2015 (8) TMI 1039 - AT - Income Tax

Revision u/s 263 by CIT(A) - earning of agricultural income from sale of bamboo sticks and and contribution to chits - Held that - AO has not only conducted inquiry on the agricultural income as well as contribution to chits, but has also applied his mind to the information submitted by assessee. In these circumstances, assessment order cannot held to be erroneous and prejudicial to the interests of the Revenue, only because the CIT was of the opinion that some more inquiries should have been made by the AO. As held by the judicial authorities, the power u/s 263 cannot be extended to hold an order passed by the AO as erroneous and prejudicial to the interests of the Revenue due to inadequacy of inquiry. No reason to uphold the exercise of power u/s 263 of the Act as far as the issue relating to agricultural income and contribution to chits are concerned. - Decided in favour of assessee. Not showing an amount of ₹ 20.00 lakhs out of the income offered of ₹ 1.00 crores at the time of survey - Held that - Exercise of power u/s 263 on this issue is valid. There is no dispute that in the statement recorded at the time of survey on 19.03.2010, assessee had offered to pay an amount of ₹ 30.00 lakhs as advance tax for A.Y under consideration. Further in the statement recorded u/s 131 of the Act on 23.03.2010, assessee again stated that he will offer additional income of ₹ 1.00crore and pay advance tax of ₹ 30.00 lakhs for A.Y under consideration. Thus, from the aforesaid statements, it is clear that the assessee consistently took the stand that he will offer an amount of ₹ 1.00 crore as his income for the A.Y under consideration for which the tax liability would be ₹ 30.00 lakhs. However, in the return filed for the impugned A.Y, assessee declared income of ₹ 80.00 lakhs. Therefore, not showing the additional income offered at the time of survey in the return of income filed ultimately should have triggered an inquiry by the AO. He should have made an effort to find out what are the reasons behind not declaring an amount of ₹ 20.00 lakhs out of the total amount of ₹ 1.00 crore declared at the time of survey. The AO could have accepted the income declared in the return after satisfying himself with the reasonableness of assessee s explanation. There is nothing in record to show that the AO made any inquiry to find out why the assessee did not offer the amount declared at the time of survey as income in the return filed. That being the case, we do not find any infirmity in the order of the ld CIT in holding the assessment order to be erroneous and prejudicial to the interests of the Revenue on this issue. - Decided against assessee. As far as the other issues considered we are of the firm view that the direction of the ld CIT on these issues are in the nature of starting a roving and fishing inquiry which is not permissible as held by Hon ble Bombay High Court in CIT vs.Gabriel India Ltd (1993 (4) TMI 55 - BOMBAY High Court ). In our view, ld CIT has no material before him to consider the assessment order to be erroneous and prejudicial to the interests of the Revenue on these issues. On perusal of the discussions made by the ld CIT, it appears that his actions are more like an AO in session of an assessment proceeding rather than a Revisional Authority exercising powers u/s 263. Power u/s 263 is to be exercised sparingly and in genuine cases where due to error committed by AO, there is loss to the Revenue. Moreover, it appears from record, the AO during the assessment proceedings has made enquiries on all these issues, though, it may not have been referred to in the assessment order. As it appears, in the garb of proceedings u/s 263 of the Act, the ld CIT in fact is undertaking an assessment proceeding himself. - Decided in favour of assessee.

Summary

Issues Involved:
1. Income from sale of Bamboo Sticks.
2. Contributions made to the Chits.
3. Additional income offered at the time of survey at Rs. 1.00 crore was reduced to Rs. 80.00 lakhs in the return filed.

Issue-wise Detailed Analysis:

Income from Sale of Bamboo Sticks:
The assessee declared agricultural income of Rs. 25 lakhs, including Rs. 16 lakhs from the sale of bamboo sticks. The Assessing Officer (AO) accepted Rs. 21.90 lakhs as agricultural income and treated Rs. 3.10 lakhs as income from other sources. The Commissioner of Income Tax (CIT) invoked Section 263, asserting that the AO failed to properly examine the adequacy of agricultural land for bamboo cultivation and the credibility of the sale proceeds. The Tribunal noted that the AO had indeed conducted inquiries and obtained confirmation from the purchaser of the bamboo sticks, who paid via cheques. The Tribunal held that the AO had applied his mind and conducted necessary inquiries, thus the assessment order was neither erroneous nor prejudicial to the interests of the Revenue on this issue.

Contributions Made to the Chits:
The CIT found that the AO did not adequately verify the source of contributions to Margadarshi Chits, totaling Rs. 31,52,110, and the accrued chit contributions of Rs. 17,86,015. The assessee claimed that the contributions were made by the Hindu Undivided Family (HUF) and were reflected in the books of accounts. The Tribunal observed that the AO had made inquiries and the assessee had provided necessary details during the assessment proceedings. Therefore, the Tribunal concluded that the AO had examined the issue and applied his mind, making the assessment order not erroneous or prejudicial to the interests of the Revenue on this issue.

Additional Income Offered at the Time of Survey:
During a survey operation, the assessee offered to declare additional income of Rs. 1 crore and pay advance tax of Rs. 30 lakhs for the assessment year (AY) 2010-11. However, in the return filed, the assessee declared only Rs. 80 lakhs. The CIT contended that the AO should have inquired about the discrepancy and added the remaining Rs. 20 lakhs to the income. The Tribunal agreed with the CIT, stating that the AO failed to investigate why the assessee did not declare the full Rs. 1 crore as promised. The Tribunal upheld the CIT's order on this issue, directing the AO to examine the matter afresh and decide based on the merits and the assessee's explanation.

Other Issues:
The CIT raised additional issues, but the Tribunal found these to be speculative and lacking prima facie evidence. The Tribunal emphasized that the CIT's role is not to conduct a fishing expedition but to address genuine errors causing revenue loss. The Tribunal ruled that the CIT's actions on these other issues were unwarranted and invalid.

Conclusion:
The Tribunal partially allowed the assessee's appeal. It upheld the CIT's order only concerning the non-disclosure of Rs. 20 lakhs out of the Rs. 1 crore offered during the survey. The AO was directed to re-examine this issue independently. For other issues, the Tribunal found the AO had conducted adequate inquiries, and the CIT's invocation of Section 263 was invalid. The order was pronounced on 5th August 2015.