When ITAT inspected documents furnished in response to show-cause notice u/s 263 and found transactions not bogus, no interference was called. Supreme Court dismissed SLP of the Revenue
ABCAUS Case Law Citation:
ABCAUS 2729 (2019) (01) SC
Important Case Laws Cited/relied upon:
The Revenue had filed an Income Tax Appeal before the Hon’ble High Court raising the following question of law:
Whether an Appellate Tribunal ought ordinarily to interfere with an order passed under Section 263 of the Income Tax Act, 1961 (the Act) for a fresh assessment to be conducted by the Assessing Officer?
In the instant case, after the assessment was completed, a complaint was received from the Director General of Income Tax (DGIT) as to certain bogus transactions apparently entered into by the assessee herein with one company.
The value of the fraudulent transactions was said to be in crores. On the basis of such communication, the jurisdictional Commissioner called upon the assessee to explain the position; or else the Commissioner would deal with the matter under Section 263 of the Act.
However, no report of the complaining income tax official was forwarded to the assessee nor was any statement that might have been obtained in course of the investigation from any official of said company was furnished to the assessee.
In response to the show-cause notice, the assessee replied disclosing voluminous documents and claiming such documents to be the evidence of the genuineness of the transactions between the assessee and the company.
However, The Commissioner did not refer to the documents that had been furnished by the assessee but was swayed by the allegation that the assessee had indulged in bogus transactions of crores.
The CIT held that the assessment completed was erroneous and prejudicial to the interest of the revenue and directed the Assessing Officer to make a fresh assessment.
In the assessee’s appeal against the order passed under Section 263 of the Act, the Appellate Tribunal noticed the copies of invoices and challans, proof of payments, bank statements, transportation payments, vouchers for movement of the goods and like documents and was satisfied on facts that the transactions between the assessee and the said company were not bogus or fraudulent.
Aggrieved, the Revenue approached the High Court.
The Hon’ble High Court opined that ordinarily, Appellate Tribunal has to be slow in receiving an appeal from an order passed under Section 263 of the Act if the order of the Commissioner is confined to requiring the Assessing Officer to make a fresh assessment.
The Hon’ble High Court clarified that a distinction ought to be made between the two parts to Section 263 of the Act: the first part which permits the Commissioner to enhance or modify the assessment and the second part which permits the Commissioner to cancel the assessment and direct a fresh assessment.
The Hon’ble High Court further stated that when the Commissioner exercises authority under the first part, an element of finality is involved, there is also an element of finality when the commissioner cancels the assessment, but there is no real prejudice to the assessee – other than the assessee suffering the process once again in a fresh assessment being required to be undertaken.
The Hon’ble High Court observed that since in the instant case, the Appellate Tribunal looked into the documents that were furnished by the assessee in response to the show-cause notice issued under Section 263 of the Act and found, on facts, that the perceived bogus transactions were genuine, the order impugned did not call for any interference on such ground.
The Hon’ble High Court had dismissed the appeal filed by the Revenue holding that no real question of law was involved.
Further aggrieved by the above order of the Hon’ble High Court, the Income Tax Department approached the Hon’ble Supreme Court by way of filing a Special Leave Petition (SLP) which was dismissed by a Division Bench.
