2016 (7) TMI 207 - AT - Income Tax

Revision u/s 263 - taxability of advances received - fishing and roving enquires - Held that - We find that the assessee had placed various orders on record to prove that the advances received were already taxed in earlier years in piecemeal basis. We find that out of the advances received, ₹ 21,50,825/- , ₹ 48,86,847/-, ₹ 11,11,817/- , ₹ 5,06,066/- , ₹ 5,66,952/- were taxed in Asst Years 1999-2000 to 2003-04 respectively and ₹ 50,75,641/- was taxed in Asst Year 2005-06 in scrutiny proceedings. We find that merely because no adjustment entries were passed by the assessee in his books by transferring the advances received to its income, it could be seen beyond doubt that no concealment of income towards advance received has been made thereon. Hence the action of the assessee and consequential order passed by the ld. AO for Asst Year 2008- 09 cannot be treated as prejudicial to the interests of the revenue. We hold that the ld. CIT had only tried to initiate proceedings with a view to start fishing and roving enquires in matters or orders which are already concluded. Entire revision proceedings had been triggered merely on the basis that the advances received were remaining outstanding in the balance sheet as on 31.3.2008. This might at best could be construed only as an error committed by the assessee in his books. But that does not make the order of the ld. AO erroneous. In these circumstances, it could only be inferred that the ld. AO had taken one of the possible views by duly appreciating the contentions of the assessee that the advance received had already been taxed in the earlier years and he had rightly not brought the same to tax in the assessment even though the same is framed u/s 144 of the Act. Thus the order passed by the ld. AO is neither erroneous nor prejudicial to the interests of the revenue. Accordingly, the order passed by the ld. CIT u/s 263 of the Act is hereby quashed - Decided in favour of assessee

Issues Involved:
1. Justification of the Learned CIT in invoking revisionary jurisdiction under Section 263 of the Income Tax Act.
2. Examination of the closing balance of advances in the Balance Sheet.
3. Assessment of whether the advance received was utilized for business activity or investment.
4. Consideration of the advance received as taxable income for the Assessment Year 2008-09.

Issue-Wise Detailed Analysis:

1. Justification of the Learned CIT in Invoking Revisionary Jurisdiction under Section 263 of the Income Tax Act:
The primary issue is whether the Learned CIT was justified in invoking the revisionary jurisdiction under Section 263 of the Income Tax Act. The CIT issued a notice proposing to revise the assessment order passed under Section 144, considering it erroneous and prejudicial to the interest of revenue. The CIT argued that the Assessing Officer (AO) did not examine the issue of advances properly. The tribunal found that the CIT did not conduct any enquiry to arrive at a prima facie conclusion that the AO's order was erroneous. Instead, the CIT passed the responsibility to the AO, which is not in accordance with Section 263(1) of the Act. The tribunal emphasized that the CIT must make necessary enquiries to pinpoint the error in the AO's order and cannot delegate this power to the AO.

2. Examination of the Closing Balance of Advances in the Balance Sheet:
The CIT noted that the closing balance of advances as per the Balance Sheet ended on 31/03/2008 was ?2,88,21,596/- and no details were filed during the assessment proceeding. The assessee argued that these advances were received in the Assessment Year 1999-2000 and were already taxed in earlier years. The tribunal found that the assessee had placed various orders on record to prove that the advances were already taxed in earlier years on a piecemeal basis. The tribunal concluded that the AO had taken one of the possible views by not bringing the advances to tax again in the Assessment Year 2008-09, and this view could not be considered erroneous.

3. Assessment of Whether the Advance Received was Utilized for Business Activity or Investment:
The CIT contended that the advance was not utilized in business activity but for investment, which the AO did not examine. The assessee clarified that the advance was received for construction activity and had been gradually adjusted and taxed in earlier years. The tribunal noted that the AO had appreciated the facts on record and had taken a possible view, which cannot be the subject matter of revision under Section 263. The tribunal held that the CIT had not provided any evidence to show how the AO's order was erroneous or prejudicial to the revenue.

4. Consideration of the Advance Received as Taxable Income for the Assessment Year 2008-09:
The CIT treated the order of the AO as erroneous and prejudicial to the interests of the revenue because the issue of advances was not properly examined. The assessee argued that the entire advance related to construction activity had already been taxed in earlier years, and there was nothing left to be taxed in the Assessment Year 2008-09. The tribunal agreed with the assessee, stating that merely because no adjustment entries were passed in the books, it does not imply concealment of income. The tribunal concluded that the AO's order was not erroneous and the CIT's initiation of revision proceedings was unwarranted.

Conclusion:
The tribunal quashed the order passed by the CIT under Section 263 of the Act, holding that the AO's order was neither erroneous nor prejudicial to the interests of the revenue. The appeal of the assessee was allowed, and the grounds raised by the assessee were accepted. The detailed analysis of the issues highlighted that the CIT failed to make necessary enquiries and merely directed the AO to re-examine the issue, which is not permissible under Section 263. The tribunal emphasized that the AO had taken a possible view based on the facts and records, and such a view cannot be revised merely because the CIT disagreed with it.

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