2024 (10) TMI 207 - HC - Income Tax

Revision u/s 263 - as per CIT AO had not verified the necessary relevant facts relating to the taxability of sale of certain immovable property - Tribunal rejected the appellant s appeal against the order passed by the CIT u/s 263 - HELD THAT - We find no merit in the appellant s contention. Concededly, the audit report could not have commented upon the dishonour of cheques, as the report was issued prior to the date of the cheques aggregating ₹1,45,00,000/-. The AO had accepted the said report. The assessment order does not indicate any enquiries in this regard. CIT has rightly held that the Assessment Order was passed without making the necessary inquiries and verification. Thus, in terms of clause (a) of Explanation 2 to Section 263 of the Act, the assessment order is deemed to be erroneous in so far as it is prejudicial to the interests of the revenue.The appeal is, accordingly, dismissed.

Summary

Issues:
1. Appeal under Section 260A of the Income Tax Act, 1961 against an order by the Income Tax Appellate Tribunal.
2. Assessment of taxability of sale of immovable property.
3. Examination of dishonored cheques related to the sale transaction.
4. Validity of the order passed under Section 263 of the Act by the Principal Commissioner of Income Tax.
5. Appeal against the order passed by the Commissioner of Income Tax.
6. Rejection of appeal by the Tribunal against the order passed under Section 263 of the Act.
7. Compliance with Section 263 of the Act regarding necessary inquiries and verifications.

Analysis:

1. The appellant filed an appeal under Section 260A of the Income Tax Act against an order by the Income Tax Appellate Tribunal challenging the Assessment Order for the year 2015-16. The Principal Commissioner of Income Tax held that the Assessment Order was erroneous due to lack of verification of relevant facts concerning the taxability of the sale of immovable property.

2. The controversy revolved around the sale of an immovable property for a specific amount during the financial year 2014-15. The appellant claimed that the transaction was incomplete as certain cheques were dishonored, and thus, the sale was not consummated. Consequently, the appellant did not report the sale in the relevant Assessment Year, leading to a dispute regarding the tax liability on capital gains.

3. The Principal Commissioner of Income Tax found that the Assessing Officer did not investigate the dishonor of the cheques issued by the purchaser, which were post-dated. As the audit report was issued before the dates of the dishonored cheques, it could not address this crucial aspect, highlighting a deficiency in the assessment process.

4. Subsequently, the Assessing Officer issued an order under Section 144 read with Section 263 and 144 B of the Act, assessing the appellant's income and raising a demand. The appellant appealed against this order, and a separate appeal was also filed before the Commissioner of Income Tax (Appeals), which is pending.

5. The Tribunal rejected the appellant's appeal against the order passed by the Principal Commissioner of Income Tax under Section 263 of the Act, upholding the findings that the Assessment Order lacked necessary inquiries and verifications. The Tribunal affirmed the correctness of the Principal Commissioner's decision.

6. The appellant contended that all relevant material was available to the Assessing Officer, and proper inquiries were conducted. However, the Tribunal disagreed, emphasizing that the Assessment Order was erroneous as it did not meet the requirements of Section 263 of the Act, specifically regarding necessary inquiries and verifications.

7. Ultimately, the Tribunal found no legal issue of merit in the case and dismissed the appeal. The pending application was also dismissed, affirming the decision based on the provisions of Section 263 of the Income Tax Act, 1961.