2010 (9) TMI 853 - AT - Income Tax

Revision under 263 - Order of AO erroneous and prejudicial to interest of revenue acceptng the genuineness of the claimed gifts - Held that - To establish the genuineness of the claimed gifts the assessee had furnished all the possible documents and the donors Shri Radhey Lal Gupta, Shri Madan Lal Gupta, Shri Om Prakash Garg and Shri Shiv Prasad Gupta were also summoned, their statements were also recorded wherein they have confirmed the claimed gifts donated by them. Their affidavits were also filed in confirmation except in case of Shri Gopal Ram Gupta who died in between. There is no dispute about the identity of these donors. It has also not been denied that gift amounts have been paid through banking channel. Some of the donors in support of their source of income have furnished bank statements and some have furnished pension papers to support their source of gifts, their relations with the assessee also not in dispute. Under these circumstances, find no reason to agree with the allegation of the CIT against the AO that AO has completed the assessment on issue without making proper enquiry and without applying the correct legal provisions. In view of Max India Ltd. (2007 (11) TMI 12 - Supreme Court of India) and Malabar Industrial Co. Ltd. (2000 (2) TMI 10 - SUPREME Court) when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue or where two views are possible and ITO has taken one view with which the learned CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the ITO is unsustainable in law. In favour of assessee.

Summary

Issues Involved:
1. Legitimacy of the gifts received by the assessee.
2. Adequacy of the Assessing Officer's (AO) enquiry into the claimed gifts.
3. Appropriateness of invoking Section 263 of the Income Tax Act by the Commissioner of Income Tax (CIT).

Detailed Analysis:

1. Legitimacy of the Gifts Received by the Assessee:
The assessee claimed to have received gifts from his elder brother and cousin brothers during various assessment years, which were accepted by the AO in the assessment framed under sections 153A and 143(3) of the Act. The CIT questioned the genuineness of these gifts, stating that the AO did not conduct a proper enquiry to examine their veracity. The CIT issued a show-cause notice under section 263 of the Act, ultimately setting aside the assessment order and directing the AO to reassess the issue of the alleged gifts after proper enquiry.

2. Adequacy of the Assessing Officer's (AO) Enquiry into the Claimed Gifts:
The assessee's representative argued that during the assessment proceedings, all necessary documents including gift deeds, affidavits, and bank statements were provided to the AO. The donors were summoned, and their statements were recorded, confirming the gifts. The representative contended that the AO conducted a thorough enquiry and was satisfied with the genuineness of the gifts. The representative cited various legal precedents to support the claim that the AO's acceptance of the gifts was justified and that the CIT's invocation of section 263 was unwarranted.

3. Appropriateness of Invoking Section 263 of the Income Tax Act by the Commissioner of Income Tax (CIT):
The CIT invoked section 263, arguing that the AO's acceptance of the gifts without proper enquiry was erroneous and prejudicial to the interests of the Revenue. The CIT's primary grievance was the lack of a thorough examination by the AO. However, the tribunal found that the AO had conducted a proper enquiry, and the donors' identities, relationships with the assessee, and the transactions' genuineness were established. The tribunal held that the CIT's invocation of section 263 was unjustified as the AO's order was not erroneous or prejudicial to the Revenue. The tribunal cited several Supreme Court and High Court decisions to support its conclusion that the AO's decision, even if resulting in a loss of revenue, was permissible in law if it was one of the possible views.

Conclusion:
The tribunal concluded that the CIT's invocation of section 263 was not justified and set aside the revisional order. The assessment orders accepting the claimed gifts during the years under consideration were restored, and the appeals were allowed. The tribunal emphasized that an AO's order cannot be termed erroneous simply because the CIT disagrees with it, especially when the AO has conducted a proper enquiry and adopted a permissible view under the law.