2017 (2) TMI 1522 - AT - Income Tax

Revision u/s 263 - Distinction between lack of enquiry and inadequate enquiry - Unexplained deposits in the bank accounts - HELD THAT - We find that assessee had submitted copy of bank accounts and had also requested Assessing Officer to verify from the banks statements that the money deposited in banks were paid to agents and if the work was not done, the same was returned. In view of the above facts and circumstance, we find that AO during assessment proceedings had duly verified the entries in the banks statement and therefore had arrived at the conclusion that the deposits represented business transactions and had taken a plausible view and therefore the provisions of section 263 were not applicable. Provisions of section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer. It is only when an order is erroneous that the section will be attracted. Before invoking provisions of section 263 of the Act one has to keep in mind the distinction between lack of enquiry and inadequate enquiry . If there was any enquiry, even thought inadequate it would not in itself empower CIT to invoke provisions of section 263 of the Act merely because he had different opinion in the matter. It is only in cases of lack of enquiry that such a course of action would be available to CIT. Cross objections filed by revenue u/s 253(4) - We find that the AO or assessee on receipt of notice that an appeal against the order of Deputy Commissioner (Appeal) or Commissioner (Appeal) has been preferred by either party and then the other party can file the cross objections. In the present case, the order passed by the CIT u/s 263 has not been passed by Deputy Commissioner (Appeal) or the Commissioner (Appeal) and rather it has been passed by Principal Commissioner and therefore the provisions relating to cross objections as contained in section 253(4) are not applicable and hence, the cross objections filed by revenue are not maintainable.

Summary

Issues Involved:
1. Validity of the order passed under section 263 of the Income Tax Act.
2. Delay in filing the appeal by the assessee.
3. Maintainability of cross objections filed by the revenue.

Detailed Analysis:

1. Validity of the Order Passed Under Section 263 of the Income Tax Act:

The primary issue in this case revolves around the order passed by the Learned Principal Commissioner of Income Tax (Pr. CIT) under section 263 of the Income Tax Act. The Pr. CIT was dissatisfied with the original assessment order, wherein the Assessing Officer (AO) had treated the deposits in the assessee’s bank accounts as business receipts and calculated income at the rate of 10%. The Pr. CIT believed the AO should have added the entire amount of Rs. 55,25,758 as income, not just 10%.

The assessee argued that the order passed by the AO was neither erroneous nor prejudicial to the interest of the revenue and hence, the provisions of section 263 were not applicable. The assessee cited various judicial precedents to support this stance, including Malabar Industries Co. Ltd. vs. CIT, where it was held that for section 263 to be invoked, the order must be both erroneous and prejudicial to the revenue. The tribunal found that the AO had made sufficient enquiries and had examined the bank statements, concluding that the deposits represented business receipts. Therefore, the AO had taken a plausible view, and the provisions of section 263 were not applicable.

2. Delay in Filing the Appeal by the Assessee:

There was a delay of 12 days in filing the appeal by the assessee, attributed to the assessee suffering from typhoid. The tribunal condoned the delay after the respondent (DR) raised no objection. The tribunal accepted the duly sworn affidavit provided by the assessee and allowed the AR to proceed with the arguments.

3. Maintainability of Cross Objections Filed by the Revenue:

The revenue filed cross objections against the grounds taken by the assessee. However, the tribunal found these cross objections to be not maintainable. According to section 253(4) of the Income Tax Act, cross objections can only be filed in response to an appeal against the order of the Deputy Commissioner (Appeals) or the Commissioner (Appeals). Since the order under section 263 was passed by the Principal Commissioner, the provisions for cross objections were not applicable. Consequently, the cross objections filed by the revenue were dismissed.

Conclusion:

The tribunal allowed the appeal filed by the assessee, quashing the order passed under section 263. It was concluded that the AO had taken a plausible view supported by the facts and circumstances of the case, and hence, the provisions of section 263 were not applicable. The cross objections filed by the revenue were dismissed as they were not maintainable under the specific provisions of the Act. The order was pronounced in the open Court on 27.02.2017.