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2024 (8) TMI 1115 - AT - Income TaxRevision u/s 263 - source of investment in property - as per CIT AO should have examined the genuineness of loan transactions towards acquisition of the property by making independent enquiries - HELD THAT - We do not find any enquiries being carried out by the AO in respect of the discrepancies as discussed in the preceding para, in the course of assessment proceeding. Thus, the AO had failed to make enquires and verifications which were required to be made in order to examine the issue for which the case was selected for scrutiny. The bank statement also revealed that the assessee had no funds of his own to make these payments. It was explained that the payments towards sale consideration were made on the strength of loans taken from Infinity International and Horizon Finvest and a copy of confirmation in respect of the loans taken from these parties along with their ITR and accounts were brought on record. The evidences filed by the assessee were accepted by the AO without any verification. AO should have examined whether any interest was paid on these loans obtained and whether TDS was deducted thereon. No such enquiry was made in the course of assessment and the documents and the evidences furnished in the course of assessment proceeding were accepted by the AO on their face value without any verification. It is, thus, evident from the above facts that the AO had not conducted proper enquiries in respect of the investment in the properties and, therefore, the order of the AO was rightly treated as erroneous and prejudicial to the interest of the revenue by the Ld. Pr. CIT. It is a trite law and a well settled position that non application of mind or wrong assumption of facts or incorrect application of law by the A.O. will make the order erroneous and pre-judicial to the interest of revenue. Therefore, we do not find anything wrong with the assumption of jurisdiction u/s 263 of the Act by the Ld. Pr. CIT as the order of the AO was erroneous and pre-judicial to the interest of revenue - Decided against assessee.
Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act. 2. Erroneous and prejudicial nature of the Assessing Officer's (AO) order. 3. Examination of the source of investment in property. 4. Compliance with notices issued under Section 263. 5. Application of judicial precedents. Issue-wise Detailed Analysis: 1. Jurisdiction under Section 263 of the Income Tax Act: The Principal Commissioner of Income Tax (Pr. CIT) exercised revisionary power under Section 263 of the Income Tax Act, 1961, to revise the assessment order for the Assessment Year 2015-16. The Pr. CIT held that the AO's order was erroneous and prejudicial to the interest of revenue due to inadequate examination of the source of investment in property. 2. Erroneous and Prejudicial Nature of the AO's Order: The Pr. CIT deemed the AO's order erroneous and prejudicial to the interest of revenue because the AO did not properly examine the source of the large investment made in the property by the assessee. The AO accepted the returned income without making necessary inquiries or verifications, particularly regarding the source of the Rs. 9.30 Crores used for purchasing agricultural land. 3. Examination of the Source of Investment in Property: The AO failed to verify the source of Rs. 9.29 Crores paid by the assessee through 12 cheques dated 13.02.2015. The bank statement revealed that these cheques were not encashed by the seller but were withdrawn by the assessee as cash, which should have raised suspicion and warranted further inquiry. Additionally, the AO did not verify the creditworthiness and genuineness of the loans taken from "Infinity International" and "Horizon Finvest" for the purchase. 4. Compliance with Notices Issued under Section 263: The assessee did not comply with the notices issued by the Pr. CIT under Section 263. Although the assessee claimed to have filed a reply on 24th March 2021, no acknowledgment of this letter was provided. The Pr. CIT made specific inquiries regarding the source of Rs. 9.30 Crores, creditworthiness of lenders, and details of interest and loan repayment, but no compliance was made. 5. Application of Judicial Precedents: The decisions cited by the assessee's counsel, such as CIT vs. Kamal Galani and CIT vs. Ranchhod Jivabhai Nakhava, were found to be distinct on facts and not applicable to this case. The Tribunal emphasized that non-application of mind, wrong assumption of facts, or incorrect application of law by the AO makes the order erroneous and prejudicial to the interest of revenue. The Tribunal upheld the Pr. CIT's order, agreeing that the AO's order was erroneous and prejudicial to the interest of revenue due to the lack of proper inquiries and verification. Conclusion: The Tribunal dismissed the appeal filed by the assessee, upholding the Pr. CIT's order under Section 263 of the Income Tax Act. The AO's failure to make necessary inquiries and verifications regarding the source of investment in property rendered the assessment order erroneous and prejudicial to the interest of revenue. The Tribunal found no fault with the Pr. CIT's assumption of jurisdiction under Section 263 and dismissed all grounds of appeal raised by the assessee.
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