2017 (10) TMI 381 - HC - Income Tax

Revision u/s 263 - Tribunal upholding the validity of the revisionary order passed under section 263 - Held that - We are of the considered view that no inquiry, as envisaged in law, was carried out, hence, question of the Commissioner taking an alternate possible view does not arise. The Assessing Officer cannot be said to have taken a plausible view, as envisaged in law, and the view taken by the Commissioner to be an alternative one. Finding of the Commissioner that the order is erroneous is not on account of his mere disagreement with the view taken by the Assessing Officer. Any inquiry, without application of mind, is nonest. The given facts warranted the Assessing Officer to have conducted complete and proper inquiry and only thereafter, assessed the income so declared by the Assessee. He ought to have considered that the Assessee had sought to revise the return by declaring an income 1872% higher than what was originally returned and that too after action for scrutinizing the return was initiated. All transactions of sale of agricultural produce were in cash. Income declared was (a) disproportionately high only with respect to the relevant year and never in the preceding or succeeding years, (b) investment of huge amount of ₹ 3.8 crore was carried out by the Assessee himself, be from whatever source and there was no reference thereof in the original return. As such, omission or wrong statement cannot be said to be bonafide. Prima facie returns, being invalid, ought to have been rejected. The case in hand being that of no inquiry, and the amplitude of the powers of the Commissioner being wide enough to pass such order as the circumstances of the case justify, including (a) cancelling the assessment, (b) modifying the order of assessment, (c) directing fresh assessment, as such, the Commissioner was well within his right to pass an appropriate order of remission. Scope of the Tribunal to examine correctness of the exercise of jurisdiction by the Commissioner is wide enough and not limited and restricted to the record as defined under clause (b) of sub-section (1) of Section 263 of the Act. In any case, even this definition is inclusive. It includes all records relating to any proceedings under the Act, be that of the Assessee or a third party, available at the time of examination by the Commissioner. The record need not pertain to the proceedings of the Assessee alone, be it for the relevant year or assessments pertaining to other years. It can also pertain to any other assessee. In fact, record of any proceedings under this Act available at the time of examination can be considered. Such record need not be placed by the parties. He has power to call for and examine the record of any proceedings under this Act . As is evident, definition of word record , inclusive in nature, is restricted to and confined only to the exercise of power by the Commissioner and would not relate to the amplitude of the power exercisable by the Tribunal to pass such orders as it deems fit . - Decided against assessee.

Issues Involved:
1. Validity of the revisionary order under Section 263 of the Income Tax Act.
2. Legality of admitting and considering additional evidence by the Tribunal.

Issue-Wise Analysis:

1. Validity of the Revisionary Order under Section 263 of the Income Tax Act:

The Assessee challenged the revisionary order dated 18.03.2014 passed by the Commissioner, which set aside the assessment order dated 28.03.2013. The Commissioner found the assessment order to be erroneous and prejudicial to the interest of Revenue. The Assessee argued that the view taken by the Assessing Officer was plausible and that the Commissioner could not exercise revisional jurisdiction merely because he disagreed with it. The Assessee also contended that the Commissioner should have conducted the inquiry himself rather than remitting the matter, as it was not a case of "no inquiry" but "some inquiry."

The Court examined the statutory provisions under Sections 139, 142, 143, 147, 263, and 254 of the Income Tax Act and Rule 29 of the Income Tax Rules, 1962. It noted that the Assessee had filed a revised return declaring a significantly higher income from agricultural sources after the original return was selected for scrutiny. The Commissioner, invoking Section 263, found the Assessing Officer's inquiry inadequate and the revised return not bona fide. The Court upheld the Commissioner's order, stating that the Assessing Officer had not conducted a proper inquiry and had accepted the Assessee's revised return without verifying the authenticity of the income claimed.

The Court emphasized that the Commissioner has the power to revise an order if it is erroneous and prejudicial to the interests of Revenue. It held that the Assessing Officer's failure to conduct a proper inquiry and the Assessee's disproportionate income declaration justified the Commissioner's revisional jurisdiction. The Court also clarified that the Tribunal's power is not limited to the record available at the time of the Commissioner's examination but includes any additional evidence necessary for a just decision.

2. Legality of Admitting and Considering Additional Evidence by the Tribunal:

The Assessee contended that the Tribunal erred in admitting and considering additional evidence submitted by the Revenue, arguing that it violated Rule 29 of the ITAT Rules and principles of natural justice. The Tribunal had accepted the additional evidence, which included documents and statements related to the Assessee's Agent, to support the Commissioner's findings.

The Court upheld the Tribunal's decision, stating that the Tribunal has wide powers to admit additional evidence if it is necessary for a just decision. It noted that the Tribunal had provided the Assessee with adequate opportunity to rebut the additional evidence, which the Assessee chose not to do. The Court found no violation of principles of natural justice and fair play, as the Tribunal had extensively dealt with the issue and provided sufficient reasons for admitting the additional evidence.

The Court also addressed the Assessee's reliance on the Andaman Timber Industries case, clarifying that the need for cross-examination did not apply in this case, as the statements were those of the Assessee's Agent. It concluded that the Tribunal had correctly affirmed the Commissioner's order and that the additional evidence was relevant and necessary for a just decision.

Conclusion:

The Court dismissed the appeal, affirming the validity of the revisionary order under Section 263 and the legality of admitting and considering additional evidence by the Tribunal. It held that the Assessing Officer's failure to conduct a proper inquiry and the Assessee's disproportionate income declaration justified the Commissioner's revisional jurisdiction. The Tribunal's decision to admit additional evidence was found to be in accordance with law and principles of natural justice.

← Previous Next →