2022 (8) TMI 1311 - AT - Income Tax

Tax Tribunal annuls order for lack of enquiry by Pr.CIT under Section 263, allowing assessee's appeal.

The Tribunal found that the Principal Commissioner of Income Tax (Pr.CIT) did not conduct any enquiry before passing the order under Section 263, ... Revision u/s 263 - absence of any enquiry done by the ld. Pr.CIT - HELD THAT:- An examination of the order passed u/s.263 of the Act, in the impugned appeal, shows that the ld. Pr.CIT has “not made or caused to be made such enquiry” before passing the order u/s.263 of the Act. A perusal of the order of the ld. Pr.CIT shows that in para 14, he starts his decision and it goes on to para 28 but other than discussing the facts that has led him to believe that the order passed by the AO was erroneous and prejudicial to the interest of revenue, there has been no enquiry by him nor he has caused any enquiry to be done before he has passed the order u/s.263. This is not a case of inadequacy of enquiry. It is a case of absence of enquiry. On this ground alone, the order passed u/s.263 of the Act by the ld. Pr.CIT is liable to be annulled and we do so. In the decision in the case of Gee Vee Enterprises [1974 (10) TMI 29 - DELHI HIGH COURT] the issue was a decision in the writ petition and the said writ petition was dismissed in limine because the petitioner had not filed any appeal against such order of the CIT u/s.263 of the Act nor it had given any explanation as to why he did not file appeal against the order u/s.263 of the Act nor any exceptional circumstances were shown to persuade the Hon‟ble High Court to depart from normal rule that writ petition complaining against order of Commissioner would not be entertained in absence of such adequate explanation by petitioner. As in absence of any enquiry done by the ld. Pr.CIT, the order passed u/s.263 of the Act by the Pr.CIT would not survive See Orissa State Police Housing & Welfare Corporation Ltd [2022 (4) TMI 1395 - ORISSA HIGH COURT] - Appeal of the assessee is allowed. Issues Involved:1. Whether the Principal Commissioner of Income Tax (Pr.CIT) can use his revisionary powers under Section 263 of the Income Tax Act to impose his view over that of the Assessing Officer (AO) when the AO has taken a possible view on a given set of facts.2. Whether the Pr.CIT conducted an enquiry before passing the order under Section 263 of the Income Tax Act.Issue-wise Detailed Analysis:1. Revisionary Powers of Pr.CIT under Section 263:The assessee argued that the Pr.CIT cannot use his powers of revision to impose his view over that of the AO when the AO has taken a possible view based on the given facts and circumstances. The revenue countered that during a search on the premises of Hira Group of Companies, of which the assessee is a sister concern, undisclosed income was identified. Specifically, for the assessment year 2009-2010, the surrendered amount was Rs.2,05,00,000/-. The AO did not add this amount, citing no established nexus between the assessee and Hira Group of Companies. The Pr.CIT found this to be a clear error and invoked his powers under Section 263 to direct the AO to re-examine the issue.2. Enquiry by Pr.CIT Before Passing Order:The assessee contended that the Pr.CIT did not conduct any enquiry before passing the order under Section 263. The revenue referred to the decision of the Tribunal in the case of M/s Kalinga Mining Corporation Pvt. Ltd. and the Hon'ble Delhi High Court in Gee Vee Enterprises, asserting that it is not necessary for the Pr.CIT to make further enquiries before canceling the assessment order of the AO. The Tribunal emphasized that the AO is both an adjudicator and an investigator and must ascertain the truth of the facts stated in the return when circumstances provoke an inquiry. The term 'erroneous' in Section 263 includes failure to make necessary inquiries.Tribunal's Findings:Upon examining the provisions of Section 263, the Tribunal outlined the procedural requirements: the Pr.CIT must call for records, examine them, find an error that is both erroneous and prejudicial to the interest of revenue, and may give the assessee an opportunity to be heard. The Tribunal noted that the Pr.CIT must make or cause to make such enquiry as deemed necessary before passing an order.In this case, the Tribunal found that the Pr.CIT did not make or cause to make any enquiry before passing the order under Section 263. The Tribunal highlighted that the Pr.CIT's order discussed facts leading to the belief that the AO's order was erroneous and prejudicial to the revenue but did not conduct any enquiry. This absence of enquiry rendered the Pr.CIT's order liable to be annulled.Supporting Jurisprudence:The Tribunal's view was supported by the Hon'ble Jurisdictional High Court of Orissa in the case of Orissa State Police Housing & Welfare Corporation Ltd., which held that in the absence of any enquiry by the Pr.CIT, the order under Section 263 would not survive.Conclusion:The Tribunal concluded that the absence of any enquiry by the Pr.CIT before passing the order under Section 263 rendered the order bad in law. Consequently, the impugned order passed under Section 263 by the Pr.CIT was annulled, and the appeal of the assessee was allowed.Order:The appeal of the assessee is allowed. Order dictated and pronounced in the open court on 29/08/2022.