Taking a view should be backed by reasons in order itself with evidences & enquiry

Taking a view should be backed by reasons in the order itself with evidences and independent enquiry. ITAT upheld revision order passed u/s 263

ABACUS Case Law Citation
ABCAUS 3385 (2020) (09) ITAT

Important case law relied upon by the parties:
Rampyari Devi Sarogi vs CIT (1968) 67 ITR 84 (SC)
Tara Devi Aggarwal vs. CIT (1973) 88 ITR 323 (SC)
Malabar Industrial Co. Ltd. Vs. CIT, Kerala State, 243 ITR  83 (SC)
Commissioner of Income-Tax vs Gabriel India Ltd, 203 ITR 108
S, Balan Alias Shanmugam Balkrishna Chettair Vs. DCIT (2009) 120 ITD 469

In the instant case, the assessee had challenged the revisionary jurisdiction undertaken by the Pr. Commissioner of Income Tax (PCIT) u/s 263 of the Income Tax Act, 1961 (the Act).

The appellant assessee along with others had sold non agricultural land.

During the course of verification, it was observed by the Department that the assessee had taken loan from the bank for making investment in the property and the interest paid on such loan was claimed as cost of improvement.

Since, the nexus between the particular property acquired and the loan amount obtained for such purchase was not proved, the said information was forwarded to the Assessing Officer.

Subsequently, assessment proceedings for the assessee were re-opened by the issuance of notice u/s. 148 of the Act and the assessee filed a revised return of income in respect of the said notice.

During the course of the re-assessment proceedings, it was contended before the Assessing Officer that the interest had not been claimed as revenue expenditure and has been capitalized in the cost of assets.

The assessee, placing reliance on the  decision of the Coordinate Bench of the Tribunal, it was claimed that the assessee was entitled  to claim interest as cost of capital asset for computation of capital  gains. 

The Assessing Officer accepted the said contention and accepted the returned income while finalizing the assessment proceedings u/s.143(3) r.w.s. 147 of the Act

The PCIT, however, noticed that no tangible material was available to prove the nexus between the particular property acquired and the loan amount obtained for such purpose and the decision relied upon was substantially different on facts. 

Therefore, the Pr. Commissioner of Income Tax was of the opinion that the assessment order passed u/s. 143(3) r.w.s. 147 of the Act was erroneous in so far as it is prejudicial to the interest of the revenue.

Before the Tribunal, the assessee contended that the order passed by the PCIT u/s 263 of the Act was bad in law since the  assessment order passed by the Assessing  Officer  was not only  completed u/s 143(3) of the Act but was re-opened after issuance of notice u/s.148 of the Act and completed u/s 143(3) r.w.s.147/148  after verifying each and every details of the transactions in question.

The assessee placing reliance on the judgment of the Hon’ble High Court further contended that if after detailed enquiry, the AO had formed an opinion which may not be appropriate according to the opinion of the  PCIT but nonetheless, it is still an opinion formed  with reasons and verification and therefore, assessment order  cannot be made a subject matter of revisionary jurisdiction vide order u/s.263 of the Act stating that the same is erroneous so far as it is prejudicial to the interest of the revenue.

Taking a view should be backed by reasons in order itself 

The Tribunal observed that in the entire order of the Assessing Officer, there was no discussion or examination of facts wherein, he had categorically given findings through enquiry that nexus between the loan and property whether at all existed or not.

When asked by the Bench the assessee failed to demonstrate the nexus between the property acquired and loan taken for the said purpose from the order of the Assessing Officer nor could he provide any evidence that independent enquiry and verifications were conducted by the Assessing Officer on this issue.

The Tribunal stated that taking a view should be backed by reasons and that reasons should be demonstrated in the order itself with evidences brought on record and independent enquiry conducted.

The Tribunal opined that the Assessing Officer had not at all gone into the area of examination of facts concerning the said nexus which was the subject matter of order u/s 263 of the Act and therefore, on this issue, the AO had not formed any view. 

The Tribunal stated that when no view had been taken, no enquiry had been conducted, when no reasons on facts has been placed on record, the order of assessment is bound to be erroneous in so far as prejudicial to the interest of the revenue.

The Tribunal, on the facts and circumstances  and  judicial pronouncements of Hon’ble Supreme Court upheld the order  passed  u/s 263 of the Act’

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