2010 (11) TMI 531 - AT - Income Tax

Revision u/s 263 - Addition u/s 40A(2)(b) - Merely because the Assessing Officer after making enquiries does not make a reference to the same in the assessment order, that would not make the assessment order erroneous - it has duly been demonstrated that the gift had been received from assessee s aunty i.e., father s brother s wife and this relation comes under the list provided under section 56(2)(v) r/w Explanation (vii) - once he had taken a possible view after making enquiries, then, merely because the Commissioner of Income-tax felt that detailed enquiry was required, the assessment order could not be treated as erroneous - Decided in favour of the assessee

Summary

Issues Involved:
1. Validity of gifts claimed by the assessee.
2. Verification of unsecured loans and sundry creditors.
3. Invocation of jurisdiction under section 263 by the CIT.

Detailed Analysis:

1. Validity of Gifts Claimed by the Assessee:

The assessee declared gifts amounting to Rs.8,83,700, which were scrutinized by the CIT. The CIT questioned the legitimacy of these gifts, particularly a gift of Rs.4,00,000 from Mrs. Mehrunissa Mohd. Abbas Muqri, arguing that there was no lineal relationship as required under section 56(2)(v) of the Act. The assessee countered this by demonstrating that Mrs. Mehrunissa, being the wife of the father's brother, falls under the definition of "relative" as per the Explanation (iv) and (vii) of section 56(2)(v). The Tribunal found that the Assessing Officer (AO) had verified the gifts through bank statements, gift declarations, and affidavits confirming the transactions, thus concluding that the AO had taken a possible view after due verification.

2. Verification of Unsecured Loans and Sundry Creditors:

The CIT noted that unsecured loans amounting to Rs.45,66,000 and sundry creditors totaling Rs.21,41,000 were not adequately verified by the AO. However, the Tribunal observed that the AO had conducted necessary verifications, including obtaining confirmations and bank extracts from the lenders. The AO's office note indicated that the identity, creditworthiness of the donors, and genuineness of the loans were verified and found to be satisfactory. Therefore, the Tribunal concluded that the AO had conducted a proper inquiry into these aspects.

3. Invocation of Jurisdiction under Section 263 by the CIT:

The CIT invoked section 263, arguing that the AO's order was erroneous and prejudicial to the interests of the Revenue due to inadequate scrutiny of the gifts and loans. The Tribunal referred to various case laws, emphasizing that an order cannot be deemed erroneous merely because it is brief or lacks detailed documentation of the AO's inquiries. The Tribunal cited judgments from the Allahabad High Court, Calcutta High Court, and Rajasthan High Court, which held that section 263 cannot be invoked for mere differences in opinion or to correct minor errors unless there is a clear demonstration of non-application of mind by the AO. The Tribunal concluded that the AO had conducted appropriate inquiries and adopted a possible view, thus the CIT's invocation of section 263 was not justified.

Conclusion:

The Tribunal found that the AO had conducted sufficient inquiries regarding the gifts and loans, and had taken a possible view based on the evidence provided. The CIT's invocation of section 263 was deemed unjustified as the AO's order was neither erroneous nor prejudicial to the interests of the Revenue. Consequently, the Tribunal set aside the CIT's order under section 263, allowing the assessee's appeal.