2016 (5) TMI 958 - AT - Income Tax

Tribunal overturns tax revision order, no new incriminating material found

The Tribunal quashed the revision order passed by the Commissioner of Income Tax under Section 263, stating that the Assessing Officer had already ... Revision u/s 263 - CIT(A) directing the AO to pass fresh assessment order which is completed u/s.153A r.w.s.143(3) - Held that:- Commissioner of Income Tax has not independently arrived satisfaction with the order of the Assessing Officer as erroneous and prejudicial to the interest of the Revenue. The Commissioner of Income Tax u/s.263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it was only when an order is erroneous that the section will be attracted. In the present case there is no incorrect assumption of facts or an incorrect application of law by the Assessing Officer. The Assessing Officer has applied his mind to the seized material while framing assessment for the year 2006-07 u/s.153A of the Act. The Commissioner of Income Tax cannot expect to correct the assessment order passed u/s.153A of the Act duly considered the seized material and in the present case the Commissioner of Income Tax wanted to consider the statement of affairs filed by the assessee during the course of assessment u/s.153A though it was not part of the seized material and it cannot be considered for framing assessment u/s.153A of the Act as assessment for the assessment year 2006-07 has already been completed u/s.143(3) and re-assessment u/s.153A be made only on the basis of incriminating material found in the course of search but not produced in the course of original assessment The taxing authority can act only if there is power under the statute to do so. Being so, the contention of the Departmental Representative cannot be accepted that before the Commissioner of Income Tax, the assessee has conceded that the statement of affairs needs to be examined, so that revision of jurisdiction u/s.263 is appropriate. In our opinion this is not a fit case for revision u/s.263 of the Act and we are cancelling the order passed u/s.263 for the year 2006-07. The revision order passed for the assessment years 2007- 08, 2008-09, 2009-10, 2010-11 and 2011-12 were mere aftermath to the order passed u/s.263 for the assessment year 2006-07. The Commissioner of Income Tax himself agreed that findings for assessment year 2006-07 having cascading effect on the subsequent assessment years i.e from 2007-08 to 2012- 2013. Since, we have cancelled the revision order for the assessment year 2006-07 on the basis on which revision order for the other assessment year was framed, these orders cannot stand on their own leg, in view of the cancellation of the revision order of the assessment year 2006-07. Thus, all the other orders passed u/s.263 by Commissioner of Income Tax are annulled - Decided in favour of assessee Issues Involved:1. Invoking provisions of Section 263 of the Income Tax Act.2. Examination of investment and interest income.3. Reconciliation of opening capital balance.4. Adequacy of cash flow statements.5. Discrepancies in Statements of Affairs for various years.6. Treatment of loans and unexplained investments.7. Jurisdiction and powers of the Commissioner of Income Tax under Section 263.Detailed Analysis:1. Invoking Provisions of Section 263 of the Income Tax Act:The primary grievance of the assessee was against the invocation of Section 263 by the Commissioner of Income Tax (CIT), which directed the Assessing Officer (AO) to pass a fresh assessment order. The Tribunal noted that for Section 263 to be invoked, the CIT must independently conclude that the AO's order is erroneous and prejudicial to the interests of revenue. In this case, the CIT acted upon the proposal sent by the AO, which is not permitted under Section 263.2. Examination of Investment and Interest Income:The CIT observed that the AO did not examine certain issues relating to investments made by the assessee in various companies and firms, and the interest income received/receivable from some debtors. The Tribunal noted that these issues were already analyzed during the original assessment and subsequent proceedings, and there was no new incriminating material found during the search to warrant a fresh examination.3. Reconciliation of Opening Capital Balance:The CIT found that the opening capital balance for the year 2006-07 and subsequent years was not properly reconciled. The Tribunal observed that the discrepancies in the capital account were already addressed in earlier proceedings, and the AO had made necessary additions. Hence, revisiting this issue under Section 263 was not justified.4. Adequacy of Cash Flow Statements:The CIT questioned the adequacy of the cash flow statement provided by the assessee, indicating that the drawings were not sufficient to justify the cash found during the search. The Tribunal held that the AO had already considered the cash flow statement during the original assessment, and there was no new evidence to suggest it was erroneous.5. Discrepancies in Statements of Affairs for Various Years:The CIT noted substantial discrepancies in the Statements of Affairs filed by the assessee for different years. The Tribunal found that these discrepancies were already examined during the original assessment and subsequent appeals, and no new incriminating material was found during the search to justify a fresh assessment.6. Treatment of Loans and Unexplained Investments:The CIT highlighted discrepancies in the figures of loans received and given, and unexplained investments. The Tribunal observed that these issues were part of the original assessment and subsequent appeals, and there was no new incriminating material to warrant a fresh assessment under Section 153A.7. Jurisdiction and Powers of the Commissioner of Income Tax under Section 263:The Tribunal emphasized that the CIT cannot use Section 263 to correct every error or omission by the AO. The AO had applied his mind to the seized material and the statements provided by the assessee, and there was no incorrect application of law or facts. The Tribunal concluded that the CIT's order under Section 263 was not justified as it attempted to review issues already settled in earlier proceedings.Conclusion:The Tribunal quashed the revision order passed by the CIT under Section 263, stating that the AO had already examined the relevant issues during the original assessment and subsequent proceedings. There was no new incriminating material found during the search to justify a fresh assessment. The appeal of the assessee was allowed, and the revision orders for subsequent years were also annulled as they were based on the same grounds.