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2016 (11) TMI 712 - AT - Income TaxRevision u/s 263 - Held that - As held by the Hon ble Delhi High Court in the case of ITO Vs. D.G. Housing Projects Ltd., (2012 (3) TMI 227 - DELHI HIGH COURT ), the CIT has to make enquiries himself to arrive at the conclusion that the assessment order is both erroneous as well as prejudicial to the interest of the Revenue. CIT cannot direct the AO to make enquiries as to whether the assessment order is erroneous as well as prejudicial to the interest of the Revenue. As the CIT in the present case has failed to satisfy the above conditions, we are of the opinion that the revision order is not sustainable. Further, the source of the capital introduced by the partners has to be examined in the hands of the individual partners. The assessee has already explained the source and the CIT has not found the said sources as not acceptable. Therefore, we set aside the revision order u/s 263 of the Act. - Decided in favour of assessee
Issues:
Assessment order passed u/s. 263 of the Income Tax Act - Whether the CIT can revise the order based on erroneous grounds without proving prejudice to Revenue's interest. Analysis: The case involved an appeal against the order of the Commissioner of Income Tax-II, Hyderabad, passed u/s. 263 of the Income Tax Act. The Assessing Officer (AO) observed a difference in income declared by the assessee during a survey operation and the return of income filed. The AO added the difference to the returned income, leading to an appeal before the CIT(A) where partial relief was granted. Subsequently, the CIT assumed powers u/s. 263 and found that the AO did not consider additional capital introduced by partners. The CIT issued a show cause notice, and the assessee explained the sources of the additional capital. However, the CIT held the assessment order erroneous and prejudicial to Revenue's interest, directing the AO to make further inquiries. The assessee appealed this decision before the ITAT. The assessee argued that the CIT cannot substitute his opinion for the AO's when the latter accepted the assessee's contentions. The assessee contended that the CIT's order lacked findings on how the assessment was prejudicial to Revenue's interest. The assessee cited relevant case laws and a CBDT Circular to support the argument against the CIT's decision. The assessee also highlighted that the partners' additional capital was not admitted during the survey, and thus, its addition without corroborative evidence was unjustified. On the other hand, the Revenue supported the CIT's decision, emphasizing the lack of verification regarding the additional capital introduced by partners. The Revenue claimed that the assessment order was erroneous and rightly revised by the CIT. The ITAT analyzed the case, noting the admitted difference in stock and the additional capital offered by the assessee. The ITAT found that the AO did not verify the claim of additional capital introduced by partners, making the assessment order erroneous. However, the ITAT emphasized that for a revision under section 263, both error and prejudice to Revenue's interest must be proven. As the CIT did not verify the contentions or provide reasons for rejecting them, the ITAT held the revision order unsustainable. The ITAT also highlighted the necessity to examine the source of the partners' capital individually. Consequently, the ITAT allowed the assessee's appeal, setting aside the revision order u/s. 263 of the Act.
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