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2017 (8) TMI 1374 - AT - Income TaxRevision u/s 263 - disclosure of sale consideration - order erroneous and prejudicial to the interest of Revenue - Held that - A reference to the provisions of s. 263 shows that jurisdiction thereunder can be exercised if the CIT finds that the order of the AO was erroneous and prejudicial to the interest of Revenue. Mere audit objection and merely because a different view could be taken, were not enough to say that the order of the AO was erroneous or prejudicial to the interest of the Revenue. The jurisdiction could be exercised if the CIT was satisfied that the basis for exercise of jurisdiction existed. No rigid rule could be laid down about the situation when the jurisdiction can be exercised. Whether satisfaction of the CIT for exercising jurisdiction was called for or not, has to be decided having regard to a given fact situation. In the present case, the Tribunal has held that the assessee had disclosed that out of sale consideration, a sum of ₹ 1 lakh was to be received for sale of permit. If that is so, there was no error in the view taken by the AO and no case was made out for invoking jurisdiction under s. 263. Applying the propositions of law laid down to the facts of this case, we uphold the contention of the assessee that the exercise of powers by the ld. CIT u/s 263 of the Act, is bad in law. Hence, we cancel this order passed under section 263 - Decided in favour of assessee.
Issues Involved:
1. Legitimacy of the order passed under Section 263 of the Income Tax Act, 1961. 2. Adequacy of the Assessing Officer's (AO) inquiry into the commission payments made by the assessee. 3. The role of the Commissioner of Income Tax (CIT) in determining the erroneous and prejudicial nature of the AO's order. Issue-wise Detailed Analysis: 1. Legitimacy of the order passed under Section 263 of the Income Tax Act, 1961: The appeal was filed by the assessee against the order of the Principal Commissioner of Income Tax (CIT) under Section 263 of the Income Tax Act, 1961. The CIT's order dated 24/03/2015 revised the AO's order passed under Section 143(3) for the Assessment Year 2010-11. The CIT issued a show-cause notice under Section 263, alleging that the AO failed to make sufficient inquiries into unverifiable commission payments amounting to ?9,25,000. The CIT deemed the AO's order erroneous and prejudicial to the interest of the Revenue. 2. Adequacy of the Assessing Officer's (AO) inquiry into the commission payments made by the assessee: The assessee argued that during the regular assessment proceedings, it had provided evidence of commission payments to M/s. Wise Agencies Pvt. Ltd., including TDS deduction and remittance through banking channels. The AO had issued a notice under Section 142(1) and received satisfactory responses from the assessee. The CIT, however, contended that the AO did not conduct adequate inquiries beyond the documents submitted by the assessee. The CIT criticized the AO for not issuing a notice under Section 133(6) to verify the genuineness of the transactions independently. The assessee countered that the AO had indeed made inquiries and accepted the commission payments as genuine. The CIT's order was based on the premise that the AO's inquiries were inadequate, not non-existent. The assessee cited several case laws to support its argument that the CIT cannot revise an order merely because he disagrees with the AO's view if the AO's view is one of the possible views permissible in law. 3. The role of the Commissioner of Income Tax (CIT) in determining the erroneous and prejudicial nature of the AO's order: The CIT's role under Section 263 is to ensure that the AO's order is not only erroneous but also prejudicial to the interest of the Revenue. The CIT must provide reasons to show that the AO's order is unsustainable in law. In this case, the CIT argued that the AO did not conduct sufficient inquiries into the commission payments. However, the assessee provided evidence that the AO had made inquiries and accepted the commission payments as genuine. The tribunal examined various judgments, including those from the Supreme Court and High Courts, which established that the CIT cannot revise an order merely because he believes further inquiries were needed. The CIT must demonstrate that the AO's order is erroneous and prejudicial to the Revenue, which was not established in this case. Conclusion: The tribunal concluded that the CIT's exercise of powers under Section 263 was not justified. The AO had made inquiries and accepted the commission payments as genuine. The CIT's order was based on the premise of inadequate inquiries, not non-inquiry. The tribunal upheld the assessee's contention that the CIT's order was bad in law and quashed the order passed under Section 263. The appeal of the assessee was allowed.
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