2016 (8) TMI 1565 - AT - Income Tax

Commissioner's Section 263 Orders Rejected for 2008-09 and 2009-10 Assessments

Shri Bhiva Shankar Rane Versus The Asstt. Commissioner of Income Tax, Circle-9, Pune

Shri Bhiva Shankar Rane Versus The Asstt. Commissioner of Income Tax, Circle-9, Pune - TMI Issues Involved:1. Invocation of Section 263 by the Commissioner.2. Alleged failure of the Assessing Officer (AO) to conduct proper enquiries/verifications.3. Jurisdiction and scope of reassessment under Section 147.4. Doctrine of merger and its applicability.5. Examination of bad debts written off under Section 36(1)(vii) r.w.s. 36(2).Detailed Analysis:1. Invocation of Section 263 by the Commissioner:The Commissioner of Income Tax (CIT) invoked Section 263 of the Income Tax Act, 1961, to revise the assessment orders for the assessment years 2008-09 and 2009-10. The CIT contended that the assessment orders were erroneous and prejudicial to the interests of the Revenue. The assessee challenged the invocation of Section 263, arguing that the orders were not erroneous and that the CIT's action was contrary to law and facts.2. Alleged Failure of the AO to Conduct Proper Enquiries/Verifications:The CIT alleged that the AO failed to conduct proper enquiries regarding the trading results and the write-back of certain credits. Specifically, the CIT noted discrepancies in the figures of income written back and claimed that the AO did not verify these discrepancies or the authenticity of the disclosure. The assessee argued that all relevant details were provided to the AO and that no further enquiry was necessary.3. Jurisdiction and Scope of Reassessment under Section 147:The Tribunal examined whether the AO, during reassessment under Section 147, is required to conduct roving enquiries into all aspects of the assessment. It was noted that Section 147 allows the AO to assess or reassess 'other income' that comes to his notice during the reassessment proceedings. However, the Tribunal clarified that this does not imply that the AO must conduct roving enquiries without any relevant material. The Tribunal cited the Supreme Court's decision in CIT vs. Alagendram Finance Ltd., which stated that the reassessment does not reopen the entire proceedings unless the subject matter is distinct and different.4. Doctrine of Merger and Its Applicability:The Tribunal discussed the doctrine of merger, which applies when an assessment order is subjected to appellate proceedings. In this case, the reassessment order for the assessment year 2008-09 was already appealed before the CIT(A) and the ITAT. The Tribunal held that the doctrine of merger applied, and the CIT could not invoke Section 263 to revisit issues already decided in the appellate proceedings.5. Examination of Bad Debts Written Off under Section 36(1)(vii) r.w.s. 36(2):For the assessment year 2009-10, the CIT invoked Section 263 on the ground that the AO did not verify the details of the amount written off as bad debts. The Tribunal referred to the Supreme Court's decision in T.R.F. Ltd. vs. CIT, which held that it is sufficient for the assessee to write off the debts in their books. The Tribunal found that the AO had accepted the debts written off based on the particulars provided by the assessee and that the CIT's action was not justified.Conclusion:The Tribunal concluded that the CIT's invocation of Section 263 was without authority of law and could not be sustained. The reassessment orders passed by the AO were not erroneous or prejudicial to the interests of the Revenue. Consequently, the Tribunal set aside and quashed the orders passed under Section 263 for both assessment years 2008-09 and 2009-10. Both appeals filed by the assessee were allowed.