2022 (9) TMI 1037 - AT - Income Tax

Revision u/s 263 - Reopening of assessment u/s 147 - no inquiries were conducted with regard to cash deposits in bank accounts of assessee, no inquiry made by the AO regarding land development charges, assessee has shown unsecured loans from seven persons, there are advances given for land purchase but no confirmation of any those parties are available and the assessee declared short term capital gains on sale of three properties in earlier years, the short term capital gains work out to approximately as stamp duty on purchases not taken into account in the computation of income - HELD THAT - No reply to the show cause notice was filed by the assessee. We find that Ld PCIT passed the impugned order after detailed discussion and on clearly holding that it was the duty of the AO to investigate the fact in the return of assessee, when circumstances demand to make such inquiries. Thus, in absence of proper inquiry, the assessment order passed by AO is erroneous and prejudicial to the interest of revenue. We find that in absence of proper investigation of the issues the order passed by AO in erroneous, the Revenue suffered loss of due tax. Thus, the assessment order is prejudicial to the interest of Revenue as well. The order passed by the AO is not only erroneous but also in so far as prejudicial to the interest of revenue. Before us, the present appeal was filed on 04.06.2018, no document till date filed by the assessee. Any material or evidence or written submission, we do not find any reason to deviate from the finding of Ld. PCIT, which we affirm. In the result, appeal of the assessee is dismissed.

Issues:

1. Revision of assessment order under section 263 of the Income Tax Act, 1961.
2. Validity of initiating proceedings under section 263 beyond the period of limitation.
3. Calculation of time limit for passing order under section 263.
4. Legality of passing order under section 263 based on the validity of proceedings under section 147.
5. Authority to make additions in the assessment order based on the reasons for reopening the assessment under section 147.

Issue 1: Revision of assessment order under section 263 of the Income Tax Act, 1961

The appeal was against the order of the Principal Commissioner of Income tax, which was passed under section 263 of the Income Tax Act for the assessment year 2008-09. The assessee raised multiple grounds of appeal challenging the revision of the assessment order. The Principal Commissioner identified various issues such as cash deposits, land development charges, unsecured loans, advances for land purchase, and short term capital gains, where the Assessing Officer did not conduct proper inquiries. The Principal Commissioner held that the assessment order was erroneous and prejudicial to the interest of revenue due to the lack of investigation by the Assessing Officer. The Tribunal affirmed this decision, stating that in the absence of proper inquiry, the assessment order was erroneous and prejudicial to the revenue's interest.

Issue 2: Validity of initiating proceedings under section 263 beyond the period of limitation

The assessee contended that the proceedings under section 263 were initiated beyond the period of limitation. However, the Tribunal did not find merit in this argument and upheld the revision of the assessment order by the Principal Commissioner under section 263. The Tribunal emphasized the importance of conducting proper inquiries by the Assessing Officer to avoid erroneous assessment orders that could be prejudicial to the revenue's interest.

Issue 3: Calculation of time limit for passing order under section 263

The assessee challenged the calculation of the time limit for passing the order under section 263, arguing that it was incorrectly calculated from the end of the financial year in which the order under section 147 was passed. The Tribunal did not find this argument persuasive and maintained that the assessment order was rightly revised under section 263 due to the lack of proper inquiries conducted by the Assessing Officer on crucial issues.

Issue 4: Legality of passing order under section 263 based on the validity of proceedings under section 147

The assessee raised concerns about the legality of passing the order under section 263 based on the validity of the proceedings under section 147. However, the Tribunal held that the lack of proper investigations by the Assessing Officer on significant issues warranted the revision of the assessment order under section 263, as it was deemed erroneous and prejudicial to the revenue's interest.

Issue 5: Authority to make additions in the assessment order based on the reasons for reopening the assessment under section 147

The assessee argued that no additions could be made by the Assessing Officer beyond the reasons recorded for reopening the assessment under section 147. However, the Tribunal upheld the revision of the assessment order under section 263, emphasizing the importance of conducting thorough inquiries to ensure accurate assessment orders that safeguard the revenue's interest. The Tribunal dismissed the appeal due to the absence of any material or evidence filed by the assessee, affirming the decision of the Principal Commissioner under section 263.

In conclusion, the Tribunal upheld the revision of the assessment order under section 263, emphasizing the necessity of conducting proper inquiries by the Assessing Officer to avoid erroneous assessments that could be prejudicial to the revenue's interest. The appeal was dismissed due to the lack of material or evidence provided by the assessee to challenge the decision of the Principal Commissioner.

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