2016 (8) TMI 1552 - AT - Income Tax

Tribunal overturns Principal CIT's decision under Section 263, upholding Assessing Officer's order.

Jiwan Kumar Versus he Pri. Commissioner of Income Tax, Bathinda

The Tribunal set aside the Principal Commissioner of Income Tax's order passed under Section 263, concluding that the Assessing Officer's order was not ... Revision u/s 263 - unexplained cash - only contention of the Pri. CIT is that the AO should have made further enquiries, which has not been done, according to him - HELD THAT:- CIT observed that Sh. Om Parkash prop, of M/s. Khubsoorat Ornaments, i.e. the father of the assessee was neither produced by the assessee nor summoned by the AO; that the agreement regarding purchase of property was not produced; that there was no power of attorney given by Sh. Om Parkash to Sh. Jiwan Kumar for purchase of property on his behalf; that no agreement to sell was produced and no part payment was made; and the AO did not examine the availability of cash in hand with M/s. Khubsoorat Ornaments. As seen that the books of account were produced before the AO ward 1(4) Mansa during the course of proceedings u/s.132B for release of cash and also before the AO during the course of assessment proceedings. The copies of relevant pages of cash book are part of the assessment record in which cash amounting to ₹ 1480000/- has been debited in cash in transit on 05.01.2012 and the cash was seized on 06.01.2012 - Further during the course of assessment proceeding Sh. Sham Lal S/o. Sh. Mohan Lal was produced and his statement was recorded on 25.11.2013 in which he has confirmed that he had entered in to a deal of sale of property with Sh. Om Parkash and Sh. Om Parkash alongwith his son Sh. Jiwan Kumar visited him with a sum for finalizing the deal of property but the same could not be finalized due to non clearance of loan. But the Pr. CIT after raising objections to the explanation of the assessee held that the assessment order is erroneous and prejudicial to the interest of the revenue. The objections reproduced in the order u/s. 263 were not confronted to the assessee and only because of this fact the reply could not be given. It is apparent that the only contention of the Pr. CIT is that the AO should have made further enquiries which has not been done according to him. Thus this is not a case of lack of enquiry and the Pr. CIT erred in assuming jurisdiction u/s. 263 merely because he has a different opinion then the AO in the matter. It is seen that the present case is not a case of lack of enquiry - enquiry was carried out by the AO. We find that in fact, the ld. Pri. CIT has substituted its opinion for the opinion of the AO by repraising evidence on record, as has rightly been contended on behalf of the assessee. This is certainly a case of difference of opinion between AO and CIT. The only contention of the CIT seems to be that the AO should have made further enquiries/investigation, which he has not done - for assuming jurisdiction u/s. 263, one has to keep in mind the distinction between lack of inquiry and inadequate enquiry. If there was an enquiry, even inadequate, that would not by itself give occasion to the CIT to pass order u/s. 263, merely because he has a different opinion in the matter. It is only in case of 'lack of enquiry' that such a cause of action could be open. AO accepted and even in the office note meant for internal purposes, he mentions that the assessee has substantiated the jewellery seized. In view of these evidences, this is not a case of lack of inquiry either. - Decided in favour of assessee. Issues Involved:1. Lack of proper opportunity of hearing under Section 263.2. Substitution of opinion by the Principal Commissioner of Income Tax (CIT) under Section 263.3. Alleged lack of inquiry by the Assessing Officer (AO).4. Justification of invoking Section 263 by the Principal CIT.Issue-wise Detailed Analysis:1. Lack of Proper Opportunity of Hearing under Section 263:The assessee contended that the Principal CIT erred in setting aside the AO's order under Section 143(3) without providing a proper opportunity of hearing. The Principal CIT issued a notice under Section 263(1) stating that the AO accepted the assessee's version without adequate inquiry, thus making the assessment order erroneous and prejudicial to the interests of the Revenue. The assessee argued that the objections raised by the Principal CIT were not confronted to him and that he was never asked to produce certain documents or individuals, such as Sh. Om Parkash, the proprietor of M/s. Khoobsurat Ornaments.2. Substitution of Opinion by the Principal CIT under Section 263:The assessee argued that the Principal CIT substituted his opinion for that of the AO by reappraising the evidence on record. The Principal CIT's notice and subsequent order highlighted that the AO did not sufficiently verify the key elements of the assessee's version, such as the availability of cash with M/s. Khoobsurat Ornaments and the absence of a written agreement for the property deal. The assessee cited case laws, including 'CIT vs. Indo German Fab' and 'CIT vs. Deepak Mittal,' to support the argument that Section 263 does not confer jurisdiction upon the CIT to substitute his opinion for the AO’s opinion.3. Alleged Lack of Inquiry by the AO:The Principal CIT assumed jurisdiction under Section 263 on the grounds of alleged lack of inquiry by the AO. The AO had accepted the assessee's explanation regarding the source of cash without verifying the business concern's cash availability, the existence of independently verifiable evidence, and the knowledge of the cash movement by the proprietor of Khoobsurat Jewellers. The assessee countered that the AO had conducted inquiries, including examining the cash book and recording statements from Sh. Sham Lal, the property seller. The Tribunal found that the AO had made sufficient inquiries and that the Principal CIT's objections were not confronted to the assessee, thus this was not a case of lack of inquiry.4. Justification of Invoking Section 263 by the Principal CIT:The Tribunal concluded that the Principal CIT erred in assuming jurisdiction under Section 263 merely because he had a different opinion from the AO. The Tribunal emphasized the distinction between lack of inquiry and inadequate inquiry, stating that even if the inquiry was inadequate, it would not justify invoking Section 263. The Tribunal cited 'Narain Singla vs. Pr. CIT' to support the view that a difference of opinion does not give the CIT jurisdiction to revise an order under Section 263. The Tribunal found that the AO had conducted an inquiry and that the Principal CIT's order was based on a difference of opinion rather than a lack of inquiry.Conclusion:The Tribunal set aside the Principal CIT's order passed under Section 263, concluding that the AO's order was not erroneous and prejudicial to the interests of the Revenue. The appeal of the assessee was allowed, and the Tribunal held that the Principal CIT had overstepped his jurisdiction by substituting his opinion for that of the AO. The order was pronounced in the open court on 26/08/2016.