2019 (4) TMI 958 - AT - Income Tax

Revision u/s 263 - return income of the assessee was accepted by the AO without carrying out proper and necessary enquiries regarding unsecured loans received by the assessee during the year from one Satish Chander Gupta, Chandigarh - lack of enquiry or prejudice - HELD THAT - Assessment u/s. 143(3) of the Act was framed by the Assessing Officer after obtaining necessary details from the assessee and further the same were examined by him. Therefore, even if, the same has not been spelt elaborately in the assessment order it cannot be said that there is a lack of enquiry or prejudice has been caused to the Revenue, as we have discussed various case laws in earlier part of this order which are identical to the facts before us. Even otherwise in the case of Narayan Tatu Rane vrs. ITO 2016 (5) TMI 1162 - ITAT MUMBAI it was held that newly inserted explanation-2(a) to section 263 does not authorize or give unfettered powers to the Commissioner to revise each and every order, if in his opinion, the same has been passed without making enquiries or verifications which should have been made. Even from the records, we notice that the assessee by way of exhaustive reply filed with the CIT in respect of all the aforesaid issues, on the basis of which the order passed by the AO was sought to be revised, had thus furnished clarifications as regards all the said issues and demonstrated that the assessment order was not erroneous and prejudicial to the interest of revenue‟. However, the Ld. CIT without pointing out any infirmity in the reply /explanation of the assessee, and as to why the same could not accepted had rather hushed through the matter and concluded that the assessment order passed by the AO was found to be erroneous and prejudicial to the interest of revenue . By no stretch of imagination, the assessment order can be termed as erroneous and or prejudicial to the interest of revenue and are required to be satisfied for invoking the provisions of section 263 of the Act - Decided in favour of assessee.

Summary

Issues Involved:

1. Validity of the order passed under section 263 of the Income Tax Act, 1961.
2. Adequacy of enquiries conducted by the Assessing Officer (AO) during the original assessment.
3. Whether the assessment order was erroneous and prejudicial to the interest of the revenue.

Issue-Wise Detailed Analysis:

1. Validity of the Order Passed Under Section 263 of the Income Tax Act, 1961:

The assessee challenged the order passed by the Principal Commissioner of Income Tax (Pr. CIT) under section 263 of the Income Tax Act, 1961, which set aside the original assessment order and directed a fresh assessment. The Tribunal examined whether the Pr. CIT was justified in invoking section 263, which allows revision of orders that are erroneous and prejudicial to the interest of the revenue. The Tribunal noted that the Pr. CIT's order was based on the assertion that the AO had accepted the returned income without conducting proper enquiries and investigations.

2. Adequacy of Enquiries Conducted by the Assessing Officer (AO) During the Original Assessment:

The Tribunal evaluated the original assessment order and the evidence submitted by the assessee. The Pr. CIT argued that the AO had not conducted sufficient enquiries regarding unsecured loans and other expenses claimed by the assessee. The Tribunal, however, found that the assessee had provided detailed submissions and documentary evidence during the original assessment, including confirmation of loans and other financial details. The Tribunal noted that the AO had mentioned in the assessment order that the books of accounts were audited and all relevant details were verified.

3. Whether the Assessment Order Was Erroneous and Prejudicial to the Interest of the Revenue:

The Tribunal referred to various judicial precedents to determine the conditions under which an order can be considered erroneous and prejudicial to the revenue. It was highlighted that mere inadequacy of enquiry does not justify revision under section 263; there must be a lack of enquiry. The Tribunal cited the case of Malabar Industrial Co. Ltd Vs CIT, where the Supreme Court held that an order is erroneous if it is not in accordance with law and prejudicial if it causes loss to the revenue. The Tribunal also referred to the case of CIT vrs. Sunbeam Auto Pvt. Ltd., which distinguished between lack of enquiry and inadequate enquiry, stating that the latter does not justify revision under section 263.

The Tribunal concluded that the AO had conducted adequate enquiries and obtained necessary details from the assessee. The Tribunal found that the Pr. CIT had not demonstrated how the assessment order was erroneous and prejudicial to the revenue. The Tribunal cited the case of John Galt International Vrs. Pr. CIT, where it was held that both conditions must be satisfied for invoking section 263.

Conclusion:

The Tribunal set aside the order passed by the Pr. CIT under section 263, stating that the original assessment order was neither erroneous nor prejudicial to the interest of the revenue. The Tribunal emphasized that the AO had conducted sufficient enquiries and that the Pr. CIT had failed to provide adequate reasons for invoking section 263. The appeal filed by the assessee was allowed, and the Tribunal ruled in favor of the assessee.

General Ground:

The fourth ground of appeal was deemed general in nature and required no specific adjudication.

Final Decision:

The appeal filed by the assessee was allowed, and the order pronounced in the open court on 8th February 2019.