2025 (3) TMI 882 - SCH - Income Tax

Validity of Revision u/s 263 - notice u/s 148 referred to non-declaration of the account in ING Vysya Bank with a credit and with regard to the claim of deduction u/s 10AA HELD THAT - It is accepted that a reassessment order under Section 148 r/w Section 143(3) of the 1961 Act was passed. Addition was not made for the first reason. In the given facts the assertion by the Revenue that inquiry and verification in re the bank account was not made is ex-facie incorrect. This being the position this is not a case of failure to investigate but as no addition was made the Revenue can argue that it is a case of wrong conclusion and decision in the reassessment proceedings. Therefore to exercise jurisdiction u/s 263 the Commissioner of Income Tax should have examined the merits and only on reaching a finding that the re-assessment order was erroneous and prejudicial to the interest of the Revenue made an addition. This is not a case of no inquiry and verification but as made out by the Revenue a case of wrong conclusion. The difference between the two situations is clear and has different consequences. This being the position the High Court 2023 (9) TMI 1343 - GUJARAT HIGH COURT was right in dismissing the appeal preferred by the Revenue.

Summary

The Supreme Court of India, comprising Hon'ble The Chief Justice and Hon'ble Mr. Justice Sanjay Kumar, addressed a special leave petition concerning Section 263 of the Income Tax Act, 1961. The petition was deemed "misconceived" and contrary to the relevant law.The case involved a notice under Section 148 of the 1961 Act, citing two reasons: non-declaration of an account in ING Vysya Bank with a substantial credit and a claim for deduction under Section 10AA. A reassessment order was issued under Section 148 read with Section 143(3), but no addition was made for the first reason.The Revenue's assertion of a lack of inquiry and verification regarding the bank account was found to be incorrect. The issue was characterized not as a failure to investigate but as a "wrong conclusion and decision" in the reassessment proceedings. For the Commissioner of Income Tax to exercise jurisdiction under Section 263, it was necessary to establish that the reassessment order was both erroneous and prejudicial to the Revenue's interest.The Supreme Court upheld the High Court's decision to dismiss the Revenue's appeal, emphasizing the distinction between "no inquiry and verification" and a "wrong conclusion," which bear different legal consequences. The special leave petition was dismissed, and any pending applications were disposed of accordingly.