2015 (6) TMI 33 - AT - Income Tax

Revision u/s 263 - Bank a/c was maintained towards Sony Wines, whereas the assessee was claimed to be the proprietor of M/s Sri Rama Wines - Held that - As that assessee is proprietor of M/s. Sri Srirama Wines and since he was earlier working with another concern namely Sony Wines, the care-of address of that concern was given while opening the bank account. This being the factual position, no enquiry on this aspect of the matter was required to be done by the A.O. and it cannot be said that the order of the A.O. passed under section 143(3) was erroneous as alleged by the Ld. CIT on the basis of point No.1 raised in the notice issued under section 263. As per P & L a/c, the turnover is of ₹ 44.00 lakhs for which the accounts are to be audited u/s 44AB of the I.T. Act but neither the assessee furnished the audit report nor the A.O. called for the it and examined. - Held that - CIT(A) in notice issued under section 263 that the A.O. having failed to call for the tax audit report under section 44AB which was required to be filed by the assessee, his order suffered from an error, as find merit in the contention of the Ld. Counsel for the assessee that the action of the A.O. in not calling for the tax audit report under section 44AB cannot be regarded as an error in the order of the A.O. which is prejudicial to the interests of the Revenue. Bank account reflected business activities for only 3 months and the balance transactions throughout the year were stated as activities on the agricultural lands of assessee s wife - Held that - As regards non-examination of the transactions reflected in the bank account of the assessee for the period from 01.07.2008 to 31.03.2009, it is observed that this aspect was duly examined by the A.O. during the course of assessment proceedings as is evident from the relevant portion of the assessment order which wherein the issue relating to the transactions reflected in the bank account of the assessee from 01.07.2008 to 31.03.2009 was examined by the A.O. and on such examination, the addition of ₹ 40,500 was also made by the A.O. to the total income of the assessee being estimated interest income. A possible view on this issue thus was taken by the A.O. after due examination and application of mind and even if the same was not acceptable to the Ld. CIT, he cannot exercise the powers conferred upon him under section 263 to substitute his own view for the possible view taken by the A.O. - Decided in favour of assesse.

Summary

Issues:
1. Whether the order passed by the Assessing Officer under section 143(3) was erroneous and prejudicial to the interests of Revenue, warranting revision under section 263 of the Income Tax Act, 1961.

Analysis:
1. The assessee, engaged in running a wine shop, filed a return of income declaring total income. The Assessing Officer (A.O.) determined the total income after making additions. The Commissioner of Income Tax (CIT) found deficiencies in the assessment and issued a notice under section 263. The assessee contended that all aspects were duly examined during the assessment proceedings, and the A.O. was satisfied with the explanations provided. The CIT, however, held the A.O.'s order to be erroneous and prejudicial to Revenue's interests due to various reasons, including lack of examination of sources of investment, nature of credits in bank account, and failure to call for a tax audit report.

2. The CIT set aside the A.O.'s order and directed a re-assessment. The assessee argued that the errors pointed out by the CIT were not substantial enough to warrant revision under section 263. The Tribunal analyzed each point raised by the CIT. Regarding the care-of address in the bank account, it was clarified that no further inquiry was necessary. The failure to call for a tax audit report was not deemed prejudicial to Revenue's interests. The examination of transactions in the bank account was found to have been adequately addressed by the A.O., leading to the addition of estimated interest income. The Tribunal concluded that there were no errors in the A.O.'s order that warranted revision under section 263, thereby allowing the assessee's appeal and restoring the A.O.'s order under section 143(3).

3. The Tribunal emphasized that the CIT's revision powers under section 263 are limited to errors pointed out in the notice and cannot be based on extraneous grounds. The Tribunal's decision was based on a detailed examination of the issues raised by the CIT and the adequacy of the A.O.'s actions during the assessment proceedings. The judgment highlighted the importance of proper examination and consideration of all relevant aspects during assessments to avoid unwarranted revisions under section 263, ensuring fairness and adherence to established procedures.