2020 (2) TMI 985 - AT - Income Tax

Tribunal upholds Section 263: Assessment order deemed erroneous, prejudicial to Revenue

Shri Nandkishore S. Shodhan (HUF) Versus ITO, Ward-5 (2) (3) Ahmedabad

The Tribunal upheld the ld.Pr.CIT's invocation of Section 263 of the Income Tax Act, finding the assessment order erroneous and prejudicial to the Revenue ... Revision u/s 263 - AO not inquired whether any capital gain arose to the assessee; whether he has computed any deduction under section 54C/54E - HELD THAT:- AO has not asked any question relating to the issue entertained by the ld.Commissioner in 263 proceedings. The assessee during the course of hearing drew our attention towards question raised at serial no.6 of the questionnaire but under this question, the AO has only called for a copy of any sale/purchase deed, if done by the assessee. He has not inquired whether any capital gain arose to the assessee; whether he has computed any deduction under section 54C/54E etc. This questionnaire is totally silent. Thus, it gives an impression that the AO has accepted the accounting entry as it is, without making any inquiry. Therefore, to our mind, it is a fit case where the ld.Commissioner has jurisdiction to take cognizance under section 263 of the Income Tax Act. We do not find any error in the order of the ld.Pr.CIT. Accordingly, the appeal of the assessee is dismissed. Issues Involved:1. Validity of the invocation of Section 263 of the Income Tax Act by the ld.Pr.CIT.2. Examination of the assessment order's correctness and whether it was erroneous and prejudicial to the interest of the Revenue.3. Specific issues regarding the assessment order, including interest income, capital gains, deductions under Sections 54/54EC/54F, and other related matters.Issue-wise Detailed Analysis:1. Validity of the Invocation of Section 263:The Tribunal examined whether the ld.Pr.CIT was justified in invoking Section 263 of the Income Tax Act, 1961. The assessee contended that the ld.Pr.CIT erred in taking cognizance under Section 263 and setting aside the assessment order dated 24.12.2013 for fresh assessment. The Tribunal noted that the ld.Pr.CIT found the assessment order erroneous and prejudicial to the interest of the Revenue because the AO did not conduct any inquiry before finalizing the assessment. The Tribunal upheld the ld.Pr.CIT's action, stating that the AO's lack of inquiry justified the invocation of Section 263.2. Examination of the Assessment Order's Correctness:The Tribunal scrutinized the assessment order to determine if it was erroneous and prejudicial to the Revenue's interest. The ld.Pr.CIT identified several issues where the AO failed to conduct proper inquiries, including discrepancies in interest income, capital gains from the sale of immovable property, and deductions claimed under Sections 54/54EC/54F. The Tribunal agreed with the ld.Pr.CIT's findings, emphasizing that the AO's failure to verify these issues rendered the assessment order erroneous and prejudicial to the Revenue.3. Specific Issues Regarding the Assessment Order:a. Interest Income Discrepancy:The ld.Pr.CIT noted that the assessee received interest of Rs. 2,65,247 from Dutta Developers Pvt. Ltd., but only Rs. 1,99,627 was disclosed in the return of income. The AO did not examine the taxability of the undisclosed interest income, making the assessment order erroneous and prejudicial to the Revenue.b. Capital Gains from Sale of Immovable Property:The assessee sold an immovable property for Rs. 9,21,27,000 and claimed expenses, including a dubious 'Dastavej' fee of Rs. 15,00,000. The AO failed to verify the authenticity of the receipt for this fee, leading to an erroneous allowance of the expenditure and prejudicing the Revenue.c. Deductions under Sections 54/54EC/54F:The assessee claimed deductions for investments in a new house, capital gain account scheme, and REC Bonds. The Tribunal found that the AO did not verify the supporting evidence for these claims, including the genuineness of the investment receipts and compliance with the provisions of Section 54F. The Tribunal upheld the ld.Pr.CIT's decision that these deductions were wrongly allowed without proper verification, making the assessment order erroneous and prejudicial to the Revenue.d. Ownership of Multiple Residential Properties:The assessee owned multiple residential properties, which, according to the proviso to Section 54F(1), disqualified him from claiming the deduction under Section 54F. The AO failed to verify this aspect, leading to an erroneous allowance of the deduction and prejudicing the Revenue.Conclusion:The Tribunal concluded that the AO did not conduct proper inquiries on the issues identified by the ld.Pr.CIT, making the assessment order erroneous and prejudicial to the Revenue. The Tribunal upheld the ld.Pr.CIT's invocation of Section 263 and dismissed the assessee's appeal. The Tribunal emphasized that the AO's lack of detailed examination and verification justified the ld.Pr.CIT's action under Section 263.