2016 (6) TMI 783 - AT - Income Tax

Revision u/s 263 - addition u/s 69 - Held that - The fact of issuing of notice under section 148 is mentioned in the assessment order itself. However, in the assessment year 2008-09, we find that no such regularisation under section 148 has been mentioned in the assessment order and, therefore, in this year the revised return was after the prescribed period of time. The due date for filing the revised return in this year is March 31, 2010, whereas the revised return has been filed on June 24, 2010. Therefore it is correct that the Assessing Officer should not have taken cognizance of the revised return as the assessee had filed the revised return beyond the prescribed period of time. But the question remains that whether the Assessing Officer could have ignored such revised return. It was not even necessary on the part of the assessee to file the revised return as he could have claimed during the assessment proceedings itself that the bank deposits reflected the turnover of the assessee from retail trade because the claim of the assessee being engaged in retail trade was open to scrutiny and the Assessing Officer had carried sufficient enquiries in this respect. Therefore, these are not the cases where no enquiry has been done. In the present cases, the Assessing Officer has completed the assessments after accepting the submissions of the assessee that the bank deposits reflected the turnover from retail business whereas in the opinion of the learned Commissioner of Income-tax the additions should have been made under section 69 of the Act. The honourable Supreme Court in the case of Max India Ltd. 2007 (11) TMI 12 - Supreme Court of India has held that where two views are possible and the Assessing Officer has taken one of the views with which the Commissioner does not agree it cannot be treated as erroneous or prejudicial to the interest of the Revenue unless the view taken by Assessing Officer is unsustainable in law. THus we are in agreement with the arguments of learned authorised representative that the Assessing Officer had passed orders after due application of mind and these are not the cases fit for action under section 263. - Decided in favour of assessee

Summary

Issues Involved:
1. Validity of the order passed under section 263 by the Commissioner of Income-tax.
2. Adequacy of the Assessing Officer's inquiry and application of mind in the assessment process.
3. Legitimacy of considering revised returns filed beyond the statutory period.

Issue-wise Detailed Analysis:

1. Validity of the order passed under section 263 by the Commissioner of Income-tax:

The primary issue in both appeals was the validity of the order passed under section 263 by the Commissioner of Income-tax. The Tribunal found that the Assessing Officer (AO) had completed the assessment under section 143(3) after due application of mind. The AO had issued a questionnaire and made inquiries, including asking for details of the business income declared under section 44AF. The AO was satisfied with the assessee's responses and the applicability of section 44AF, which led to the completion of the assessment without further inquiry. The Tribunal noted that the AO's order, though not elaborately written, was not erroneous. Reliance was placed on various judicial precedents, including CIT v. Max India Ltd., CIT v. Kelvinator of India Ltd., and Malabar Industrial Co. Ltd. v. CIT, which established that if the AO adopts one of the possible views, it cannot be termed erroneous or prejudicial to the interests of the Revenue.

2. Adequacy of the Assessing Officer's inquiry and application of mind in the assessment process:

The Tribunal examined whether the AO had made adequate inquiries during the assessment process. It was found that the AO had indeed made sufficient inquiries, including asking for a cash flow statement and sales tax/VAT returns. The assessee had provided detailed replies, including a reliance on the decision of the ITAT Amritsar Bench in a similar case. The Tribunal concluded that the AO had applied his mind and made necessary inquiries, thus the action under section 263 was not warranted. The Tribunal emphasized the distinction between "lack of inquiry" and "inadequate inquiry," citing the Delhi High Court's decision in CIT v. Sunbeam Auto Ltd., which held that even if the inquiry was inadequate, it would not justify action under section 263 if the AO had applied his mind.

3. Legitimacy of considering revised returns filed beyond the statutory period:

For the assessment year 2007-08, the Tribunal found that the AO had regularized the revised return by issuing a notice under section 148, thus making it a valid return filed under section 148. However, for the assessment year 2008-09, the revised return was filed beyond the statutory period, and the AO should not have taken cognizance of it. Despite this, the Tribunal noted that the AO could have considered the bank deposits as turnover from retail trade during the assessment proceedings without the need for a revised return. The Tribunal concluded that the AO had made sufficient inquiries and accepted the assessee's claim under section 44AF, thus the order was not erroneous or prejudicial to the interests of the Revenue.

Conclusion:

The Tribunal allowed the appeals filed by the assessee, holding that the AO had made sufficient inquiries and applied his mind during the assessment process. The orders passed by the AO were not erroneous or prejudicial to the interests of the Revenue, and thus, the action under section 263 by the Commissioner of Income-tax was not justified. The appeals were allowed, and the orders under section 263 were set aside.