2009 (5) TMI 18 - HC - Income Tax

Opportunity of being heard - Order-in-Revision refers to issues and discrepancies which did not find mention in the initial notice - Therefore, to suggest that it would be sufficient compliance of the provisions of Section 263, if an opportunity to respond to the discrepancies mentioned in the Order-in-Revision is given to the assessee in reassessment proceedings before the Assessing Officer, is according to us is completely untenable - It is the requirement of Section 263 that the assessee must have an opportunity of being heard in respect of those errors which the Commissioner proposes to revise. To accord an opportunity after setting aside the assessment order, would in our view not meet the mandate the Section 263

Summary

Issues Involved:
1. Examination of books of accounts.
2. Verification of parties summoned under Section 131.
3. Voluntary offer of additional income by the assessee.
4. Acceptance of income declared for other properties.
5. Examination of books and vouchers for other properties.
6. Expenses payable by the assessee.
7. Bank Reconciliation Statement.
8. Sale of Shop No. 5 in Malviya Nagar.
9. Dropping of penalty proceedings under Section 271(1)(c).

Issue-wise Detailed Analysis:

1. Examination of Books of Accounts:
The Commissioner noted that the Assessing Officer (AO) did not examine the books of accounts of the assessee and did not initiate penalty proceedings under Section 271(1)(b) for non-compliance with statutory notices. The Tribunal, however, found that the assessee had submitted various details and documents during the scrutiny process, indicating that the books of accounts were indeed examined.

2. Verification of Parties Summoned under Section 131:
The Commissioner raised concerns that the AO did not verify the parties summoned under Section 131 and did not record their statements on oath. The Tribunal observed that the AO had issued summons and sought details from the summoned parties, fulfilling the requirements under Section 131.

3. Voluntary Offer of Additional Income by the Assessee:
The Commissioner believed that the AO should have further investigated the additional income of Rs 8 lakhs voluntarily offered by the assessee from the Malviya Nagar property. The Tribunal found that the AO had considered the additional income and included it in the taxable income, indicating that the matter was adequately addressed.

4. Acceptance of Income Declared for Other Properties:
The Commissioner questioned the basis on which the AO accepted the income declared for properties at Gitanjali Enclave and Defence Colony. The Tribunal noted that the assessee had provided detailed information and documents regarding these properties, and the AO had examined these details during the scrutiny process.

5. Examination of Books and Vouchers for Other Properties:
The Commissioner criticized the AO for not examining the books and vouchers related to the Gitanjali Enclave and Defence Colony properties. The Tribunal found that the assessee had submitted relevant details and documents, and the AO had scrutinized these during the assessment process.

6. Expenses Payable by the Assessee:
The Commissioner highlighted that the AO did not query the expenses payable by the assessee amounting to Rs 11,00,734/-. The Tribunal observed that the assessee had provided details of these expenses, and the AO had considered them during the assessment.

7. Bank Reconciliation Statement:
The Commissioner noted that the AO did not raise queries regarding the Bank Reconciliation Statement. The Tribunal found that the assessee had submitted the Reconciliation Statement and related details, which were considered by the AO.

8. Sale of Shop No. 5 in Malviya Nagar:
The Commissioner pointed out discrepancies in the sale of Shop No. 5 in Malviya Nagar, which the AO did not examine. The Tribunal found that the assessee had provided details of the sale, and the AO had scrutinized these details during the assessment.

9. Dropping of Penalty Proceedings under Section 271(1)(c):
The Commissioner criticized the AO for dropping penalty proceedings under Section 271(1)(c) based on a single letter from the assessee. The Tribunal observed that the AO had considered the assessee's explanation and decided to drop the penalty proceedings, indicating that the matter was adequately addressed.

Conclusion:
The Tribunal concluded that the AO had conducted a thorough examination of the assessee's details and documents during the assessment process. The Tribunal found that the Commissioner had raised additional issues in the final order, which were not part of the initial notice, violating the principles of natural justice. The Tribunal set aside the Commissioner's order under Section 263, and the High Court upheld the Tribunal's decision, dismissing the Revenue's appeal. The High Court emphasized that the Tribunal's findings were based on facts, and no substantial question of law arose for consideration.