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2015 (7) TMI 736 - AT - Income TaxInvoking jurisdiction u/s.263 by the Commissioner of Income Tax directing the Assessing Officer to pass fresh assessment order which was completed u/s.153A r.w.s. 143(3) of the Act - Validity of assessment u/s.153A - Held that - The original assessment order for the assessment year 2006-2007 was already completed u/s.143(3) of the Act. Hence the assessment u/s.153A to be made on the basis of incriminating material which means books of account other documents found in the course of search but not produced in the course of original assessment and undisclosed income or property discovered in the course of search. It was admitted fact in this case that there was no incriminating material discovered in the course of search action. There was also no allegation that the assessee has failed to produce books of accounts and documents in the course of original documents. It is also a fact that recorded by Commissioner of Income Tax that the Assessing Officer failed to examine the books of accounts produced by him due to paucity of time and the Assessing Officer proposed the Commissioner of Income Tax to review the order u/s.153A of the Act. In our opinion the Commissioner of Income Tax wanted to do the things indirectly which cannot be done directly. Further he mentioned in the order that the Assessing Officer examined the statement of affairs for the assessment years 2006-07 and 2007-08 during the course of assessment u/s.143(3) of the Act finalised on 31.12.2009 and he wanted to review the same which is nothing but causing roving inquiry which is not permitted u/s.263 of the Act. In the present case there is no incorrect assumption of facts or an incorrect application of law by the Assessing Officer. The Assessing Officer has applied his mind to the seized material while framing assessment for the year 2006-07 u/s.153A of the Act. The Commissioner of Income Tax cannot expect to correct the assessment order passed u/s.153A of the Act duly considered the seized material and in the present case the Commissioner of Income Tax wanted to consider the statement of affairs filed by the assessee during the course of assessment u/s.153A though it was not part of the seized material and it cannot be considered for framing assessment u/s.153A of the Act as assessment for the assessment year 2006-07 has already been completed u/s.143(3) and re-assessment u/s.153A be made only on the basis of incriminating material found in the course of search but not produced in the course of original assessment. In the present case the Commissioner of Income Tax categorically observed whatever statements on record were already produced by the assessee both in the course of original assessment u/s.143(3) and also in assessment proceedings u/s.153A of the Act. The Assessing Officer adopted one of the course permissible under law and he has taken one view that the Commissioner of Income Tax does not agree which cannot be treated as error unless the view taken by the Assessing Officer is unsustainable under law. Moreover while making assessment the Assessing Officer examined the accounts made enquiries applied his mind to the facts and circumstances of the case and determined the income the Commissioner of Income Tax while exercising his power u/s.263 is not permitted to substitute his estimate of income in place of the income estimated by the Assessing Officer. In our opinion the Assessing Officer exercises quasi-judicial power vested in his hands and if he exercises such power in accordance with law and arrive at a conclusion such conclusion cannot be termed to be erroneous simply because the Commissioner of Income Tax wanted to do further enquiry as he has not satisfied with the enquiry made by the Assessing Officer. In the present case the Assessing Officer made enquiry both in the course of original assessment u/s.143(3) for the assessment year 2006-07 and also during the course of assessment u/s.153A of the Act and the assessee has given a detailed explanation to Assessing Officer to consider the same after being satisfied by the explanation given by the assessee he adopted not to make any addition. Further as held in the case of Mariam Aysha vs. Commissioner of Agricultural Income Tax 1971 (7) TMI 50 - MADRAS High Court that consent cannot give jurisdiction is an essential principle of law. The taxing authority can act only if there is power under the statute to do so. Being so the contention of the Departmental Representative cannot be accepted that before the Commissioner of Income Tax the assessee has conceded that the statement of affairs needs to be examined so that revision of jurisdiction u/s.263 is appropriate. In our opinion this is not a fit case for revision u/s.263 of the Act and we are cancelling the order passed u/s.263 for the year 2006-07. Thus all the other orders passed u/s.263 by Commissioner of Income Tax are annulled. - Decided in favour of assessee.
Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act. 2. Examination of discrepancies in the Statement of Affairs. 3. Adequacy of personal drawings and cash flow statements. 4. Validity of the invoking of Section 263 by the Commissioner of Income Tax. Issue-wise Analysis: 1. Jurisdiction under Section 263 of the Income Tax Act: The primary grievance of the assessee was the invocation of jurisdiction under Section 263 by the Commissioner of Income Tax, directing the Assessing Officer to pass a fresh assessment order. The original assessment was completed under Section 143(3), followed by Section 153A read with Section 143(3), due to a search action at the assessee's premises. The Commissioner of Income Tax believed that the Assessing Officer did not examine certain issues due to time constraints and proposed a review under Section 263. The Tribunal noted that the Commissioner of Income Tax acted upon the proposal sent by the Assessing Officer, which is not permissible under Section 263. The Tribunal emphasized that the Commissioner must independently arrive at a conclusion that the order is erroneous and prejudicial to the interest of the Revenue. 2. Examination of discrepancies in the Statement of Affairs: The Commissioner of Income Tax observed discrepancies in the Statement of Affairs filed by the assessee during different proceedings (under Sections 139(1), 143(3), and 153A). The discrepancies included differences in loan balances, unexplained investments, and unverified sources of repayment. The Commissioner proposed that these discrepancies rendered the assessment erroneous and prejudicial to the interests of the Revenue. However, the Tribunal noted that these issues were already examined during the original assessment and the subsequent proceedings under Section 153A. The Tribunal concluded that the Commissioner cannot use Section 263 to re-examine issues that were already scrutinized and decided upon. 3. Adequacy of personal drawings and cash flow statements: The Commissioner of Income Tax questioned the adequacy of the assessee's personal drawings and the cash flow statements, suggesting that the cash found during the search was not adequately explained. The Commissioner proposed estimating higher personal expenditures based on the Cost Inflation Index method. The Tribunal disagreed with this methodology, stating that it was neither scientific nor sanctioned by statute. The Tribunal directed the Assessing Officer to re-examine the details of personal expenditures and decide on the justification for the cash found during the search independently for each assessment year. 4. Validity of the invoking of Section 263 by the Commissioner of Income Tax: The Tribunal highlighted that for an order to be revised under Section 263, it must be both erroneous and prejudicial to the interests of the Revenue. The Tribunal cited the Supreme Court's decision in Malabar Industrial Co. Ltd, which emphasized that the Commissioner must be satisfied with both conditions. The Tribunal also referred to the Bombay High Court's decision in CIT vs. Continental Warehousing Corporation, which stated that assessments under Section 153A should be based on incriminating material found during the search. Since no such material was found in the assessee's case, the Tribunal concluded that the invocation of Section 263 was not justified. Conclusion: The Tribunal allowed the appeals of the assessee, canceling the orders passed under Section 263 for all the assessment years involved. The Tribunal emphasized that the Commissioner of Income Tax cannot use Section 263 to re-examine issues already scrutinized and decided upon, especially in the absence of incriminating material found during the search. The Tribunal also noted that the Commissioner must independently determine that an order is erroneous and prejudicial to the interests of the Revenue before invoking Section 263.
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