2019 (4) TMI 1378 - AT - Income Tax

Revision u/s 263 by CIT - source of purchase declared was examined by AO - unrealistically lower costs of purchases declared - no inquiry on correctness of the cost of purchase of land - preponderance of evidence - HELD THAT - A perusal of the questionnaires issued and reply made by the assessee thereon clearly shows that no relevant meaningful inquiry was conducted in respect to correctness of the cost of purchase of land. What was inquired was source of cost of purchase declared. The issue raised by the Pr.CIT is altogether different and quite valid for that matter. A bare look at the assessment order also gives the infallible impression that the assessment order was passed in a routine and perfunctory manner without any discussion on any aspect of the assessment whatsoever. The preponderance of evidence clearly indicates unrealistically lower costs of purchases declared formally which would warrant an inquiry with the competent registering authority as well as with other comparable cases and by other realistic means. Pr.CIT in discharge of its solemn duty under s.263 of the Act could not remain oblivious of the facts objectively drawn. There is an apparent plausibility in the action of the Pr.CIT by resorting to powers under s.263 which is of wide amplitude. The circumstances clearly exist which demands inquiry which was not done by the AO while discharging of statutory function. Thus, armed with fairly extensive powers, the Pr.CIT, in our view, has taken action compatible with circumstances. The purchase transaction culminated and stood consummated during the year under review. Therefore, the cause of action did exist in relation to the assessment order in question. Hence, the Pr.CIT was fully justified in invoking its power under s.263 of the Act to set aside the assessment framed without any application of mind on the crucial aspect which is self-revealing from the stamp duty payment itself. A lack of inquiry on a pertinent point which demonstrates possible revenue leakage of staggering amount would definitely tantamount to the order being both erroneous as well as prejudicial to the interest of the Revenue. The assessee has not estopped in any manner from dealing with the inquiry as specified to the AO and to rebut the perception that the prima facie belief on error in the original order is not correct - Decided against assessee

Summary

Issues:
Challenging revisional jurisdiction under s.263 of the Act by the Principal Commissioner of Income Tax, assessment order under s.143(3) of the Income Tax Act, 1961 concerning AY 2011-12, alleged error in assessment order regarding cost of land purchase and stamp duty paid, exercise of revisional power by the Principal Commissioner, justification of setting aside the assessment order, applicability of Section 263 of the Act, judicial precedents, dismissal of the appeal.

Detailed Analysis:

1. Challenging Revisional Jurisdiction:
The appeal was filed by the Assessee against the order of the Principal Commissioner of Income Tax-1, Vadodara, challenging the revisional jurisdiction invoked under s.263 of the Act. The Principal Commissioner set aside the assessment order passed by the Assessing Officer under s.143(3) of the Act for fresh assessment due to lack of inquiry into vital aspects.

2. Alleged Error in Assessment Order:
The Principal Commissioner found the assessment order erroneous and prejudicial to the interest of the Revenue due to discrepancies in the cost of land purchase. The stamp duty paid by the Assessee indicated a significantly higher value of the land compared to the declared purchase price, suggesting undisclosed income. The Principal Commissioner directed the Assessing Officer to conduct further inquiries and verifications.

3. Justification of Setting Aside Assessment Order:
The Assessee contended that the transaction did not relate to the assessment year in question, and the application of Section 69B of the Act was unwarranted. However, the Principal Commissioner justified the exercise of revisional power under s.263 based on the glaring discrepancy in the declared cost of land purchase and the stamp duty paid, indicating potential revenue leakage.

4. Applicability of Section 263 of the Act:
The Tribunal examined the revisional order and cited the lack of meaningful inquiry by the Assessing Officer into the cost of land purchase. The Principal Commissioner was deemed justified in setting aside the assessment order as it was passed without proper scrutiny, and the declared value of the land appeared unrealistically low.

5. Judicial Precedents and Dismissal of Appeal:
The Tribunal rejected the judicial precedents cited by the Assessee, emphasizing the necessity for the Principal Commissioner to find the order erroneous and prejudicial to the Revenue to invoke Section 263 of the Act. The appeal of the Assessee was ultimately dismissed, upholding the revisional action of the Principal Commissioner.

This detailed analysis covers the issues involved in the legal judgment, including the challenges to revisional jurisdiction, alleged errors in the assessment order, justification for setting aside the order, the application of Section 263 of the Act, examination of judicial precedents, and the final dismissal of the appeal.