2008 (12) TMI 430 - AT - Income Tax

Commissioner's Revisional Order Cancelled; Original Assessment Restored.

The Tribunal held that the Commissioner of Income-tax failed to establish that the assessment order was both erroneous and prejudicial to the interests of ... Revision - Of orders prejudicial to interests of revenue Issues Involved:1. Examination of the identity, creditworthiness, and genuineness of the gift.2. Details of bank accounts of the donor and the donee.3. Legality and validity of the order passed under section 263 of the Income-tax Act, 1961.4. Principles of natural justice and fair play.5. Revisional power of the Commissioner under section 263.Issue-wise Detailed Analysis:1. Examination of the Identity, Creditworthiness, and Genuineness of the Gift:The assessee filed a return of income for the assessment year 2003-04, declaring a total income of Rs. 91,590, which included a gift of Rs. 2 lakhs from Manisha Goyal, sister of the karta Rajesh Goyal. The Assessing Officer (AO) initially accepted the gift as genuine after examining the relevant documents, including the identity and creditworthiness of the donor. However, the Commissioner of Income-tax (CIT) later revised this assessment order under section 263, citing that the AO did not adequately examine the identity, creditworthiness, and genuineness of the gift. The CIT observed that the AO did not obtain the donor's bank statement to verify her creditworthiness, despite the donor's total income being only Rs. 18,741 for the relevant assessment year.2. Details of Bank Accounts of the Donor and the Donee:The CIT noted that the AO failed to obtain the details of the bank accounts of both the donor and the donee. The CIT emphasized that the AO did not verify the source of the deposit in the donor's bank account on the date of the gift, which was crucial to establish the genuineness of the gift. The CIT concluded that the assessment order was erroneous and prejudicial to the interest of the revenue due to these lapses.3. Legality and Validity of the Order Passed Under Section 263 of the Income-tax Act, 1961:The assessee contended that the order passed under section 263 was illegal, unwarranted, and against the principles of natural justice. The assessee argued that the AO had already examined all relevant documents and found the gift to be genuine. The Tribunal examined the provisions of section 263 and the precedents set by the Hon'ble Supreme Court, particularly in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83. The Tribunal concluded that the twin conditions for invoking section 263-i.e., the order being erroneous and prejudicial to the interest of the revenue-did not co-exist in this case.4. Principles of Natural Justice and Fair Play:The assessee argued that the CIT did not consider the written submissions filed by the assessee, making the order arbitrary and lopsided. The Tribunal noted that the CIT must provide reasons for passing an order under section 263 and must base his decision on proper material. The Tribunal found that the AO had made proper inquiries during the reassessment proceedings and had examined all relevant documents before accepting the gift as genuine.5. Revisional Power of the Commissioner Under Section 263:The Tribunal emphasized that the revisional power under section 263 is of wide amplitude but must be exercised within the bounds of law and fairness. The Tribunal reiterated that an order could only be revised if it is both erroneous and prejudicial to the interests of the revenue. The Tribunal found that the AO had reopened the assessment specifically to verify the gift and had examined all relevant documents before concluding that the gift was genuine. The Tribunal concluded that the CIT's order was not justified as the AO had taken a possible view based on the evidence available before him.Conclusion:The Tribunal held that the CIT had not established that the assessment order was both erroneous and prejudicial to the interests of the revenue. The Tribunal canceled the revisional order passed by the CIT under section 263 and restored the original assessment order. The appeal of the assessee was partly allowed.