2014 (11) TMI 292 - AT - Income Tax

Tribunal overturns CIT's revision order under Income Tax Act, finds Assessing Officer's inquiry sufficient.

The Tribunal allowed the appeal, setting aside the CIT's order invoking revisional jurisdiction under Section 263 of the Income Tax Act. It concluded that ... Jurisdiction of CIT to invoke revisional jurisdiction u/s 263 - Prejudicial to the interest of Revenue or not - Necessary details and evidences for the claim of benefit were duly furnished before the AO or not – Held that:- The observation of the CIT that necessary enquiries were not made or necessary details were not furnished by the assessee or examination of the same by the Assessing Officer is not substantiated - CIT has not pointed out any error in the order as to how it is erroneous and prejudicial to the interest of Revenue - requisite details were duly furnished by the assessee and the same were duly examined by the AO - there is a distinction between “lack of enquiry” and “inadequate enquiry” - necessary details were produced and examined by the AO, thus, it is not a case of lack of enquiry by the AO – relying upon Reliance Gas Transportation Infrastructure Ltd. vs. CIT [2014 (1) TMI 800 - ITAT MUMBAI] - there must be material before the Commissioner to satisfy himself that two requisite provided u/s. 263 are present, otherwise power cannot be exercised at the whims and caprice of the Commissioner. An incorrect assumption of fact or an incorrect application of law would satisfy the requirement of order being erroneous u/s. 263 - The phrase “prejudicial to the interest of the Revenue” u/s. 263, has to be read in conjunction with the expression “erroneous” order by the AO - every loss of Revenue as a consequence of assessment order cannot be termed as prejudicial to the interest of Revenue - assessment u/s 143(3) of the Act was framed by the AO after obtaining necessary details from the assessee and further it were examined by him - even if, the same has not been spelt elaborately in the assessment order it cannot be said that there is a lack of enquiry or prejudice has been caused to the Revenue, the order of the Commissioner is set aside – Decided in favour of assessee. Issues Involved:1. Invocation of revisional jurisdiction under Section 263 of the Income Tax Act, 1961.2. Determination of whether the assessment order was erroneous and prejudicial to the interest of the Revenue.3. Examination of whether the Assessing Officer conducted a proper inquiry and applied his mind to the details provided by the assessee.Issue-wise Detailed Analysis:1. Invocation of Revisional Jurisdiction under Section 263 of the Income Tax Act, 1961:The assessee challenged the invocation of revisional jurisdiction under Section 263 by the Commissioner of Income Tax (CIT). The CIT directed the modification of the assessment order passed under Section 143(3) on the grounds that it was prejudicial to the interest of the Revenue. The assessee's counsel argued that the CIT did not point out specific errors in the assessment order and that all necessary details and evidence were furnished to the Assessing Officer (AO) and examined in detail.2. Determination of Whether the Assessment Order was Erroneous and Prejudicial to the Interest of the Revenue:The CIT-DR defended the CIT's decision, stating that the AO framed a short order, making it erroneous and prejudicial to the Revenue's interest. The Tribunal noted that the assessee filed an e-return declaring total income, which was later revised. The case was taken up for scrutiny, and notices under Sections 142(1) and 143(2) were issued. The assessee attended the assessment proceedings and provided all requested details, which were examined by the AO. The Tribunal found that the CIT's observation that loose papers found during the survey were not analyzed was factually incorrect, as the AO had indeed examined these documents.3. Examination of Whether the Assessing Officer Conducted a Proper Inquiry and Applied His Mind to the Details Provided by the Assessee:The Tribunal emphasized the distinction between 'lack of enquiry' and 'inadequate enquiry.' It was noted that the AO collected necessary details, examined them, and then framed the assessment under Section 143(3). The Tribunal referenced the decision in CIT vs. Anil Kumar Sharma (2011) 335 ITR 83 (Del.), which held that even if the enquiry was inadequate, it would not constitute 'lack of enquiry' if the AO applied his mind to the relevant material and facts. The Tribunal also cited similar decisions from various High Courts, including CIT vs. Development Credit Bank Ltd. (2010) 323 ITR 206 (Bom.) and CIT vs. Gabriel India Ltd. (203 ITR 108) (Bom.), supporting the view that the AO's order was not erroneous or prejudicial to the Revenue's interest.The Tribunal concluded that the AO had indeed conducted a proper inquiry and applied his mind to the details provided by the assessee. The CIT's invocation of revisional jurisdiction under Section 263 was, therefore, not justified. The Tribunal set aside the CIT's order and allowed the appeal in favor of the assessee.Final Judgment:The appeal of the assessee was allowed, and the order of the CIT invoking revisional jurisdiction under Section 263 was set aside. The Tribunal pronounced the order in the open court on October 31, 2014.