2014 (10) TMI 461 - AT - Income Tax

Validity of order u/s 263 - Search and Seizure operation u/s 132 Held that - During the course of assessment proceeding questions, enquiries and explanation on the relevant issues were called for by the AO and were replied by the assessee - Thus these are not the assessments where there was no enquiry on the relevant aspect - The questionnaires, order sheet entries, assessees submissions and explanations make it quite clear it cannot be held that assessment orders suffer from lack of enquiries relying upon Commissioner of Income-tax Versus Sunbeam Auto Ltd. 2009 (9) TMI 633 - Delhi High Court - though revision can be made in a case when there is lack of enquiry in the order, however, inadequate inquiries cannot be a basis of revision as it depends on the perception of the officer exercising assessment powers - a mere deference is perception of CIT and AO cannot make the order erroneous and prejudicial to the interest or revenue - It is not mere prejudice to the revenue, or a mere erroneous view which can be revised under section 263 - it cannot be held that the assessment orders suffer from unsustainability also - since reasonable enquiries were made, assesssee was called on to file their explanation and submissions on relevant issue and besides the assessment orders are sustainable, it cannot be held that these are cases of any manifest inadequate inquiry or impossible view or unsustainability - the exercise of jurisdiction u/s 263 by CIT in setting aside the assessments passed u/s 153A r/w sec 143(3) in the case of both the assessee is bad in law, his orders are quashed Decided in favour of assessee.

Issues Involved:
1. Validity of the CIT's order under Section 263.
2. Whether the assessment orders were erroneous and prejudicial to the interest of revenue.
3. Consideration of details and documentary evidence provided by the assessees.
4. Source of professional fees received.
5. Examination of opening cash balance.
6. Verification of FDRs and other assets.
7. Adequacy of investigation, verification, and examination by the AO.
8. Adequate opportunity of being heard provided to the appellant.

Issue-wise Analysis:

1. Validity of the CIT's Order under Section 263:
The appeals were filed against the orders of CIT- Central Circle II, New Delhi, passed under Section 263 of the Income Tax Act, revising the assessment orders passed by AO under Section 153A read with Section 143(3). The CIT held these orders to be erroneous and prejudicial to the interest of revenue. The assessees contended that the CIT's order was bad in law and on facts, arguing that the CIT did not duly consider the explanations and documents provided during the assessment proceedings.

2. Whether the Assessment Orders were Erroneous and Prejudicial to the Interest of Revenue:
The CIT issued show cause notices questioning the sources of cash found, the opening cash balance, the source of FDRs, and interest income from banks. The CIT concluded that the AO had accepted these without proper verification, making the assessment orders erroneous and prejudicial to the interest of revenue. The assessees argued that the AO had duly considered all explanations and documents, and the CIT's order was merely a review of the AO's decision, which is not permissible under the law.

3. Consideration of Details and Documentary Evidence Provided by the Assessees:
The assessees provided detailed explanations and documentary evidence regarding the cash found, FDRs, and interest income. They argued that these were duly considered by the AO during the assessment proceedings. The CIT, however, summarily rejected these explanations, leading to the setting aside of the assessment orders.

4. Source of Professional Fees Received:
The CIT held that no source of professional fees received had been submitted by the appellant. The assessees countered that all necessary explanations and documents were furnished, and the AO had accepted these after due verification.

5. Examination of Opening Cash Balance:
The CIT noted that the opening cash balance was not supported by any documents and held that the AO had not examined this during the assessment proceedings. The assessees provided cash flow statements and bank statements to support their claims, arguing that these were duly considered by the AO.

6. Verification of FDRs and Other Assets:
The CIT held that the AO had accepted the FDRs and other assets without making any verification. The assessees provided detailed sources and supporting documents for the FDRs, arguing that these were thoroughly examined by the AO during the assessment proceedings.

7. Adequacy of Investigation, Verification, and Examination by the AO:
The CIT concluded that the AO had not conducted proper investigation, verification, and examination during the assessment proceedings. The assessees argued that the AO had made reasonable enquiries and that the CIT's order was based on a different perception of the same evidence, which is not a valid ground for revision under Section 263.

8. Adequate Opportunity of Being Heard Provided to the Appellant:
The assessees contended that the CIT did not provide adequate opportunity of being heard before passing the order under Section 263. They argued that all relevant material was on record, and the CIT was under a statutory obligation to consider the explanations provided.

Conclusion:
The Tribunal held that the assessment orders did not suffer from lack of enquiries and were not unsustainable. The CIT's order under Section 263 was quashed, and the appeals were allowed. The Tribunal emphasized that the CIT must demonstrate how the assessment orders were prejudicial to the interest of revenue and that mere differences in perception between the CIT and AO do not justify revision under Section 263.

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