2013 (7) TMI 483 - HC - Income Tax

Revision of Assessment order u/s 263 - assessee had declared sale consideration of 4 plots at 4 lacs each - However it is alleged by the complainant that the total sale consideration received was Rs.84 lacs - Assessing Officer after conducting inquiry did not make any addition - CIT held order erroneous - Held that - An order is not erroneous, unless the CIT hold and records reasons why it is erroneous - An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous - material which the CIT can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record as it stands at the time of examination by the CIT - inquiries were certainly conducted by the Assessing Officer - The order under Section 263 itself records that the Director felt that the inquiries were not sufficient and further inquiries or details should have been called - No substantial question of law arises - Following decision of Commissioner Of Income-Tax Versus Gabriel India Limited 1993 (4) TMI 55 - BOMBAY High Court - Decided against Revenue.

Issues Involved:
1. Validity of the reassessment notice under Section 147 of the Income Tax Act, 1961.
2. Adequacy of the inquiry conducted by the Assessing Officer.
3. Exercise of revisionary powers under Section 263 by the Director of Income Tax (Exemptions).

Detailed Analysis:

1. Validity of the reassessment notice under Section 147 of the Income Tax Act, 1961:

The reassessment notice under Section 147 was issued following a complaint by one Jayant Pandey, alleging that the sale consideration for four plots was underreported. The respondent-assessee declared a sale consideration of Rs. 16 lakhs, whereas the complainant alleged it was Rs. 84 lakhs. The Assessing Officer, after conducting an inquiry, accepted the declared consideration and did not make any additions.

2. Adequacy of the inquiry conducted by the Assessing Officer:

The Director of Income Tax (Exemptions) issued a notice under Section 263, criticizing the inquiry conducted by the Assessing Officer. The Director noted that the assessment was completed hurriedly without proper inquiries, particularly failing to locate the complainant, Jayant Pandey, to verify the transaction. The Director emphasized that merely recording the statements of the purchasers and seller was insufficient as they were interested parties. The Director highlighted the need for local inquiries to ascertain the actual consideration involved in the transaction. The assessment order was set aside with directions for further inquiry.

3. Exercise of revisionary powers under Section 263 by the Director of Income Tax (Exemptions):

The High Court discussed the scope of revisionary powers under Section 263, emphasizing that such powers are applicable when an order is erroneous and prejudicial to the interest of the Revenue. The court cited previous judgments to clarify that orders passed without inquiry are treated as erroneous, but orders passed after inquiry are not, even if the revisionary authority believes further inquiry is needed. The court noted that the Director should have conducted the necessary inquiry himself to establish that the assessment order was erroneous, rather than remanding the matter to the Assessing Officer for further inquiry.

The High Court referenced several precedents, including *Income Tax Officer vs. DG Housing Projects Limited* and *Commissioner of Income Tax vs. Sunbeam Auto Ltd.*, to underline the distinction between lack of inquiry and inadequate inquiry. The court emphasized that in cases of inadequate inquiry, the Commissioner must record a clear finding that the order is erroneous. The Director's failure to conduct an inquiry and directly establish the error rendered the exercise of jurisdiction under Section 263 unsustainable.

Conclusion:

The High Court concluded that the inquiries were indeed conducted by the Assessing Officer, and it was not a case of no inquiry. The Director's dissatisfaction with the sufficiency of the inquiries did not justify setting aside the assessment order without conducting an inquiry himself. Consequently, the court dismissed the appeal, stating that no substantial question of law arose for consideration.

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