2014 (12) TMI 308 - HC - Income Tax

Tribunal decision upheld, Assessing Officer's order not erroneous. Revenue's appeals dismissed. Commissioner overstepped jurisdiction.

Commissioner of Income-Tax Versus Shri Kiran Hirji Shah

The High Court upheld the Tribunal's decision that the Assessing Officer's order was not erroneous or prejudicial to the Revenue's interest. The Court ... Validity of order of revision u/s 263 – Erroneous or prejudicial to interest of revenue – Held that:- The Tribunal was of the view that there could be an explanation and which was later on furnished so as to explain the source of funds - the Assessee offered a sum as additional income in the returns filed after the search - if after examining the details the AO accepts one of the possible views, then his order cannot be called erroneous and prejudicial to the interest of the Revenue – Relying upon CIT v/s. Gabriel India Ltd. [1993 (4) TMI 55 - BOMBAY High Court] - inquiries have been made in regard to nature of the expenditure incurred by the Assessee, the explanation has been given and which the Assessee termed as a detailed explanation and in writing - the claim was allowed by the AO on being satisfied with this explanation of the assessee - Such an order or assessment made by the AO could not have been held to be erroneous simply because elaborate or better reasons could have been assigned - If the Commissioner initiates proceedings u/s 263 and hears the assessee, but on examination of the entire material what he upsets or rather interferes with is a possible view, then the course adopted by him was held to be impermissible in law. The AO has made inquiry and which also appears to have been reflected in the figures - assessee was carrying on petroleum and other business for more than 15 years and earned additional income - diary entries have been referred to and the AO's conclusions have been eventually upheld - once inquiry was made and how the view taken by the AO is demonstrated to be possible and plausible one, then, there is no reason that the Tribunal's order can be termed as perverse or vitiated by any error of law apparent on the face of record – as such no substantial question of law arises for consideration – Decided against revenue. Issues Involved:1. Legality of the Commissioner's order under section 263 of the Income Tax Act.2. Validity of the Assessing Officer's assessment order.3. Examination of unaccounted expenses and income.4. Tribunal's interference with the Commissioner's order.5. Jurisdiction and powers of the Commissioner under section 263.Issue-Wise Detailed Analysis:1. Legality of the Commissioner's order under section 263 of the Income Tax Act:The Commissioner of Income Tax (Central)-II, Mumbai, issued an order under section 263 of the Income Tax Act, 1961, regarding the unaccounted expenses incurred by M/s. Motta Construction Pvt. Ltd. for the Assessment Years 2000-01, 2001-02, and 2004-05. The Commissioner concluded that the Assessing Officer's assessment was erroneous and prejudicial to the interest of the Revenue, as the source of Rs. 2.33 crores was not satisfactorily explained by the Assessee. The Commissioner directed a denovo assessment by the Assessing Officer.2. Validity of the Assessing Officer's assessment order:The original assessment order under section 143(3) read with section 153C was passed on 4 May 2007, assessing the total income of Rs. 21,73,220/-. The Tribunal found that the Assessing Officer had raised specific queries and received responses from the Assessee, indicating an application of mind. The Tribunal held that the Assessing Officer had accepted a possible and plausible view, which could not be termed erroneous merely because the Commissioner believed a more detailed inquiry was necessary.3. Examination of unaccounted expenses and income:The Commissioner scrutinized the assessment records and seized materials, concluding that there was no conclusive evidence to prove that the transactions pertained to the period before 31 March 1999. The Assessee failed to provide evidence supporting the claim that Rs. 2.33 crores was an opening balance as of 31 March 1999. However, the Tribunal noted that the Assessee had provided explanations and additional income of Rs. 2.47 crores in the returns filed after the search, which the Assessing Officer had accepted after due inquiry.4. Tribunal's interference with the Commissioner's order:The Tribunal allowed the Assessee's appeals against the Commissioner's order under section 263, holding that the Assessing Officer had taken a possible and plausible view. The Tribunal emphasized that the Assessing Officer had made inquiries and considered the Assessee's explanations, thus the assessment order could not be deemed erroneous and prejudicial to the interest of the Revenue. The Tribunal relied on the judgment of CIT v/s. Gabriel India Ltd., which states that an order is not erroneous simply because a different view could have been taken.5. Jurisdiction and powers of the Commissioner under section 263:The Tribunal acknowledged the wide powers of the Commissioner under section 263 to revise orders that are erroneous and prejudicial to the interest of the Revenue. However, it found that in this case, the Commissioner had overstepped his jurisdiction by interfering with a possible view taken by the Assessing Officer. The Tribunal held that the Commissioner's order lacked consideration of the complete material and inquiries made by the Assessing Officer, thereby justifying its interference with the Commissioner's order.Conclusion:The High Court dismissed the Revenue's appeals, upholding the Tribunal's decision that the Assessing Officer's order was a possible and plausible view and not erroneous or prejudicial to the interest of the Revenue. The Tribunal's detailed analysis and adherence to legal principles, as established in CIT v/s. Gabriel India Ltd., were deemed appropriate, and no substantial question of law was raised.