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2023 (10) TMI 1233 - AT - Income TaxRevision u/s 263 - as per CIT re-assessment order accepting the cash advance in a commercial and business transaction is without proper inquiry having regard to the provisions of Section 40A(3) and therefore erroneous in so far as prejudicial to the interest of the Revenue - HELD THAT - CIT cannot merely set aside the assessment on the basis of a new fact (albeit incorrect) coming on record without exerting himself and provide some basis to dislodge the response of the assessee on such new material. CIT, under the circumstances, is under bounden duty to take into account the perspective of the assessee on such fresh material and is required to pass a speaking order thereon. CIT thus is not expected to sit solely in the capacity of revisionary authority qua the new fact coming to the light post assessment/re-assessment order but is required to assume the task of AO in tandem and discharge quasi judicial functions in a reasonable manner. CIT, in the instant case, has failed to do so. There is not even an iota of any discussion as to how reply of the assessee is without any substance particularly when the assessee has furnished evidences to corroborate his version before theCIT. CIT has abruptly observed that the re-assessment order is erroneous in so far as it is prejudicial to the interest of the Revenue in view of following observations but however no observations thereafter has been found to be made. Thus, findings of CIT suffer from apparent error and incompleteness. CIT has summarily set aside the re-assessment order and shifted the responsibility on the AO to examine or verify the facts. The opportunity contemplated under Section 263 is thus rendered illusory and merely an empty formality resulting in miscarriage of justice in contravention of express intendment of provision of Section 263. Directions towards verification of impugned transactions without observance of natural justice and without speaking order on the point based on some degree of inquiry by CIT himself, are unsustainable in law and deserves to be quashed. Decided in favour of assessee.
Issues involved: Revision of assessment order under Section 263 of the Income Tax Act based on alleged errors in the original assessment related to purchase of land in cash exceeding permissible limit.
Summary: Issue 1: Alleged erroneous assessment due to cash purchase of land: The appeal was directed against the revisional order passed by the Principal Commissioner of Income Tax, Rohtak, setting aside the assessment order passed by the Assessing Officer. The issue revolved around the alleged purchase of agricultural land in cash amounting to Rs. 25 lakhs, which the Assessing Officer failed to investigate. The Principal Commissioner considered this omission prejudicial to the interest of the Revenue, leading to the revision under Section 263. Details for Issue 1: The assessment for the relevant year was initially completed by the Assessing Officer under Section 143(3) r.w. Section 147, determining the total income at Rs. 3,73,530. The Principal Commissioner issued a notice under Section 263(1) based on the alleged cash purchase of land, seeking to set aside or modify the assessment order. The assessee contended that no land was purchased, but an advance was received for the sale of ancestral land, which was later returned due to the deal not materializing. Despite providing documentary evidence supporting this claim, the Principal Commissioner held the assessment to be erroneous and directed a fresh assessment. Issue 2: Appeal against the revisional order: The assessee appealed before the Tribunal challenging the revisional order under Section 263, arguing that the proceedings were based on erroneous assumptions and that no prejudice was caused to the Revenue. The counsel emphasized that the assertions made post-reassessment by the assessee's representative were inadvertent and did not reflect the actual transaction accurately. Details for Issue 2: The Tribunal considered the contentions of both parties. It noted that the Principal Commissioner's decision was primarily based on a post-reassessment correspondence, highlighting the need for a thorough inquiry before setting aside the assessment. The Tribunal found that the Principal Commissioner failed to provide a reasoned order, disregarding the evidence presented by the assessee and not conducting a proper assessment of the new material post-reassessment. Consequently, the Tribunal allowed the appeal, deeming the directions for verification of transactions without due process unsustainable and in violation of natural justice principles. Conclusion: The Tribunal allowed the appeal of the assessee, emphasizing the importance of a fair and thorough assessment process in revisionary proceedings under Section 263 of the Income Tax Act.
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