2017 (6) TMI 865 - AT - Income Tax

Validity of assessment u/s. 143(3) - assessee s case was reopened on the basis of AIR information - Held that - The notice under reference having been issued only on the basis of AIR information, it is clearly a AIR case. Sure, the assessee is not a party to the transaction in his personal capacity, but it needs to be appreciated that at the time of issue of notice it is the information received through the AIR return/s that is relevant, and there is no scope either for its verification or vetting or explanation at that stage. The jurisdictional fact of the notice being in respect of an AIR case stands established, and its legality therefore cannot be questioned. The next question if the assessee having furnished the PAN of his brother, clarifying his role to be no more than his representative, the party of the first part in the sale deed, which is the subject matter of AIR information, ought the AO to have dropped the proceedings we find no legal mandate for the same. Rather, s. 119(1)(a) clearly places a restriction on the power of the Board to issue any orders, instructions or directions requiring any income tax authority to make a particular assessment or to dispose of a particular case in a particular manner. Finding the assessee s return as inconsistent with the law, i.e., given the undisputed, admitted facts, he made adjustments to the returned income, to which in fact the ld. AR also conceded as valid in law and, in any case, are not disputed. The assessee s challenge accordingly fails.

Summary

Issues:
Challenge to legal competence of Assessing Officer to scrutinize the assessee's return of income under section 143(3) of the Income Tax Act, 1961 for assessment year 2013-14 based on AIR information.

Analysis:
The appellant contested the assessment under section 143(3) of the Income Tax Act, 1961, arguing that the Assessing Officer (AO) lacked the legal competence to scrutinize the return of income based on AIR information. The appellant, a salaried individual, received a notice under section 143(2) in relation to a property purchase transaction reflected in AIR, where he was incorrectly identified as a party. The appellant clarified his role as a power of attorney holder for his non-resident brother, providing necessary documentation. The appellant challenged the jurisdiction of the AO to proceed with the assessment beyond the AIR information, citing CBDT instructions limiting scrutiny to AIR data only.

The appellant argued that the AO's actions were in violation of CBDT instructions, which restrict scrutiny to information received through AIR returns. The appellant's representative contended that the AO should have ceased proceedings upon clarification of the appellant's role as a representative in the transaction. The appellant emphasized that the notice under section 143(2) was stamped as 'Selected Under Computer Assisted Scrutiny Selection' (CASS), indicating an AIR case. The AO's decision to continue the assessment beyond the AIR information was challenged as exceeding jurisdictional limits set by CBDT guidelines.

The Tribunal analyzed the legal basis of the notice under section 143(2) and the AO's authority to proceed with the assessment based on AIR information. The Tribunal found that the notice was issued on the basis of AIR data, making it an AIR case. The Tribunal held that the AO was within his rights to verify information provided by the appellant, even after clarifying his representative status. The Tribunal emphasized that CBDT instructions do not restrict the AO's power to inquire and make adjustments based on verified information, even if beyond the scope of AIR data.

The Tribunal dismissed the appellant's challenge, affirming the legality of the notice under section 143(2) and the subsequent assessment by the AO. The Tribunal noted that the AO's adjustments to the appellant's income were valid and in accordance with the law. The Tribunal rejected the appellant's reliance on other cases, emphasizing the specific legal provisions governing the present case. The appeal was ultimately dismissed, upholding the AO's assessment based on the verified information beyond the AIR data.

In conclusion, the Tribunal upheld the legality of the AO's actions in scrutinizing the appellant's return of income based on AIR information, dismissing the appeal challenging the assessment under section 143(3) for the assessment year 2013-14.