2018 (10) TMI 1588 - AT - Income Tax

Revision u/s 263 - proof of AO s order to be erroneous and prejudicial to the interest of the Revenue - Held that - Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interest of the Revenue, but which are passed after inquiry/investigation on the question/issue are not per se are normally treated as erroneous and prejudicial to the interest of the Revenue. Because, the Revisionary Authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken, the same cannot be initiated without following the proper provisions u/s 263 of the Act. In the present case the Assessing Officer has made all the inquiries and after verifying the documents/ material on record passed a reasoned Assessment Order. Therefore, the Commissioner does not have any locus standi to make further inquiry. Therefore, order u/s 263 of the Act in present appeal is not justified and is set aside herewith - Decided in favour of assessee

Summary

Issues:
Appeal against order under Section 263 of the Income Tax Act, 1961 for Assessment Year 2010-11.

Detailed Analysis:
The appellant challenged the order passed under Section 263 of the Income Tax Act, 1961, arguing that all issues were duly considered during assessment and reassessment proceedings. The appellant had submitted Form 15G, and the Assessing Officer had dropped the reassessment proceeding after being satisfied with the submission. The appellant contended that the proceedings under Section 263 were beyond jurisdiction and against natural justice principles. The appellant reserved the right to amend any ground after relevant documents were supplied by the CIT.

The appellant, engaged in mining and transport contracting, filed a return disclosing NIL income for the year under consideration. The case underwent scrutiny, and assessments were carried out under various sections of the Income Tax Act. The Assessing Officer made additions to the income in different assessment orders. Subsequently, proceedings under Section 263 were initiated, deeming the assessment order erroneous and prejudicial to revenue due to an issue related to TDS on interest paid on unsecured loans.

During the appeal, the appellant argued that the issue in question was merely a second opinion without any new facts unearthed by the Principal Commissioner of Income Tax. The appellant maintained that all queries were properly addressed, and all necessary documents were provided during the original assessment and reopening proceedings. The appellant stressed that no factual aspect was suppressed, and the Section 263 application was incorrectly applied.

After hearing both parties and reviewing the relevant material, the Tribunal found that the Assessing Officer had conducted thorough inquiries and verifications before passing the assessment orders. The Principal Commissioner's application of Section 263 was deemed a second opinion, not permissible under the Act. The Tribunal highlighted that the revisionary power under Section 263 is to correct orders passed without proper inquiry or investigation, which was not the case here. Therefore, the Commissioner's order under Section 263 was set aside, and the appellant's appeal was allowed.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the Principal Commissioner's order under Section 263 of the Income Tax Act, 1961 for the Assessment Year 2010-11.