2024 (2) TMI 1392 - AT - Income Tax

Revision u/s 263 - as per CIT expenses made by M/s AD Enterprises for job work remained unverified and AO could have referred matter to the Verification Unit for physical verification but it was not done - HELD THAT - AO has considered the replies/submissions and thereafter taken a plausible view. The action of AO in accepting the replies/ submissions of assessee cannot not lack bona fides and cannot be said to be faulty specially when the assessment of assessee has been made by National e-assessment Centre, Delhi. With regard to various objections raised by PCIT in revision-order and also contended by Ld. DR qua M/s AD Enterprises, we find that the Ld. AR for assessee is very much correct in arguing that the assessee filed complete point-wise replies to AO; that all payments were made through banking channel and bank statements were duly filed; that the assessee deducted TDS and filed copies of TDS returns/ challans; that the assessee filed PAN, current address and phone number of Smt. Nilima, proprietor of M/s AD Enterprises. Assessee has also filed details of payments made to M/s AD Enterprises not only in current year but also the payments made in preceding year and subsequent year. Ld. AR is also justified in submitting that non-filing of income-tax return and no response of the notice u/s 133(6) by Smt. Nilima is not under the control of assessee and the assessee cannot be punished for this. The submission of Ld. AR that the assessee is engaged in the business of real estate and the services taken from M/s AD Enterprises in the nature of various job works like moram filling, chambers, road, boundary wall, drainage line, etc. were very much required by assessee to build the structures, is also meritorious. We may mention here that the assessee has deducted substantial amount of TDS from payments made to M/s AD Enterprises, remitted the proceeds of TDS to income-tax department and also filed statutory returns of TDS giving each item of payment, TDS etc. against the payee M/s AD Enterprises. TDS returns also contain PAN of Smt. Nilima proprietor of M/s AD Enterprises. The PAN so mentioned is verified and accepted as valid and correct by TDS Wing of Income-tax Department and that is why they have not created demand of higher amount of TDS u/s 206AA of the Act. Therefore, just by saying that the payee has not filed income-tax return, the authorities cannot punish the assessee . Non-response of notice u/s 133(6) - Assessee has very much discharged his duty by providing current address and current phone number of M/s AD Enterprises which has enabled the AO to issue notice u/s 133(6). But thereafter, non-response by the payee to the statutory notice directly issued by AO, is not within the reach and control of assessee. Hence, we are unable to understand as to how the assessment-order of assessee can be considered as erroneous for no fault of assessee. Thus, we are persuaded to hold that the facts of the present case do not warrant application of section 263. Assessee appeal allowed.

Summary

Issues Involved:
1. Whether the assessment order passed by the AO was erroneous and prejudicial to the interest of revenue, thereby justifying the invocation of revisionary jurisdiction u/s 263 by the PCIT.

Summary:

Issue 1: Erroneous and Prejudicial Assessment Order
The assessee filed a return of income for AY 2018-19 declaring a total income of Rs. Nil, which was selected for scrutiny for "verification of genuineness of expenses." The AO completed the assessment u/s 143(3) accepting the returned income. The PCIT, upon examining the assessment record, found that the AO failed to verify the genuineness of payments amounting to Rs. 2,76,06,810/- made to M/s. AD Enterprises. The PCIT issued a show-cause notice and subsequently passed a revision-order u/s 263, deeming the assessment order erroneous and prejudicial to the interest of revenue due to lack of proper inquiries and verification.

Issue 2: Assessee's Defense Against Revisionary Action
The assessee argued that the AO, being part of the National e-assessment Centre, followed rigorous verification procedures. The AO issued multiple notices u/s 142(1), and the assessee provided comprehensive replies, including financial statements, details of payments, and services rendered by M/s. AD Enterprises. The assessee also submitted bank statements, TDS returns, and other relevant documents. The AO's assessment order explicitly stated that the issue of "Verification of Genuineness of Expenses" was examined, and no addition was made.

Issue 3: PCIT's Justification for Revisionary Action
The PCIT noted that M/s. AD Enterprises did not file an income-tax return for AY 2018-19 and did not respond to a notice u/s 133(6). The PCIT argued that the AO should have referred the matter for physical verification. The PCIT held that the AO's failure to make further inquiries rendered the assessment order erroneous and prejudicial to the interest of revenue.

Issue 4: Tribunal's Analysis and Conclusion
The Tribunal found that the AO made detailed inquiries and the assessee provided all necessary documents. The AO's acceptance of the assessee's submissions was deemed plausible and bona fide, especially given the assessment was conducted by the National e-assessment Centre. The Tribunal held that the non-filing of the income-tax return by M/s. AD Enterprises and the non-response to the notice u/s 133(6) were beyond the control of the assessee. The Tribunal concluded that the assessment order was not erroneous and the revision-order u/s 263 was invalid. Consequently, the Tribunal quashed the revision-order and restored the original assessment-order.

Conclusion:
The appeal of the assessee was allowed, and the revision-order passed by the PCIT was quashed. The original assessment-order was restored.