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1997 (10) TMI 98 - AT - Income Tax

Issues Involved:
1. Validity of the order u/s 263 based on a proposal from the ACIT.
2. Jurisdiction of the CIT u/s 263 for income that allegedly escaped assessment.
3. Errors committed by the Assessing Officer (AO) in the original assessment.
4. Wholesale cancellation of the assessment order.
5. Directions given by the CIT regarding sections 276C and 277.

Summary:

1. Validity of the order u/s 263 based on a proposal from the ACIT:
The appellant contended that the order u/s 263 was based on a proposal from the ACIT, which is not permissible as the CIT must act on his satisfaction. The Tribunal held that the CIT could validly call for and examine the records based on information from the ACIT or any other source and is not restricted to acting suo motu. The order of the CIT cannot be canceled solely because it was initiated based on a proposal from the ACIT.

2. Jurisdiction of the CIT u/s 263 for income that allegedly escaped assessment:
The appellant argued that the CIT cannot reassess income that escaped assessment as it falls under the jurisdiction of section 147. The Tribunal held that the CIT has the authority u/s 263 to revise an assessment if it is erroneous and prejudicial to the interest of the revenue, regardless of the possibility of action u/s 147. The Tribunal cited judgments supporting the simultaneous initiation of proceedings u/s 263 and 147.

3. Errors committed by the AO in the original assessment:
The CIT identified errors in the original assessment, including the omission of Rs. 19.5 crores as alleged dividend income, incorrect disallowance of a loss of Rs. 2,10,31,425, and failure to include interest income of Rs. 25,44,657. The Tribunal agreed with the CIT that the AO failed to conduct necessary and proper inquiries, making the assessment order erroneous and prejudicial to the revenue. However, the Tribunal held that the CIT should not have given firm findings on the under-assessment amounts but should have directed the AO to investigate and reassess.

4. Wholesale cancellation of the assessment order:
The appellant argued against the wholesale cancellation of the assessment order. The Tribunal agreed, stating that the CIT should have limited the reassessment to the specific items mentioned in the show-cause notice. The Tribunal modified the CIT's order, directing the AO to reassess only the specific items after proper investigation.

5. Directions given by the CIT regarding sections 276C and 277:
The appellant contended that the CIT acted beyond his jurisdiction by directing the AO to examine sections 276C and 277. The Tribunal agreed, stating that such directions are beyond the scope of section 263. The Tribunal directed the deletion of these directions.

Conclusion:
The Tribunal modified the CIT's order, upholding the reassessment directive for specific items while canceling the firm findings on under-assessment amounts and the directions regarding sections 276C and 277. The AO is to conduct a fresh assessment after proper investigation and providing reasonable opportunity to the assessee.

 

 

 

 

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