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2014 (2) TMI 1408 - AT - Income TaxRevision u/s 263 - CIT directing AO to make verification/investigation on cash gifts - HELD THAT - Ld. CIT had not applied his mind but the matter was referred by the AO for initiating the proceeding under section 263 - In the present case it is noticed that the notice dated 17/01/2013 under section 263 of the Act was issued only on receipt of the proposal under section 263 from the ITO, Ward-2(2), Kota and the assessee explained, vide written submission which has been reproduced in para 4 of the impugned order, each and every objection raised by the ITO, Ward-2(2), Kota. It is well settled that the Ld. CIT while exercising the revisionary powers under section 263 of the Act may call for and examine the records of any proceedings and thereafter if he considers that any order passed therein is erroneous insofar as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justified. Therefore, before taking any action, Ld. CIT himself shall apply his mind after examining the record of any proceedings and his satisfaction is must As in the present case, the satisfaction was of the ITO (Tech.) who proposed action under section 263 of the Act, but not of the Ld. CIT. Therefore, issuance of notice under section 263 of the Act on the basis of the proposal made by the ITO was void ab initio. We, therefore, set aside the same. Appeal of assessee allowed.
Issues Involved:
1. Legality of the order passed under section 263 by the Commissioner of Income Tax (CIT). 2. Directive to the Assessing Officer (AO) for verification/investigation of cash gifts received by the assessee. Issue-wise Detailed Analysis: 1. Legality of the Order Passed Under Section 263 by the Commissioner of Income Tax (CIT): The primary contention of the assessee was that the order passed under section 263 by the CIT was illegal and bad in law. The assessee argued that the CIT did not call for and examine the record himself before initiating proceedings under section 263 but relied on a proposal received from the Income Tax Officer (ITO), Ward-2(2), Kota. The assessee cited several case laws to support this contention, emphasizing that the CIT must independently examine the records and form an opinion that the order passed by the AO was erroneous and prejudicial to the interests of the revenue. The Tribunal noted that the ITO, Ward-2(2), Kota, proposed action under section 263, and it was not the CIT who called for and examined the records. The Tribunal observed that the satisfaction for initiating proceedings under section 263 must be of the CIT and not based on the proposal of the ITO. The Tribunal cited various decisions, including Rajiv Arora Vs. CIT (2011) 131 ITD 58 (Jp.), Jheendu Ram Vs. CIT (2011) 7 ITR (Trib.) 463 (Lucknow), and others, to support the view that the CIT must apply his mind independently. Consequently, the Tribunal held that the issuance of notice under section 263 based on the ITO's proposal was void ab initio and set aside the same. 2. Directive to the Assessing Officer for Verification/Investigation of Cash Gifts Received by the Assessee: The assessee received cash gifts totaling Rs. 10 lakhs from family members, which were scrutinized during the assessment under section 143(3). The AO made partial additions to the income, treating a portion of the gifts as undisclosed income. The CIT, however, directed the AO to conduct further verification and investigation, considering the initial assessment as erroneous and prejudicial to the revenue. The Tribunal examined the facts and submissions, noting that the AO had already made certain additions after considering the explanations and documents provided by the assessee. The Tribunal emphasized that the CIT should have independently verified the records before concluding that the AO's order was erroneous. The Tribunal found that the CIT's direction for further verification was based on the proposal from the ITO rather than an independent examination by the CIT. The Tribunal concluded that the CIT's order under section 263 was not justified as it was based on the ITO's proposal without the CIT independently examining the records. Therefore, the Tribunal set aside the CIT's order and allowed the appeal of the assessee. Conclusion: The Tribunal allowed the appeal of the assessee, setting aside the CIT's order under section 263, on the grounds that the CIT did not independently examine the records and relied solely on the proposal from the ITO. The Tribunal emphasized the necessity for the CIT to apply his mind independently before initiating proceedings under section 263.
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