2014 (5) TMI 374 - HC - Income Tax

Validity of revision u/s 263 of the Act Existence of a Bank Account not disclosed - Held that - Whether it is the assessee who is right or whether it is the version of the Commissioner of Income Tax which is correct, It will be for the AO to decide whether the amounts which have been credited and debited in Bank Account No.30044789261 of SBI are reflected in the books of account or not - If they are reflected in the books of account then the only non-disclosure is about the final amount lying in the bank account in the return - the transactions of the bank account are not reflected in the books of account then the order of the CIT would be right and all the transactions in the bank account which were not reflected in the books of account would have to be treated as undisclosed income - the AO while looking into the issue as to where the credits have come from and where the debits have gone, shall also look into the issue as to whether these credits and debits have been reflected in the books of account of the assessee which were produced before him the matter is remitted back to the AO for adjudication - Decided in favour of Assessee.

Summary

Issues:
Challenge to revisional order under Section 263 of the Income Tax Act, 1961.

Analysis:
The petitioner, a contractor, challenged a revisional order by the Commissioner of Income Tax under Section 263 of the Income Tax Act, 1961. The Assessing Officer discovered undisclosed income in the petitioner's bank account during scrutiny, leading to penalty proceedings. The Commissioner's communication proposing revision under Section 263 was deemed illegal as it set aside the order before notifying the petitioner. However, subsequent developments showed the Commissioner's intention to express a prima facie view rather than set aside the order. The petitioner was given opportunities to be heard, leading to a detailed reasoned order by the Commissioner.

The legality of the notice was questioned, but since the petitioner had been heard, setting aside the subsequent order under Section 263 was deemed unnecessary. The petitioner's counsel argued that all bank account transactions were reflected in the books of account, except for the undisclosed amount. The Commissioner held that non-disclosure of the bank account undermined the correctness of the accounts. The Assessing Officer was directed to re-examine the issue, focusing on the taxability of the undisclosed bank account transactions.

In the writ jurisdiction, the Court clarified that the Assessing Officer must determine if the bank account transactions were reflected in the books of account. If so, they should not be treated as undisclosed income. The writ petition was disposed of with this observation, without any costs incurred.