2016 (5) TMI 963 - AT - Income Tax

Revision u/s 263 - Held that - In the assessment order, merely, it has been mentioned that the details/explanation called for have been examined and placed on record and further that the receipt on account of sale of wind power, sale of flats from projects and stock of unsold projects. Next issue discussed in the assessment order is with respect to disallowance of depreciation on motor car and no discussion has been made with respect to section 36(1)(iii) along with explanation 8 to section 43(1), while allowing the interest on borrowing. Likewise, no discussion has been made with respect to investment of ₹ 5.31 crores in UTI mutual funds, wherein, dividend of ₹ 2.53 lakhs was claimed as exempt. It is also noted that during the year, fresh interest free unsecured loans were raised, amounting to ₹ 3.74 cores from Om Prakash and Company and ₹ 7.19 crores from Reshma Kukreja. The Ld. Assessing Officer neither examined the genuineness of loans, its creditworthiness, in the light of applicability of section 68 of the Act. Taking fresh loan by the assessee was not even contradicted by the assessee. In view of this factual matrix, we agree with the finding of the ld. Commissioner that the assessment order is erroneous as well as prejudicial to the interest of Revenue. The Assessing Officer neither conducted proper enquiries nor applied his mind on the issues, thus, the order is erroneous and prejudicial to the interest of the Revenue - Decided against assessee.

Issues:
1. Revisional jurisdiction u/s 263 of the Income Tax Act invoked by the Commissioner of Income Tax, Mumbai.
2. Assessment order under section 143(3) of the Act challenged by the assessee.
3. Contentions regarding erroneous assessment order and prejudicial to the interest of Revenue.
4. Arguments on inadequate inquiry by the Assessing Officer.
5. Justification of invoking revisional jurisdiction by the Commissioner.
6. Directions given in the impugned order for re-examination of specific issues.

Issue 1: Revisional Jurisdiction u/s 263
The Tribunal considered the correctness of the order passed by the Commissioner invoking revisional jurisdiction under section 263 of the Income Tax Act. The Tribunal emphasized that an order can be deemed erroneous if there is an incorrect assumption of fact or law. It was highlighted that for revision to be permissible, the order must be both erroneous and prejudicial to the interest of Revenue. The Tribunal referred to various judicial precedents to support the Commissioner's authority to revise orders to prevent revenue leakage.

Issue 2: Assessment Order Challenge
The assessee contended that the assessment order under section 143(3) was completed after due consideration and application of mind by the Assessing Officer. The assessee argued that the revisional jurisdiction invoked by the Commissioner was not justified as the assessment order was not erroneous. However, the Tribunal noted discrepancies in the assessment order, such as lack of discussion on crucial issues like disallowance of depreciation and investment in mutual funds, leading to a finding that the order was indeed erroneous and prejudicial to the interest of Revenue.

Issue 3: Erroneous Assessment Order
The Tribunal analyzed the contentions of both parties regarding the erroneous nature of the assessment order. It was observed that the Assessing Officer failed to conduct proper inquiries and overlooked critical aspects, indicating errors in the assessment process. The Tribunal agreed with the Commissioner's decision to set aside the issues for re-examination to ensure a fair assessment, emphasizing the importance of addressing errors that could impact revenue collection.

Issue 4: Inadequate Inquiry
The Tribunal addressed the argument of inadequate inquiry raised by the assessee, noting that the Assessing Officer did not thoroughly examine essential aspects like the genuineness of loans and applicability of relevant sections of the Act. This lack of scrutiny led to a finding that the order was erroneous and prejudicial to the interest of Revenue, justifying the invocation of revisional jurisdiction by the Commissioner.

Issue 5: Justification of Revisional Jurisdiction
The Tribunal evaluated the Commissioner's justification for invoking revisional jurisdiction under section 263, emphasizing the need to correct erroneous orders that could impact revenue administration. The Tribunal supported the Commissioner's decision based on the facts of the case and the directions provided in the impugned order, ensuring a fair re-examination of the issues to prevent any prejudice to the Revenue.

Issue 6: Directions for Re-examination
The Tribunal examined the specific directions given in the impugned order for re-examination of issues related to unsecured loans, depreciation, and exempt income. It was noted that the Commissioner's directions aimed at a thorough and unbiased assessment process, providing the assessee with an opportunity to contest observations and ensuring a fair decision-making process by the Assessing Officer.

In conclusion, the Tribunal upheld the Commissioner's decision to invoke revisional jurisdiction under section 263, dismissing the appeal of the assessee based on the findings of errors in the assessment order that were prejudicial to the interest of Revenue. The Tribunal emphasized the importance of conducting proper inquiries and addressing discrepancies to maintain the integrity of the assessment process and revenue collection.

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