2014 (8) TMI 1087 - AT - Income Tax

Assessing Officer's Order Deemed Erroneous - Tribunal Directs Reassessment

Shri Sadiq Sheikh Versus Dy. Commissioner of Income Tax, Trade Central Circle, Panaji, Goa

Shri Sadiq Sheikh Versus Dy. Commissioner of Income Tax, Trade Central Circle, Panaji, Goa - TMI Issues Involved:1. Validity of the order passed under Section 263 of the Income Tax Act.2. Allegation of lack of inquiry by the Assessing Officer (AO) regarding the transaction under Section 2(47) of the Income Tax Act.3. Determination of whether the transaction constituted a transfer under Section 2(47) during the relevant assessment year.Issue-wise Detailed Analysis:1. Validity of the order passed under Section 263 of the Income Tax Act:The primary issue in the appeals is the validity of the order passed under Section 263. The Commissioner of Income Tax (CIT) invoked jurisdiction under Section 263, deeming the AO's order erroneous and prejudicial to the interest of the revenue. The CIT's contention was based on the AO's failure to consider the transaction related to the sale of property during the assessment year 2006-07, despite evidence indicating that the assessee received a significant portion of the consideration. The CIT issued a show cause notice and, after considering the assessee's submissions, concluded that the AO's order was erroneous and prejudicial to the revenue's interest, thus justifying the invocation of Section 263.2. Allegation of lack of inquiry by the AO regarding the transaction under Section 2(47) of the Income Tax Act:The CIT argued that the AO did not adequately inquire into the transaction involving the sale of property to M/s. Emgee Housing Pvt. Ltd. The AO had asked the assessee to furnish a detailed note on the transaction, but the assessee did not comply. The tribunal noted that the AO's failure to make the necessary inquiries or to examine whether the transaction constituted a transfer under Section 2(47) indicated a lack of inquiry. The tribunal emphasized that an AO must not remain passive and should ascertain the truth of the facts stated in the return, especially when circumstances provoke an inquiry.3. Determination of whether the transaction constituted a transfer under Section 2(47) during the relevant assessment year:The CIT's position was that the transaction constituted a transfer under Section 2(47) of the Income Tax Act, which includes any transaction involving the allowing of possession of immovable property in part performance of a contract as referred to in Section 53A of the Transfer of Property Act, 1882. The CIT argued that the transaction met the conditions for a valid contract and thus should be taxed in the year the agreement was entered into, i.e., the assessment year 2006-07. The tribunal agreed with the CIT, noting that the AO did not examine the applicability of Section 2(47) to the transaction.Conclusion:The tribunal concluded that the AO's order was indeed erroneous and prejudicial to the interest of the revenue due to the lack of inquiry into the transaction. The tribunal upheld the CIT's invocation of Section 263, directing the AO to reconsider the transaction in accordance with the provisions of the Income Tax Act after giving the assessee an opportunity to be heard. The appeals filed by the assessees were dismissed, affirming the CIT's decision to set aside the original assessment order and mandate a fresh assessment.