2022 (5) TMI 684 - AT - Income Tax

Revision u/s 263 - Incorrect source of the money showed as receipt from the sale of such fruits and vegetables - non-inquiry by AO -HELD THAT - We find that though 7/12 extracts was before the A.O where the assessee has shown having received income from sale of watermelon, vegetables, chana but the reality was there was no cultivation of these crops in the said 7/12 extracts submitted by the assessee. This fact was only brought out by the ld. Pr. CIT in his inquiry. The non-inquiry in this case by the A.O has resulted the order to be erroneous so as to be prejudicial to the interests of revenue since the source of the money showed as receipt from the sale of such fruits and vegetables has clearly turned out to be incorrect and the source of such money is still to be ascertained in the given facts and circumstances of this case, meaning thereby the tax which was lawfully excisable has not been imposed or that by application of the relevant statutes on an incorrect and incomplete interpretation a lesser tax than what was just has been imposed. The order becomes erroneous simply because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. In the said judgment, Hon ble Delhi High Court has referred to earlier decisions of the Hon ble Supreme Court in the case of Rampyari Devi Saraogi 1967 (5) TMI 10 - SUPREME COURT and Tara Devi Aggrawal 1972 (11) TMI 2 - SUPREME COURT wherein it has been held that where the A.O has accepted a particular contention/issue without any inquiry or evidence whatsoever, the order is erroneous and prejudicial to the interests of the Revenue. The aforesaid observation has to be understood in the light of the present case, where the A.O has not conducted any inquiry or examined the said 7/12 extracts which were in front of him. Therefore, this case has to be seen differently from the case where the A.O has conducted inquiry but the findings were erroneous. In the present facts it s a case of lack of inquiry by the A.O and not inadequate inquiry. CIT was justified in assuming revisionary jurisdiction and passing an order u/s 263 of the Act which is hereby upheld. - Decided against assessee.

Summary

Issues Involved:
1. Legality of the Principal Commissioner of Income Tax (Pr. CIT) assuming revisionary jurisdiction under Section 263 of the Income-tax Act, 1961.
2. Verification of agricultural income claimed by the assessee.

Issue-wise Detailed Analysis:

1. Legality of the Principal Commissioner of Income Tax (Pr. CIT) assuming revisionary jurisdiction under Section 263 of the Income-tax Act, 1961:

The primary grievance of the assessees was that the Pr. CIT was incorrect in law in assuming revisionary jurisdiction under Section 263 of the Income-tax Act, 1961. The assessees contended that the Assessing Officer (A.O) had made all necessary inquiries, and they had submitted relevant documents, including 7/12 extracts, bank account details, and diary pages noting agricultural income transactions.

However, the Pr. CIT observed discrepancies in the agricultural income reported. Specifically, the 7/12 extracts did not record the cultivation of watermelon, vegetables, and chana, which were claimed as sources of agricultural income. The Pr. CIT determined that the alleged receipts amounting to Rs. 57,76,670/- were not genuine and concluded that Rs. 24,89,944/- of this amount was income from unexplained sources.

The Pr. CIT issued a show-cause notice to the assessee, who responded by reiterating that all necessary details had been submitted during the assessment proceedings. Despite this, the Pr. CIT proceeded to pass an order based on the material available on record, invoking Explanation 2(a) to Section 263 of the Act, which states that an order passed without making necessary inquiries or verification is deemed erroneous and prejudicial to the interests of the revenue.

The Tribunal upheld the Pr. CIT's decision, citing various judicial pronouncements that support the Pr. CIT's authority to revise an order if it is deemed erroneous and prejudicial to the revenue. The Tribunal emphasized that the A.O had failed to conduct proper inquiries into the agricultural income, thus justifying the Pr. CIT's revisionary jurisdiction.

2. Verification of agricultural income claimed by the assessee:

The Pr. CIT's primary observation was that the 7/12 extracts did not show records of cultivation for watermelon, vegetables, and chana, which the assessee claimed as sources of agricultural income. The Pr. CIT concluded that the receipts amounting to Rs. 57,76,670/- were not justified, leading to an unexplained income of Rs. 24,89,944/-.

The Tribunal found that the A.O had not inquired into the discrepancies highlighted by the 7/12 extracts. The Tribunal noted that the A.O should have investigated the details regarding the receipts from the sale of watermelon, vegetables, and chana. The failure to do so resulted in an erroneous assessment order, as the source of the claimed agricultural income was not verified.

The Tribunal referenced several judicial decisions, including Gee Vee Enterprises Vs. Addl. CIT, CIT Vs. South India Shipping Corporation Ltd., and CIT Vs. M.M. Khambhatwala, which support the Pr. CIT's authority to revise an assessment order if it is found to be erroneous and prejudicial to the revenue. The Tribunal concluded that the A.O's lack of inquiry into the agricultural income justified the Pr. CIT's revisionary jurisdiction under Section 263 of the Act.

Conclusion:

The Tribunal upheld the Pr. CIT's order, dismissing the appeals of the assessees. The Tribunal found that the A.O had failed to conduct proper inquiries into the agricultural income claimed by the assessees, leading to an erroneous assessment order. The Pr. CIT's assumption of revisionary jurisdiction under Section 263 of the Income-tax Act, 1961, was deemed justified. The decision in ITA No. 177/PUN/2021 for A.Y. 2016-17 was applied mutatis mutandis to ITA No. 176/PUN/2021 for A.Y. 2016-17, resulting in the dismissal of both appeals.