2021 (12) TMI 871 - AT - Income Tax

Tribunal overturns Commissioner's tax order, finding lack of legal merit.

Smt Sonika Taxak Versus Pr. Commissioner of Income Tax, Panchkula

Smt Sonika Taxak Versus Pr. Commissioner of Income Tax, Panchkula - TMI Issues:Assessment under section 263 of the Income Tax Act, 1961.Analysis:The appeal was filed against the order of the Principal Commissioner of Income Tax, Panchkula, pertaining to the assessment year 2011-12 under section 263 of the Income Tax Act. The assessee contested the jurisdiction of the Principal Commissioner under section 263, arguing that the original assessment order did not meet the criteria of being erroneous or prejudicial to revenue. The Principal Commissioner set aside the assessment order, directing a fresh assessment due to alleged lack of thorough inquiries by the Assessing Officer (AO). The Principal Commissioner questioned the ownership of a property mentioned in an agreement to sell, leading to the conclusion that the assessment order was erroneous. However, the Tribunal found that the AO had conducted necessary inquiries, including recording statements, and the Principal Commissioner had wrongly assumed that the cash deposits were made by the assessee. The Tribunal held that the Principal Commissioner's order was legally flawed and quashed it, allowing the assessee's appeal.The case involved a cash deposit in a joint bank account, with the assessee explaining that the deposit was made by the other account holder, her husband. The Assessing Officer accepted the explanation after conducting inquiries. However, the Principal Commissioner invoked section 263, alleging lack of proper inquiry and erroneous assessment. The Tribunal observed that the Principal Commissioner's conclusions were based on a misunderstanding that the cash was deposited by the assessee and that she was involved in an agreement to sell a property. The Tribunal noted that the husband of the assessee had made the deposit and executed the agreement, absolving the assessee of any liability. The Tribunal concluded that the Principal Commissioner's order was unjustified, as the AO had appropriately investigated the matter, including recording statements, and the revision order was based on incorrect assumptions.The Tribunal emphasized that the Principal Commissioner's revision order under section 263 was unfounded, as the AO had diligently verified the transaction and the source of funds. The Tribunal highlighted that the Principal Commissioner's misconceptions about the ownership of the property and the agreement to sell were incorrect, as the husband of the assessee was responsible for the transaction. The Tribunal held that the Principal Commissioner's order lacked legal merit and was unsustainable, leading to the allowance of the assessee's appeal against the revision order. The Tribunal quashed the Principal Commissioner's order, ruling in favor of the assessee.In conclusion, the Tribunal found that the Principal Commissioner's exercise of revision jurisdiction under section 263 was erroneous and lacked legal basis. The Tribunal determined that the Assessing Officer had conducted appropriate inquiries, and the Principal Commissioner's conclusions were based on misinterpretations regarding the ownership and transactions involved. Consequently, the Tribunal allowed the assessee's appeal, quashing the Principal Commissioner's order issued under section 263 of the Income Tax Act.