2016 (12) TMI 1868 - AT - Income Tax

Tribunal overturns CIT's Section 263 decision, emphasizes limits on assessment revisions.

Rasiklal M. Dhariwal (HUF) Versus Commissioner of Income-Tax, Pune

The Tribunal held that the Commissioner of Income Tax (CIT) was not justified in invoking Section 263 for the assessment years in question. The Tribunal ... Revision u/s 263 by CIT - order passed by the AO u/s 153A r.w.s 143(3) - Assessment u/s 153A of the Act after obtaining approval of Additional CIT u/s 153D - HELD THAT:- In the present appeals for six assessment years, it is seen that except for AY 2010-11 where the assessment was framed u/s 143(3), for all the other five years, the assessments were framed u/s 153A r.w.s. 143(3) meaning thereby that while framing the assessments in those respective years, the necessary approval of Addl.CIT was obtained and that apart from AO the Addl.CIT had also applied his mind to the facts before passing the assessment orders - we find force in the submission of ld.A.R. that it cannot be said that the necessary inquiries were not made while passing the assessment orders u/s 143(3) r.w.s. 153A - it is a settled position that the assessment orders cannot be set aside or revised for inadequate inquiry by ld. CIT u/s 263 of the Act. We therefore find force in the submission of ld.A.R. that revisionary proceedings u/s 263 cannot be initiated in the present cases and for which we also find support from the following decisions. - Decided in favour of assessee. Issues Involved:1. Validity of invoking Section 263 of the Income Tax Act by the Commissioner of Income Tax (CIT).2. Examination of the assessment orders under Section 153A read with Section 143(3).3. Adequacy of inquiries conducted by the Assessing Officer (AO).4. Jurisdictional validity of revisionary proceedings under Section 263.5. Impact of the approval obtained under Section 153D on revisionary proceedings.6. Examination of specific claims and deductions made by the assessee.Issue-wise Detailed Analysis:1. Validity of Invoking Section 263 by the CIT:The CIT invoked Section 263, claiming the assessment orders were erroneous and prejudicial to the interest of the Revenue. The CIT identified several areas where the AO allegedly failed to make necessary inquiries, including the deduction under Section 80HHC, depreciation on luxury vehicles, exempt income under Section 14A, income from house properties, and interest on income tax refunds.2. Examination of Assessment Orders under Section 153A read with Section 143(3):The assessee's assessments for AY 2004-05 and AY 2006-07 to AY 2010-11 were framed under Section 153A read with Section 143(3), following a search action. The AO determined the total income for various years, which was higher than the income declared in the returns filed pursuant to the notice under Section 153A.3. Adequacy of Inquiries Conducted by the AO:The CIT argued that the AO did not conduct adequate inquiries into several claims made by the assessee. However, the Tribunal noted that the AO had obtained the necessary approval from the Additional Commissioner of Income Tax (Addl.CIT) under Section 153D before framing the assessments, indicating that both the AO and Addl.CIT had applied their minds to the facts.4. Jurisdictional Validity of Revisionary Proceedings under Section 263:The Tribunal emphasized that for the CIT to exercise revisionary powers under Section 263, two conditions must be satisfied: the order must be erroneous and prejudicial to the interest of the Revenue. The Tribunal relied on the Supreme Court's decision in Malabar Industrial Co. Ltd. vs. CIT, which held that if an AO adopts one of the permissible courses in law, the order cannot be deemed erroneous merely because the CIT disagrees.5. Impact of Approval Obtained under Section 153D on Revisionary Proceedings:The Tribunal found that since the assessments were framed after obtaining approval from the Addl.CIT under Section 153D, it could not be said that necessary inquiries were not made. The Tribunal cited several decisions, including those of the Allahabad High Court and other ITAT benches, which held that without revising the directions of the Addl.CIT, the assessments could not be revised under Section 263.6. Examination of Specific Claims and Deductions Made by the Assessee:The Tribunal noted that the issues raised by the CIT, such as deductions under Section 80HHC, depreciation on luxury vehicles, exempt income under Section 14A, and income from house properties, were already considered during the original assessment proceedings. The Tribunal held that the CIT could not initiate revisionary proceedings based on a change of opinion.Conclusion:The Tribunal concluded that the CIT was not justified in invoking Section 263 for the assessment years in question. The Tribunal set aside the orders of the CIT and allowed the appeals of the assessee, emphasizing that the assessments could not be revised merely for inadequate inquiry or based on a change of opinion.Final Order:The appeals of the assessee were allowed, and the orders of the CIT were set aside. The Tribunal pronounced the order on December 28, 2016.