2012 (12) TMI 570 - AT - Income Tax

Tribunal emphasizes specific reasons for revision under Income Tax Act

The Tribunal allowed the appeal filed by the assessee, emphasizing the necessity of providing specific reasons and a well-reasoned decision when ... Revision u/s 263 - held that:- no reason whatsoever set out in the show cause notice as to why the Commissioner was of the view that the assessment order is erroneous and prejudicial to the interest of the revenue. Unless the Commissioner specifically sets out such reasons in the show cause notice, and hears the assessee on the same, it is not open to him to exercise his revision powers under section 263 of the Act. The manner in which impugned order is passed leaves a lot to be desired, and it does not show any application to mind. Such an action cannot meet any judicial approval. In any case, unless categorical finding is given about what is wrong in the order, the matter cannot be set aside to file of the Assessing Officer for fresh examination. - Decided in favor of assessee. Issues Involved:1. Challenge to correctness of Commissioner's order under section 263 r.w.s. 143(3) of the Income Tax Act, 1961 for assessment year 2007-08.Analysis:Issue 1: Jurisdiction of Commissioner under section 263The appellant challenged the Commissioner's order under section 263 of the Income Tax Act, 1961, for the assessment year 2007-08. The grounds of challenge included the lack of reasons mentioned in the notice issued by the Commissioner, violation of natural justice, and the assumption of jurisdiction without proper application of mind. The appellant argued that the order setting aside the assessment by the Assessing Officer lacked reasons for being considered erroneous and prejudicial to the revenue's interest. The Commissioner's failure to provide specific reasons and the absence of a detailed explanation for the decision rendered the order unsustainable. The appellant contended that without setting out clear reasons, the Commissioner could not exercise revision powers under section 263. The Tribunal found that the conditions precedent for initiating revision proceedings were not satisfied as the Commissioner did not provide adequate reasons for considering the assessment order erroneous and prejudicial to revenue. The Tribunal concluded that the Commissioner's order lacked a proper application of mind and failed to meet judicial approval, ultimately vacating the revision order and granting relief to the assessee.Issue 2: Lack of Proper Enquiry by Assessing OfficerThe Commissioner's order was based on the alleged failure of the Assessing Officer to make inquiries regarding the sale of two buildings by the assessee and the claimed cost of acquisition. The Commissioner highlighted discrepancies in the assessment, including the acceptance of the cost of acquisition without verifying the fair market value and the imperfect allowance of unabsorbed depreciation. However, the Tribunal noted that the Assessing Officer had made necessary verifications during the assessment proceedings and provided a detailed reply to the audit query. The Tribunal observed that the Commissioner's order did not adequately address these aspects and failed to provide a valid reason for setting aside the assessment order. The lack of proper verification by the Assessing Officer was not substantiated, leading the Tribunal to question the basis of the Commissioner's decision. The Tribunal emphasized the importance of a thorough examination of facts before concluding an assessment as erroneous and prejudicial to revenue, highlighting the need for clear and reasoned decisions in such matters.Conclusion:The Tribunal allowed the appeal filed by the assessee, emphasizing the necessity of providing specific reasons and a well-reasoned decision when exercising revision powers under section 263 of the Income Tax Act, 1961. The judgment underscored the importance of a thorough assessment process, proper application of mind, and adherence to principles of natural justice in tax matters.