2012 (9) TMI 329 - AT - Income Tax

Invoking revision powers u/s 263 by CIT(A) - cancelling the assessment order passed u/s 147 r.w.s. 148 - investment in the house property - Held that - As the revenue was in possession of information that the assessee had purchased various lands which were not reflected in the return and once the issue was reopened to investigate the purchase of various lands then the AO was duty bound to make enquiries to examine the purchase of these land as well as the sources for the same - as AO has simply issued notice u/s 142(1) and 143(2) which is standard for format of the notice and had never bothered to call for copies of various agreements of sale, the AO has proceed to make assessment u/s 143(3) r.w.s. 147 merely on the basis of statement of affairs and made addition in respect of amounts stated in the statement of affairs which could not be proved. This clearly shows that the AO has not examined what was actual consideration for purchase of land and what were the sources. It is settled position of law that failure to make enquires which are required in the facts of the case would itself make the assessment order erroneous and prejudicial to the interest of the revenue. As in the notice the issued, Commissioner recorded that the AO had accepted an addition in house property at Rs. 7.02 lakhs without holding any enquiry and as from the report of CBI, ACB Gauhati that according to CBI investment made in the aforesaid house property was made by one Shri Moti Lal Datta son-in-law of the assessee and according to the CBI, the cost of acquisition of the house was Rs. 16,16,500/-. On these facts the Ld. Commissioner in the notice issued recorded his opinion that the assessment in question being without necessary enquiries was erroneous and prejudicial to the interest of the revenue. As the revisionary order has been passed in respect of assessment order passed u/s 143(3) r.w.s. 147 on 31.12.2009 the power u/s 263 is available to CIT(A) to revise any order passed by the assessing authority and re-assessment order within from the end of Financial Year in which the order has been passed i.e. 31.3.2010 and would expire on 31.3.2012 whereas the order challenged here has been passed before 28.3.2012 i.e. well within time limit prescribed u/s 263(2). Therefore, the order is very much within the limitation period, thus order passed u/s 263 need to be uphold - against assessee.

Summary

Issues Involved:
1. Jurisdiction for revision under Section 263 of the Income-tax Act, 1961.
2. Limitation period for invoking Section 263.

Issue-wise Detailed Analysis:

1. Jurisdiction for Revision under Section 263:

The assessee contested the jurisdiction invoked by the Commissioner under Section 263, arguing that the assessment order passed under Sections 147 and 148 was neither erroneous nor prejudicial to the interest of the revenue. The Commissioner found the assessment order erroneous and prejudicial because the Assessing Officer (AO) failed to investigate the facts regarding the assessee's investment in land. Specifically, the AO did not properly scrutinize the purchase of land measuring 9 kanals for Rs. 72,00,000, where only Rs. 2,62,500 was shown in the sale deed, suggesting an undisclosed payment of Rs. 14,17,500.

The assessee defended by stating that the agreement to purchase 9 kanals was not executed due to land acquisition by the Chandigarh Administration, resulting in the purchase of only 2 kanals 2 marlas for Rs. 2,62,500. The Commissioner, however, maintained that the AO did not make proper inquiries into these transactions, thus rendering the assessment order erroneous and prejudicial to the revenue. The Tribunal upheld the Commissioner's view, emphasizing that the AO's failure to make necessary inquiries justified the revision under Section 263.

2. Limitation Period for Invoking Section 263:

The assessee argued that the revision order was barred by limitation, citing that the original return was filed on 20.12.2002 and assessed on 21.2.2003, with reassessment proceedings initiated on 26.3.2009. The Commissioner countered that the limitation period should be calculated from the reassessment order dated 31.12.2009. The Tribunal agreed, stating that the limitation period under Section 263(2) starts from the end of the financial year in which the reassessment order was passed, i.e., 31.3.2010, making the revision order issued on 28.3.2012 well within the prescribed period.

Conclusion:

The Tribunal upheld the Commissioner's order under Section 263, affirming that the AO's failure to make necessary inquiries rendered the assessment order erroneous and prejudicial to the interest of the revenue. The Tribunal also confirmed that the revision order was within the limitation period. As a result, the appeal filed by the assessee was dismissed.