2016 (4) TMI 250 - AT - Income Tax

Revision u/s 263 - Held that - The present case of assessee is squarely covered in its favour by the various decisions of Hon ble Jurisdictional High Court including decision in the case of CIT Vs Joyti Foundations (2013 (7) TMI 483 - DELHI HIGH COURT) wherein it was held that only in the case of no enquiry provisions of section 263 of the Act can validly invoked otherwise in the case of proper enquiry the enquiry cannot be alleged as inadequate or insufficient and on this basis provisions of section 263 of the Act cannot be invoked and the ld. CIT(A) should conduct enquire himself to record finding that assessment order was erroneous and prejudicial to the interest of the Revenue specially when the conclusion of the AO is not contrary to the provisions of the Act and the same is according to the law and sustainable. Their Lordship held that the ld. CIT(A) should not have set aside the order and directed the AO to conduct the enquiry without any conclusion. From the vigilant reading of the impugned order we observe that the ld. CIT(E) without any conclusive findings and observation only on the basis of suspicion and doubts held that the assessment order is erroneous and prejudicial to the interest of the Revenue and directed the AO to examine the issue afresh setting aside the order which is not permissible - Decided in favour of assessee

Summary

Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act.
2. Erroneous and prejudicial assessment order under Section 143(3).
3. Adequacy of inquiries conducted by the Assessing Officer (AO).
4. Specific discrepancies and documentary evidence.
5. Basis for invoking Section 263.
6. Consistency in allowance of claims.

Issue-wise Detailed Analysis:

1. Jurisdiction under Section 263 of the Income Tax Act:
The appellant contended that the Commissioner of Income Tax (Exemptions) [CIT(E)] erred in invoking jurisdiction under Section 263 of the Act, claiming that the original assessment was completed with due inquiries and that the CIT(E)'s action was without valid basis.

2. Erroneous and Prejudicial Assessment Order under Section 143(3):
The CIT(E) held that the assessment order passed under Section 143(3) was erroneous and prejudicial to the interest of the Revenue. The appellant argued that the AO made necessary inquiries and that the CIT(E) drew conclusions without appreciating the due process followed by the AO.

3. Adequacy of Inquiries Conducted by the AO:
The appellant provided detailed responses to the AO's queries during the assessment proceedings, including confirmations from donors and relevant documents. The CIT(E) alleged inadequate inquiry but did not provide conclusive findings, leading to the appellant's claim that the CIT(E) acted on suspicion without specific discrepancies.

4. Specific Discrepancies and Documentary Evidence:
The CIT(E) claimed that the AO accepted the appellant's claims without proper verification. However, the appellant provided documentary evidence and explanations during the assessment, which the AO considered. The Tribunal noted that the AO's inquiries were adequate and that the CIT(E) did not identify specific discrepancies.

5. Basis for Invoking Section 263:
The CIT(E) invoked Section 263 on the grounds of inadequate inquiry and prejudicial impact on revenue. The Tribunal, referencing case law, emphasized that an order could only be revised under Section 263 if it was erroneous and prejudicial to the revenue. The Tribunal found that the AO conducted sufficient inquiries, and the CIT(E)'s action lacked a valid basis.

6. Consistency in Allowance of Claims:
The appellant argued that the AO allowed claims based on consistency with previous assessments, particularly regarding room rent receipts and investments in land. The Tribunal agreed, noting that the AO's conclusions were consistent with the law and previous assessments, and the CIT(E) failed to provide new facts or sound allegations to challenge this consistency.

Conclusion:
The Tribunal concluded that the AO conducted required and adequate inquiries on all issues raised by the CIT(E). The AO's conclusions were found to be sustainable and in accordance with the law. The Tribunal held that the CIT(E) acted on suspicion without conclusive findings, and the invocation of Section 263 was not justified. The Tribunal quashed the notice and order under Section 263, allowing the appellant's appeal.

Final Judgment:
The appeal of the appellant society was allowed, and the impugned notice and order under Section 263 were quashed. The order was pronounced in the open court on 02/03/2016.