The Mumbai Bench of the Income Tax Appellate Tribunal ( ITAT ), observed that initiation of revision jurisdiction on mere conjectures, suspicions and surmises is invalid.
The assessment in the hands of the assessee, Impact Foundation (India), for the year under consideration was completed by the AO under Section 143(3) of the Income Tax Act accepting the return of income filed by the assessee. The CIT(E), upon examination of assessment record, noticed that the assessee had claimed deduction towards accumulation of income under Section 11(2) of the Act in the immediately preceding year, i.e., in AY 2016-17 for an amount of Rs.14.51 crores.
During the year under consideration [AY 2017-18], the assessee has claimed to have spent a sum of Rs.6.00 crores out of the above said accumulated amount and has duly reported the same in Schedule 1 of the return of income. The CIT(E) noticed that the assessee has not submitted the details or any documentary evidence in support of claim of utilization of above said amount of Rs 6 crores.
Accordingly, took the view that the AO has not verified the issue at all and the same has rendered the assessment order erroneous and prejudicial to the interests of revenue. Accordingly, the CIT(E) initiated revision proceedings under Section 263 of the Income Tax Act.
The principles laid down by the courts are that the Learned CIT cannot invoke his powers of revision under section 263 if the Assessing Officer has conducted enquiries and applied his mind and has taken a possible view of the matter. If there was enquiry and a possible view has been taken, it would not give occasion to the Commissioner to pass orders under section 263 of the Income Tax Act, merely because he has a different opinion in the matter.
The consideration of the Commissioner as to whether an order is erroneous in so far it is prejudicial to the interests of Revenue must be based on materials on record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction
The Counsel for the assessee submitted that the AO was satisfied with the details furnished by the assessee and accordingly accepted the same and that the assessee has used the accumulated funds only for the purposes for which it was accumulated. Accordingly, the Counsel submitted that the AO has taken a possible view of the matter and it is not a case of non-enquiry as alleged by the CIT(E).
The Bench comprising BR Baskaran, Accountant Member and Aby T Varkey, Judicial Member observed that “the CIT(E) has not conducted any such enquiry or verification. In such a scenario, we have to hold that he has initiated revision jurisdiction on mere conjectures, suspicions and surmises, which is not permitted.”
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