonation of delay.

2. Legitimacy of the Order Under Section 263 of the Income-tax Act, 1961:
The Commissioner of Income-tax (CIT) had initially set aside the assessment orders for three assessment years and directed a de-novo assessment after proper inquiries. This order was challenged and remanded by the Hon'ble Patna High Court for fresh consideration. The CIT again set aside the assessment orders, directing the Assessing Officer to reframe them de-novo. The Tribunal upheld the CIT's order, confirming it was within his jurisdiction to revise orders that were erroneous and prejudicial to the revenue.

3. Examination of Whether the Assessment Orders Were Erroneous and Prejudicial to the Interest of the Revenue:
The Tribunal noted that the assessment orders were passed without proper inquiries and verification, making them erroneous and prejudicial to the revenue. The CIT highlighted that the Assessing Officer had accepted the returned income without scrutinizing the substantial investments and deposits found during the search and seizure operations. The Tribunal agreed with the CIT's observations that the Assessing Officer had failed to apply his mind and conduct necessary inquiries.

4. Adequacy of Inquiries and Verifications Made by the Assessing Officer:
The Tribunal emphasized that the Assessing Officer is not only an adjudicator but also an investigator. In this case, the Assessing Officer did not scrutinize the self-serving affidavits and other documents provided by the assessee and his relatives. The Tribunal pointed out that the Assessing Officer should have examined the sources of income and investments in the names of the assessee's family members, especially given the context of the AHD scam and the incriminating materials found during the search.

5. Validity of Re-assessment of Income Already Assessed in the Hands of Other Assessees:
The assessee argued that the income assessed in the hands of his father and wife should not be reassessed in his hands. However, the Tribunal noted that the mere fact that the same income was assessed in the hands of other assessees does not preclude its assessment in the hands of the assessee if it is found to belong to him. The Tribunal supported the CIT's view that proper inquiries were necessary to ascertain the true ownership of the income and investments.

Conclusion:
The Tribunal dismissed all three appeals filed by the assessee, upholding the CIT's order under section 263. The Tribunal confirmed that the assessment orders were erroneous and prejudicial to the interest of the revenue due to the lack of proper inquiries and verification by the Assessing Officer. The decision emphasized the importance of thorough investigation and application of mind by the Assessing Officer in scrutiny assessments.

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