2014 (1) TMI 289 - AT - Income Tax

Validity of invoking assessment u/s 263 - Held that - The AO had made detailed enquiry in respect of share application money and also in respect of trading activities of the assessee. The assessee had filed necessary details with supporting evidences to discharge its onus - After considering the reply of the assessee and after verifications and enquiries made by the AO, the AO finally came to the conclusion that no addition was required in respect of share application money - The conditions for invoking power u/s 263 was not fulfilled as the order passed by AO was not erroneous - It has been further observed by the Tribunal that the scope of interference under section 263 is not to set aside merely unfavourable orders and bring to tax some more money to the treasury, nor is the section meant to get at sheer escapement of revenue which is taken care of by the other provisions of the Act - There was neither incorrect assumption of facts nor there was incorrect application of law by the A.O. while passing the assessment order - Under such circumstances the invocation of jurisdiction under section 263 of the Act by the CIT was not justified - Decided in favour of assessee.

Summary

Issues involved: Invocation of jurisdiction under section 263 of the Income Tax Act regarding share application money received by the assessee during the assessment year 2007-08.

Detailed Analysis:
1. The appeals were filed against the CIT's orders relevant to the assessment year 2007-08, involving the invoking of jurisdiction under section 263 of the Income Tax Act. The common issue in both appeals was the genuineness of share application money received by the assessee. The AO accepted the transactions after necessary inquiries, but the CIT set aside the assessment order, citing lack of proper investigation regarding the share capital transactions. The CIT remanded the matter for de-novo assessment, leading to the appeal.
2. The Tribunal considered the case along with similar cases of the assessee's group concerns. It was noted that in previous instances, the Tribunal had set aside the CIT's orders under section 263 due to the AO's detailed enquiry and satisfaction with the genuineness of transactions. The Tribunal emphasized that for invoking section 263, the order must be both erroneous and prejudicial to the revenue, which was not the case here. The Tribunal highlighted that the AO had applied due diligence and made necessary inquiries before concluding on the transactions' genuineness.
3. The Tribunal found the facts of the present case identical to the earlier cases of the assessee's group concerns. It noted that the AO had applied due diligence, made necessary inquiries, and was satisfied with the genuineness of transactions. Relying on the precedent set by the Tribunal in similar cases, the order of the CIT invoking jurisdiction under section 263 was set aside, and that of the AO was restored. The Tribunal allowed both appeals, emphasizing the importance of proper investigation and satisfaction of genuineness before invoking section 263.

In conclusion, the Tribunal's detailed analysis highlighted the importance of thorough investigation and satisfaction with the genuineness of transactions before invoking jurisdiction under section 263 of the Income Tax Act. The decision emphasized that the AO must apply due diligence, make necessary inquiries, and ensure that the assessment order is not erroneous or prejudicial to the revenue before resorting to section 263. The consistent application of these principles led to the setting aside of the CIT's orders and the restoration of the AO's decisions in both appeals.