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2017 (8) TMI 1547 - HC - Income TaxRevision u/s 263 - Whether assessment order contrary to provision of Section 143(3) i.e. scrutiny assessment can not be supervised under revisionary powers given u/s 263 when income to the tune of ₹ 20 crore approximately is neither examined or verified by the Assessing Officer immediately before his retirement? - HELD THAT - When the assessee has filed reply dated 31.08.2009 and when he has specifically contended that in the assessment proceedings, he has filed different reply than what has been referred by the assessee in its reply before the CIT (A) on different dates which has not been considered by the CIT(A), even the explanations which are given of all the six grounds are not considered, therefore, rejection of contention of the assessee and then without consideration of remaining questions remanding the matter back and passing the order under Section 263 requires to be considered and the Tribunal has not committed any error in setting aside the order of CIT u/s 263. In our considered opinion, the conduct of the Commissioner of Income Tax-III while passing the order dated 12.10.2009 as under - In view of above stated facts the order passed by the AO under section 143(3) of the IT. Act, 1961 is not only erroneous but is also prejudicial to the interest of revenue. After taking into the fact and circumstances of the case the order u/s 143(3) of the Act dated 27.10.2008 is set-aside to be made de-novo. The AO is directed to made fresh assessment order after proper examination of the issues discussed above and investigations where- ever are necessary. When no other material was placed before CIT (A), requires serious consideration by the Chief Commissioner of Income Tax. The appropriate proceedings, if he is in service or retired, be taken to put his house in order. - Decided in favour of assessee
Issues Involved:
1. Whether the assessment order contrary to the provision of Section 143(3) can be supervised under revisionary powers given u/s 263 of the Income Tax Act when significant income is neither examined nor verified by the Assessing Officer. Issue-wise Detailed Analysis: 1. Scrutiny Assessment and Revisionary Powers under Section 263: The appellant challenged the tribunal's decision that allowed the assessee's appeal against the order passed under Section 263 of the Income Tax Act. The primary question was whether an assessment order, allegedly passed without proper scrutiny and verification of significant income, could be revised under Section 263. Arguments by the Appellant: The appellant argued that the Assessing Officer (AO) passed the assessment order hastily, without examining the file or the relevant material, and without providing reasons or evidence. The appellant highlighted six specific points raised by the Commissioner of Income Tax (Appeals) [CIT(A)], including the lack of examination of quantitative details of manufacturing/exporting goods, nature of payments to various parties, verification of local purchases, examination of mutual fund investments, source of investment in immovable properties, and the relationship and transactions with M/s Amrapali Jewels Pvt. Ltd. CIT(A)’s Observations: CIT(A) noted that the AO accepted the returned income without discussing the issues raised, and no investigation was made into the details provided by the assessee. The CIT(A) concluded that the AO's order was erroneous and prejudicial to the revenue's interest, thus justifying the revision under Section 263. Arguments by the Respondent: The respondent argued that the Tribunal correctly set aside the CIT(A)’s order under Section 263. The Tribunal observed that the AO had made inquiries, obtained replies, and then passed the assessment order. The CIT’s grievance was about the depth of the inquiries, not the lack thereof. The Tribunal held that the CIT could not establish how the AO's order was erroneous and prejudicial to the revenue, thus restoring the AO's original order. Legal Precedents Cited: - Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax: The Supreme Court held that Section 263 could be invoked when an order is erroneous and prejudicial to the revenue. An order passed without application of mind or without proper inquiry can be revised. - Commissioner of Income Tax, Central-I, Kolkata vs. Maithan International: The Calcutta High Court emphasized that an AO must conduct a faithful and fruitful investigation. Orders passed without proper inquiry are erroneous and prejudicial to the revenue. - Commissioner of Income Tax vs. Deepak Real Estate Developers (I) (P) Ltd.: The Rajasthan High Court upheld that revisional powers under Section 263 are limited and cannot be invoked merely for a change of opinion. - Income Tax Officer vs. DG Housing Projects Ltd.: The Delhi High Court stated that in cases of inadequate inquiry, the CIT must establish the error or mistake made by the AO. - Commissioner of Income Tax vs. Sunbeam Auto Ltd.: The Delhi High Court differentiated between lack of inquiry and inadequate inquiry, stating that the latter does not justify revision under Section 263. Conclusion: The Rajasthan High Court dismissed the appellant's appeal, agreeing with the Tribunal's decision. The court held that the Tribunal correctly set aside the CIT’s order under Section 263, as the AO had made inquiries and obtained replies before passing the assessment order. The CIT’s dissatisfaction with the depth of the inquiries did not justify the revision. The court emphasized that the CIT must provide clear and unambiguous findings to establish that the AO's order was erroneous and prejudicial to the revenue, which was not done in this case. The appeals were dismissed, and the issue was resolved in favor of the assessee.
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