2016 (5) TMI 91 - AT - Income Tax

Revision u/s 263 - addition on the basis of seized documents - Held that - It is admitted fact that during the course of search, the seized paper as was recovered, was a cancelled/crossed document. Therefore, there is no question of considering the same against the assessee, that too when the same is not signed by the assessee-company. Furthermore, when the original seized document pages 34-35 of annexure A-9 was considered and discussed in detail and it is held by the appellate authorities that no addition could be made on the basis of the same cancelled document against the assessee, there is no question of considering the same against the assessee on the basis of copy of the same seized document. When the matter in issue has already been examined by the appellate authorities, prior to the proceedings under section 263 of the Act, the learned Principal Commissioner of Income-tax should not have resorted to the present proceedings under section 263. When the order of the Assessing Officer is merged with the orders of the appellate authorities, therefore, proceedings under section 263 of the Act on the same matter in issue could not be resorted to in view of the Explanation (c) of sub section (1) of section 263 of the Act. In this case, the Assessing Officer examined the seized document at the assessment stage and his order has been set aside by the appellate authorities, therefore, there is no question of considering his order to be erroneous in so far as prejudicial to the interests of the Revenue. In this case, when the seized document itself was not relied upon by the appellate authorities, the copy of the same agreement as was received through independent sources, as stated by the learned Principal Commissioner of Income-tax would not make any difference in favour of the Revenue. - Decided in favour of assessee.

Issues Involved:
1. Validity of the addition under section 69B of the Income-tax Act based on the seized documents.
2. Jurisdiction of the Principal Commissioner of Income-tax under section 263 of the Income-tax Act.
3. Relevance and admissibility of the seized documents and their copies in the assessment and revision proceedings.

Detailed Analysis:

1. Validity of the Addition under Section 69B of the Income-tax Act Based on the Seized Documents:

The original return filed by the assessee declared nil income. A search under section 132 of the Income-tax Act led to the seizure of documents (pages 34-35 of annexure A-9) from the office premises of M/s. Narain and Co. The Assessing Officer confronted the assessee with these documents, proposing to adopt the purchase rate of land at Rs. 6,50,000 per bigha. The assessee argued that the documents did not belong to them and were canceled agreements with no mention of the assessee or its directors. The Assessing Officer, however, concluded that the assessee had paid an additional Rs. 23,62,500 for the land, leading to an addition under section 69B.

The addition was challenged before the Commissioner of Income-tax (Appeals), who deleted it, noting that no evidence of payment over and above the recorded amount was found during the search. The Tribunal upheld this decision, dismissing the Departmental appeal.

2. Jurisdiction of the Principal Commissioner of Income-tax under Section 263 of the Income-tax Act:

The Principal Commissioner of Income-tax issued a show-cause notice under section 263, arguing that the Assessing Officer failed to make an addition for the remaining 44 bighas of land, which should have led to an additional Rs. 2,31,00,000. The Principal Commissioner directed a fresh assessment, contending that the original assessment order was erroneous and prejudicial to the interests of the Revenue.

The assessee contended that the same issue had already been addressed by the appellate authorities, and the Principal Commissioner had no jurisdiction to invoke section 263. The Tribunal agreed, noting that the matter had been considered and decided in appeal, thus falling outside the scope of section 263 as per Explanation (c).

3. Relevance and Admissibility of the Seized Documents and Their Copies in the Assessment and Revision Proceedings:

The Tribunal emphasized that the seized documents were canceled agreements not belonging to the assessee. The Principal Commissioner relied on a copy of the seized document received from independent sources, which was not part of the original search. The Tribunal held that the copy of the document was inadmissible, especially since the original had been dismissed by the appellate authorities.

The Tribunal referred to the case of CIT v. Shalimar Housing and Finance Ltd., where it was established that issues already considered in appeal could not be revisited under section 263. The Tribunal also cited the Supreme Court's ruling in Malabar Industrial Co. Ltd. v. CIT, which stated that an order could not be deemed erroneous if the Assessing Officer adopted one of the permissible views.

Conclusion:

The Tribunal concluded that the Principal Commissioner exceeded his jurisdiction under section 263, as the matter had already been adjudicated by the appellate authorities. The proceedings under section 263 were deemed unjustified and unreasonable, leading to the quashing of the impugned order and allowing the appeal of the assessee.

← Previous Next →