2020 (9) TMI 491 - AT - Income Tax

Revision u/s 263 by CIT - claim of Long Term Capital Gain exemption on shares not discussed in the Assessment Order u/s.143(3) - HELD THAT - There was proper disclosure of exempt LTCG in assessee s computation of income. The transactions were duly explained by the assessee with requisite documentary evidences during the course of regular assessment proceedings. The assessment order takes note of the fact that various details were called from assessee which were duly submitted and placed on record. These details include notes and explanations on the issues that came up for discussion during the course of hearing. It could be concluded that there was due application of mind by Ld. AO on the stated issue and the claim was admitted after due verification. Merely because the issue was not elaborately discussed in the quantum assessment could not be a ground to invoke revisional jurisdiction u/s 263 particularly when the details called for by Ld. AO were submitted and placed on record. Copies of documents / office note which formed the basis of invocation of jurisdiction was never supplied to the assessee. Assessee all along denied having made any such affidavit that aforesaid income was declared under Income Declaration Scheme, 2016. However, the copy of the affidavit, stated to be in assessment records, was never confronted to the assessee to controvert his submissions. Mere suspicion could not be a ground to invoke jurisdiction u/s 263. There is no adequate material on record which would demonstrate the fulfillment of both the conditions to demonstrate that the order was erroneous as well as prejudicial to the interest of the revenue.- Revisional jurisdiction u/s 263 could not be sustained - Decided in favour of assessee.

Issues Involved:
1. Validity of revisional proceedings under Section 263 of the Income Tax Act.
2. Justification for invoking Section 263 to re-examine facts already considered.
3. Legitimacy of revision based on absence of discussion in the original assessment order.
4. Consideration of objections raised by the appellant in the revisionary order.
5. Application of mind by the CIT in determining the necessity for revision under Section 263.
6. Provision of fair and proper opportunity to the appellant during the revisionary proceedings.

Detailed Analysis:

1. Validity of Revisional Proceedings under Section 263:
The appellant argued that the proceedings under Section 263 were beyond jurisdiction, void, and of no legal effect. The appellant asserted that all material facts were fully and truly disclosed, and the original assessment was made after due consideration by the AO under Section 143(3). The tribunal noted that the quantum assessment was framed by the AO accepting the returned income after detailed scrutiny and submission of required documents by the appellant. Therefore, the revisional jurisdiction exercised by the CIT was deemed invalid.

2. Justification for Invoking Section 263 to Re-examine Facts:
The appellant contended that the CIT erred in invoking Section 263 to review and re-examine facts and documents already considered by the AO. The tribunal agreed, stating that revision cannot be undertaken merely for re-examining material already on record, especially when the AO had made a judgment based on the same. The tribunal found that the details regarding the Long Term Capital Gains (LTCG) on SRK shares were already examined during the original assessment.

3. Legitimacy of Revision Based on Absence of Discussion in Original Assessment Order:
The appellant argued that the CIT erred in invoking Section 263 on the grounds that there was no discussion in the original assessment order regarding the LTCG claim. The tribunal noted that the AO had issued notices and received detailed submissions from the appellant, which were placed on record. The tribunal concluded that the absence of detailed discussion in the assessment order does not justify invoking revisional jurisdiction, as the AO had duly verified the claim.

4. Consideration of Objections Raised by the Appellant:
The appellant claimed that the CIT passed the revisional order without disposing of the objections raised. The tribunal found that the CIT failed to address the appellant's submissions and objections, including the request for copies of documents and office notes that formed the basis of the revision. This lack of consideration rendered the revisionary order procedurally flawed.

5. Application of Mind by the CIT:
The appellant contended that the CIT did not properly apply his mind to the facts and documents furnished. The tribunal observed inconsistencies in the CIT's order, such as incorrect details regarding the quantity of shares and failure to consider the appellant's replies. The tribunal emphasized that the CIT must demonstrate that the original order was erroneous and prejudicial to the revenue, which was not adequately established in this case.

6. Provision of Fair and Proper Opportunity:
The appellant argued that the CIT did not provide a fair and proper opportunity of being heard and did not follow the principles of natural justice. The tribunal noted that the appellant was not provided with copies of crucial documents, such as the affidavit and office notes, despite several requests. This lack of transparency and opportunity to respond appropriately further invalidated the revisional proceedings.

Conclusion:
The tribunal quashed the revisional jurisdiction exercised under Section 263, as it was not sustained by adequate material evidence and did not follow due process. The appeal was allowed, and the order pronounced on 11th September 2020.

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