2021 (10) TMI 1320 - AT - Income Tax

Revision u/s 263 - as per CIT AO has made inadequate enquiry on investment in immovable property - HELD THAT - Though the copies of sale deeds were not filed before the AO at the time of assessment proceedings, however, the details of the name of persons and the amount along with confirmations were filed and the same are true and correct vis- -vis the copies of sale deeds placed before us. Therefore, it cannot be said that there was no enquiry on the part of the AO. Even it is not a case of inadequate enquiry also as the assessment proceedings were initiated for the very basic purpose of examining the investment in immovable property and the source thereof. Prima facie, there seems to be proper application of mind by the AO and the same is further verified by the fact that all the alleged persons mentioned in the list above arte the buyers of the property sold by the assessee and the total sale consideration received from all these eight persons duly supported by registered sale deed was utilized for making investment in the immovable property. As in the instant case, the assessee has sold certain immovable property to eight persons through registered sale deed and received sum of ₹ 50,78,420/-(which includes Cheque of ₹ 2,65,420/- and the remaining amount in cash) and the sale consideration so received was utilized for making investment in immovable property and these details were placed before the AO in the form of list of persons and confirmation letters and after proper application of mind, he accepted the submissions of the assessee, and, therefore, it cannot be said that there was no enquiry or inadequate enquiry by the AO. Appeal of assessee allowed.

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Validity of revisionary proceedings initiated under Section 263 of the Income Tax Act, 1961.
3. Adequacy of the Assessing Officer’s (AO) enquiry regarding the source of investment in immovable property.

Detailed Analysis:

1. Condonation of Delay:
The appeal was barred by a limitation of 224 days. The Assessee's Authorized Representative (AR) filed an application along with an affidavit for condonation of delay, citing reasons for the delay. The Departmental Representative (DR) objected, citing insufficient cause for the delay and referenced the decision in Ornate Traders (P) Ltd. vs. ITO. After hearing both parties and considering the facts, circumstances, and reasons stated in the application, the Tribunal condoned the delay in the interest of justice and proceeded to hear the appeal on its merits.

2. Validity of Revisionary Proceedings under Section 263:
The assessee challenged the revisionary proceedings initiated under Section 263 by the Principal Commissioner of Income Tax (Pr. CIT) on the grounds that the proceedings were based merely on internal audit observations, lacked new facts or corroborative evidence, and that the AO had already conducted appropriate enquiries. The Pr. CIT had issued a show-cause notice alleging that the AO accepted the investment in immovable property without proper enquiry, particularly questioning the creditworthiness of the persons who provided advances.

The Tribunal reviewed the provisions of Section 263, which allow the Pr. CIT to revise an order if it is erroneous and prejudicial to the interests of the revenue. It was noted that the power under Section 263 can only be exercised if the AO's order is contrary to law and not merely because the Pr. CIT holds a different opinion. The Tribunal emphasized that if the AO has conducted an enquiry and taken a possible view, the Pr. CIT cannot invoke Section 263 merely for a fuller enquiry. This position is supported by various judicial decisions, including CIT vs. Nirav Modi and CIT vs. Anil Kumar.

3. Adequacy of AO’s Enquiry:
The Tribunal examined whether the AO had conducted adequate enquiries regarding the source of investment in the immovable property. It was found that the AO had initiated proceedings specifically to verify high-value transactions and had called for necessary documents, including bank accounts and confirmation letters from individuals who provided advances. The Pr. CIT admitted that the AO had received confirmations but argued that the AO did not verify the creditworthiness of the individuals.

The Tribunal held that the AO had conducted adequate enquiries and applied his mind to the issue. It was noted that the AO had accepted the source of investment based on confirmations and sale deeds, and there was no new enquiry conducted by the Pr. CIT. The Tribunal cited the decision in Surekha Builders & Developers Pvt. Ltd. vs. Pr. CIT, where it was held that the revisional authority must conduct its own enquiry before concluding that the AO’s order was erroneous and prejudicial to the revenue.

The Tribunal concluded that the AO had made adequate and detailed enquiries, and the Pr. CIT had not conducted an independent enquiry to establish that the AO's order was erroneous. Therefore, the revisionary proceedings under Section 263 were quashed, and the AO's original assessment order was restored.

Conclusion:
The Tribunal allowed the appeal of the assessee, quashing the revisionary proceedings under Section 263 and restoring the AO's assessment order. The Tribunal emphasized that the AO had conducted adequate enquiries and that the Pr. CIT had not conducted an independent enquiry to justify the revisionary proceedings.

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