2015 (7) TMI 44 - AT - Income Tax

Revision u/s 263 - proceeding under section 263 has been invoked against the order passed by the Assessing Officer under sect ion 147 read with sect ion 143(3) - Held that - A perusal of the order of the CIT indicates that the assessment order passed by the Assessing Officer under section 147 read with section 143(3) was set aside on various grounds and Items No. 1 & 2 relating to the share of assessee in the property as well as the nature of the receipt of the compensation. As has been discussed these issues have duly been examined and considered by the Assessing Officer in framing the assessment under section 147 read with sect ion 143(3). Thus, in our considered opinion, these issues cannot be sufficient ground for setting aside assessment. While making assessment order, it is the satisfaction of the Assessing Officer who made the enquiry and it should be a touchstone of the assessment order passed by him, the CIT cannot substitute his view in place of finding of the Assessing Officer until and unless the view taken by the Assessing Officer is unsustainable in law. No cogent material or evidence was brought to our knowledge by the ld. D.R., which may prove that the decision taken by the Assessing Officer is not sustainable in law on these two issues. The order passed by CIT is illegal without jurisdiction on these issues. So far as these issues are concerned, the order passed by the CIT cannot be sustained if such type of order is sustained then this will permit the illegality to continue and the subsequent actions carried out on the illegal order are also illegal. We, therefore, set aside the order of CIT to the extent it relates to these two issues. In other appeals also, we set aside the orders of CIT to the extent it relate to these two issues as the facts involved in those cases are similar except that these issues have been duly examined and considered by Assessing Officer in making assessment s under section 143(3). As coming to the other issues taken in show-cause notice on the basis of which the CIT has invoked the jurisdiction under section 263, ld. A.R. did not advance any argument in all these issues. We also noted that the Assessing Officer has not made any enquiry whatsoever in respect of the other issues as has been taken by the CIT in the show-cause notice and in respect of which order under section 263 has been passed. Even no query has been raised in the notice issued under section 142. Ld. A.R. has also not pointed out to us whether any enquiry has been raised by the Assessing Officer while framing assessment in all these cases. In view of these facts, we confirm the order of CIT under section 263 in respect of the other issues taken by the assessee in the appeal except Grounds No. 5, 6 & 7 in all the appeals. - Decided partly in favour of assessee.

Issues Involved:
1. Validity of proceedings initiated under section 263.
2. Assessment order being erroneous and prejudicial to the interest of revenue.
3. Proper notice and adequate opportunity in section 263 proceedings.
4. Ownership extent and nature of the Delhi property.
5. Examination of taxability of the amount received from Delhi Administration.
6. Classification of the amount received from Delhi Administration as fair rent or revenue receipt.
7. Examination of other issues raised by the CIT in the show-cause notice.

Issue-wise Detailed Analysis:

1. Validity of Proceedings Initiated Under Section 263:
The proceedings under section 263 were challenged on the grounds that they were without jurisdiction. The appellant contended that the assessment order was neither erroneous nor prejudicial to the interest of revenue. The Tribunal noted that the CIT invoked jurisdiction under section 263 based on several issues, including the nature of the damages received from the Delhi Administration and the share of ownership in the property. The Tribunal found that the Assessing Officer (AO) had duly examined these issues during the assessment and had taken a conscious decision. Therefore, the initiation of proceedings under section 263 on these grounds was not justified.

2. Assessment Order Being Erroneous and Prejudicial to the Interest of Revenue:
The CIT argued that the assessment order was erroneous and prejudicial to the interest of revenue on several counts, including the incorrect determination of the share of ownership and the nature of the damages received. The Tribunal observed that the AO had made detailed inquiries and had taken a possible view based on the facts and legal precedents. The Tribunal held that merely because the CIT had a different opinion, it could not be said that the AO's order was erroneous and prejudicial to the interest of revenue.

3. Proper Notice and Adequate Opportunity in Section 263 Proceedings:
The appellant contended that the proceedings under section 263 were vitiated due to the lack of proper notice and adequate opportunity. The Tribunal noted that the CIT had issued a show-cause notice and had given the appellant an opportunity to respond. The Tribunal found that the procedural requirements were met, and there was no violation of principles of natural justice.

4. Ownership Extent and Nature of the Delhi Property:
The CIT questioned the appellant's claim of a 1/4th share in the Delhi property, arguing that it should have been 1/3rd. The Tribunal found that the property was owned by four co-owners, and the appellant's 1/4th share was correctly determined. The Tribunal also noted that this issue had been examined by the AO during the assessment, and there was no basis for the CIT's contention.

5. Examination of Taxability of the Amount Received from Delhi Administration:
The CIT argued that the AO had not properly examined the taxability of the amount received from the Delhi Administration. The Tribunal observed that the AO had issued several notices and had made detailed inquiries regarding the nature of the damages received. The AO had concluded that the amount was a capital receipt, except for a portion treated as interest income. The Tribunal held that the AO's decision was based on a thorough examination and was a possible view.

6. Classification of the Amount Received from Delhi Administration as Fair Rent or Revenue Receipt:
The CIT contended that the amount received from the Delhi Administration was fair rent and taxable as income from other sources. The Tribunal noted that the Delhi High Court had directed the payment of damages for wrongful possession, and the arbitrator had determined the amount based on fair rent as a method to calculate damages. The Tribunal held that the AO had correctly treated the amount as a capital receipt, and the CIT's view was not sustainable.

7. Examination of Other Issues Raised by the CIT in the Show-Cause Notice:
The CIT raised several other issues, including the non-audit of books of accounts, transactions with related parties, and non-verification of bank accounts and share transactions. The Tribunal found that the AO had not made any inquiries on these issues during the assessment. The Tribunal upheld the CIT's order under section 263 on these grounds, as the AO's failure to make inquiries rendered the assessment order erroneous and prejudicial to the interest of revenue.

Conclusion:
The Tribunal partly allowed the appeals, setting aside the CIT's order under section 263 on the issues of the share of ownership and the nature of the damages received from the Delhi Administration. The Tribunal upheld the CIT's order on other issues where the AO had not made proper inquiries. The appeals were thus partly allowed.

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