2014 (11) TMI 95 - AT - Income Tax

Tribunal upholds assessee's appeal, finding assessment order not erroneous. AO's view deemed valid.

The tribunal allowed the assessee's appeal, holding that the assessment order was not erroneous or prejudicial to the revenue. It was determined that the ... Validity of order u/s 263 – Erroneous or prejudicial to the revenue or not - Held that:- The AO in the assessment order is not required to give detailed reasons and once it is clear that there was application of mind by an enquiry, the respondent, merely because he entertains a different opinion in the matter, cannot invoke his powers under section 263 of the Act - It is, therefore, not correct to say that there was no proper enquiry by the Assessing Officer – the AO had not only taken a possible view but in the circumstances the only view possible and, therefore, his order could not have been termed as erroneous or prejudicial to the revenue warranting exercise of revisional jurisdiction u/s 263 of the Act by the respondent. The respondent had no different or new material to take different view from the one taken by the AO and the reasons given by him to reopen the assessment and sustain the revision are totally unacceptable – revenue is not vested with any power u/s 263 to initiate proceedings for revision in every case and start re-examination and fresh enquiries in matters which have already been concluded under the law. If AO takes a possible view, then the assessment order cannot be said to be erroneous and the Commissioner is not entitled to exercise jurisdiction u/s 263 of the Act, as decided in Malabar Industrial Co. Ltd. v. CIT [2000 (2) TMI 10 - SUPREME Court] - whether there was application of mind before allowing the expenditure in question has to be seen, if there was an inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under Sec. 263 merely because he has a different opinion in the matter - it is only in cases of lack of inquiry that such a course of action would be open - an assessment order made by the Income Tax Officer cannot be branded as erroneous by the Commissioner simply because, the order should have been written more elaborately – Decided in favour of assessee. Issues Involved:1. Agricultural income claim.2. Disallowance of employee's share of contribution to PF.3. Unaccounted sales.4. Unexplained cash deposit.5. Addition of share capital introduced.Issue-wise Detailed Analysis:1. Agricultural Income Claim:The assessee claimed agricultural income of Rs. 30,86,191 exempt from taxation, which the AO accepted. The CIT issued a show cause notice under section 263, arguing that the company's business is trading of hybrid seeds, thus the income should be classified as business income. The assessee contended that part of its income from the production and sale of foundation seeds to farmers should be considered agricultural income. The CIT rejected this, stating the AO accepted the claims without adequate enquiry or supporting material, making the assessment order erroneous and prejudicial to the revenue. The CIT also noted that the cultivation expenses claimed were not substantiated with proper records.2. Disallowance of Employee's Share of Contribution to PF:The CIT noted that the employees' share of PF contribution amounting to Rs. 2,73,118 was not remitted within the due date and should have been disallowed under section 36(1)(va). The assessee argued that the payments were made before the due date for filing the return under section 139(1), citing section 43B. The CIT found a discrepancy between the assessee's submissions and the tax audit report, which showed no such payments, requiring further examination.3. Unaccounted Sales:The CIT identified a discrepancy of Rs. 1,52,05,415 between the sales figures in the impounded material from a survey and those reported in the return. The assessee explained this as a combination of export sales and cultivation income disclosed in the P&L account. However, the CIT noted that the AO did not confront the assessee with this discrepancy during the assessment, thus failing to verify the correct turnover, making the order erroneous and prejudicial to the revenue.4. Unexplained Cash Deposit:The CIT questioned the source of a cash deposit of Rs. 9,50,000 in the assessee's ICICI bank account, which was not examined by the AO. The assessee provided a chart and confirmation letters from some investors but failed to furnish details for three investors. The CIT concluded that the AO should have treated the unexplained share capital as cash credit due to the lack of evidence, thus the assessment order was erroneous and prejudicial to the revenue.5. Addition of Share Capital Introduced:The CIT noted that the AO did not verify the sources of share capital introduced amounting to Rs. 32,36,030. Despite the assessee providing some confirmation letters, details for three investors were missing. The CIT held that the AO's failure to add the unexplained share capital as cash credit rendered the assessment order erroneous and prejudicial to the revenue.Conclusion:The tribunal held that the AO had conducted a proper enquiry and taken a possible view, thus the assessment order could not be termed erroneous or prejudicial to the revenue. The CIT did not have new material to justify revising the assessment. The tribunal relied on precedents indicating that if the AO takes a possible view, the assessment order cannot be deemed erroneous. The appeal by the assessee was allowed, and the tribunal concluded that the CIT's order under section 263 was not justified.Final Judgment:The assessee's appeal was allowed, and the tribunal pronounced the decision in open court on 13th October, 2014.