2016 (5) TMI 1162 - AT - Income Tax

Revision u/s 263 - CIT has taken the view that the assessing officer has completed the assessments without making proper enquiries with regard to the incriminating documents - Held that - It cannot be held that the assessing officer did not carry out enquiry or verification which should have been done, since the facts and circumstances of the case and the incriminating document was not considered to be strong by the AO to implicate the assessee. Thus, we are of the view that the assessing officer has taken a plausible view in the facts and circumstances of the case. Even though the Ld Pr. CIT has drawn certain adverse inferences from the document, yet it can seen that they are debatable in nature. Further, as noticed earlier, the Ld Pr. CIT has not brought any material on record by making enquiries or verifications to substantiate his inferences. He has also not shown that the view taken by him is not sustainable in law. Thus, we are of the view that the Ld Pr. CIT has passed the impugned revision orders only to carry out fishing and roving enquiries with the objective of substituting his views with that of the AO. Hence we are of the view that the Ld Pr. CIT was not justified was not correct in law in holding that the impugned assessment orders were erroneous. At the time of hearing, it was pointed out to Ld D.R that there are references to various names such as Mumbai Naveen, Ravi Mumbai, Vijaya Mum, Sanjeev Shetty etc. Further the entries are dated from March 99 to February, 2012. Under these set of facts, a specific question was asked to Ld D.R as to how these entries can transalate into income in the hands of the assessee, since the same lists out payments made to various persons on various dates. Unless it is established that these payments can be taken as income in the hands of the assessee, they cannot be assessed in his hands. In that case, it cannot be said that these entries would cause any prejudice to the interests of the revenue, if they are not assessable in the hands of the assessee. The Ld D.R replied that these aspects require examination at the end of the assessing officer. The said stand taken by the department clearly shows that they are also not sure as to whether these entries could be considered as income in the hands of the assessee. Further, we notice that the Ld Pr. CIT has not brought on record any material to show that these amounts were paid to the assessee or on his behalf. Even if it is considered for a moment that the assessee could be linked with it, without showing that the entries noted down in the impugned document results in income in the hands of the assessee, in our considered view, it cannot be said that the assessment orders passed by the AO could be taken as prejudicial to the interests of the revenue. Accordingly we are of the view that the revision orders passed by Ld Pr. CIT falls on this ground also. - Decided in favour of assessee.

Issues Involved:
1. Validity of revision orders passed under section 263 of the Income Tax Act.
2. Examination and verification of evidence found during search operations.
3. Whether the assessment orders were erroneous and prejudicial to the interests of revenue.

Detailed Analysis:

1. Validity of Revision Orders Passed Under Section 263 of the Income Tax Act:
The appeals filed by the assessee challenge the validity of the revision orders passed by the Principal Commissioner of Income Tax (Pr. CIT) under section 263 of the Income Tax Act. The Pr. CIT held that the assessment orders for the years 2007-08 and 2008-09 were erroneous and prejudicial to the interests of revenue. The assessee contended that the revision proceedings were not valid as the Assessing Officer (AO) had already examined the evidence and accepted the explanations provided by the assessee.

2. Examination and Verification of Evidence Found During Search Operations:
The case was reopened based on information received from the Bangalore office of Income Tax, which carried out search and seizure operations in the case of M/s R.N.S Infrastructure Ltd. Certain documents indicating payments made to persons holding public office were seized, including details under the heading "Rane CM." The AO completed the assessments without making any additions, accepting the assessee's explanations that the incriminating documents did not relate to him. The Pr. CIT, however, observed that the AO did not adequately examine and verify the issues by correlating the evidence found during the search.

3. Whether the Assessment Orders Were Erroneous and Prejudicial to the Interests of Revenue:
The Pr. CIT held that the AO's failure to make necessary inquiries and verification resulted in incorrect computation of income, making the assessment orders erroneous and prejudicial to the interests of revenue. The assessee argued that the AO had reopened the assessments specifically to assess the income noticed in the incriminating documents and had conducted detailed inquiries, ultimately deciding that no additions were necessary. The assessee relied on various case laws to support the contention that the revision proceedings under section 263 were not justified.

Judgment:
The Tribunal held that the Pr. CIT did not conduct necessary inquiries or verification to show that the AO's findings were erroneous. The Tribunal observed that the AO had reopened the assessments based on the incriminating documents and had made inquiries, but was satisfied with the explanations provided by the assessee. The Tribunal noted that the Pr. CIT initiated revision proceedings because he believed the AO should have conducted inquiries in a particular manner, which is not permissible under section 263.

The Tribunal cited several legal precedents, including judgments from the Hon'ble Supreme Court and High Courts, to emphasize that an order cannot be deemed erroneous unless it is not in accordance with law. The Tribunal concluded that the AO had taken a plausible view based on the evidence and explanations provided, and the Pr. CIT's revision orders were not justified. The Tribunal also highlighted that the Pr. CIT failed to show how the entries in the incriminating documents could translate into income in the hands of the assessee, thereby failing to establish that the assessment orders were prejudicial to the interests of revenue.

Conclusion:
The Tribunal set aside the revision orders passed by the Pr. CIT for the assessment years 2007-08 and 2008-09, allowing the appeals filed by the assessee. The Tribunal concluded that the Pr. CIT failed to demonstrate that the assessment orders were erroneous and prejudicial to the interests of revenue, as required under section 263 of the Income Tax Act.

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