2023 (9) TMI 1504 - HC - Income Tax

Revision u/s 263 - AO had not properly examined the issues for which reopening had taken place - HELD THAT - Perusal of the order of the Tribunal indicates that it has observed that the Principal Commissioner of Income Tax sought to revise the assessment order only on the basis of presumptions. Relying on a decision in the case of Gayatri Enterprise vs. I.T.O 2019 (9) TMI 777 - GUJARAT HIGH COURT the Tribunal set aside the order passed by the PCIT u/s 263 of the Act. In the case of Gayatri Enterprise (supra), the Division Bench of this Court had examined the issue at hand from an angle whether a presumption could have been drawn about the excess amount alleged to have been made by the appellant-assessee at the time of the purchase of land. The Division Bench held that it is not permissible to draw an inference from the circumstances surrounding a transaction of sale of property that the purchaser of the property must have paid more than what was actually recorded in his books of account. No presumption can be drawn on this aspect. Having considered the order of the Tribunal and in light of the decision in the case of Gayatri Enterprise (supra), no substantial question of law arises in the appeal, much less the question of law, and therefore, the tax appeal is accordingly dismissed

Summary

Issues:
Challenging order of Income Tax Appellate Tribunal under Sec. 260-A of Income Tax Act, 1961 based on substantial questions of law raised regarding quashing of order u/s. 263, justification of Tribunal's decision, and adequacy of inquiry conducted.

Analysis:
1. The appeal under Sec. 260-A challenged the Income Tax Appellate Tribunal's order dated 19.04.2023. The substantial questions of law raised included the justification of quashing the order u/s. 263 of the Income Tax Act by the Tribunal, especially regarding the Explanation 2 of Section 263 and the sustainability of the AO's order. Additionally, the adequacy of the inquiry conducted was questioned based on the Hon'ble Supreme Court's directive in a specific case.

2. The facts revealed that for Assessment Year 2012-13, the assessee filed a return of income, which was subsequently reopened under Sec. 147. The Principal CIT revised the assessment order as the Assessing Officer failed to examine the source of remaining investment of Rs. 55 lakhs in immovable property. The revision was allowed due to the unexplained investment. However, the Tribunal, considering various judicial precedents, held in favor of the assessee, citing cases where additions were not justified without concrete evidence of undisclosed investments.

3. The Tribunal's decision was based on the principle that revising an assessment order solely on presumptions was unjustified. Citing the case of Gayatri Enterprise, the Tribunal set aside the PCIT's order under Sec. 263. The Division Bench's ruling emphasized that drawing inferences about excess payments in property transactions based on circumstantial evidence was impermissible. Consequently, the Tribunal's decision was upheld, and no substantial question of law was found in the appeal, leading to its dismissal with no costs awarded.

In conclusion, the judgment highlighted the importance of concrete evidence and legal precedents in tax matters, emphasizing that revising assessment orders based on presumptions without substantial proof is not justified. The decision underscored the need for thorough examination and adherence to legal principles to ensure fairness and accuracy in tax assessments.