2019 (9) TMI 947 - AT - Income Tax

Revision u/s 263 by CIT - assessment u/s 147/ 143 - addition u/s 68 - HELD THAT - AO had made enquiries during the assessment proceedings by issuing various notices alongwith questionnaire, as aforesaid and the assessee had given detailed replies/explanation and Assessing officer on being was satisfied with the explanation of the assessee and completed the assessment at NIL, hence, such decision of the AO cannot be held to be erroneous ; and therefore cannot be revised u/s. 263 of the Act. We further note that Assessing officer even enquired from seller independently u/s. 133(6) of the Act from whom assessee has purchased shares which has been further sold to M/s Virgin Capital Services Ltd. and others. We further note assessee has sold the shares of M/s Allders Khannas (P) Ltd to M/s Parikatha Buildwell Pvt. Ltd.; Sadabhujs Realtors Pvt. Ltd.; RG Enterprises and Sunita Bindal which has been accepted in order of Assessment and has not been disputed in proceedings u/s. 263 Show cause notice itself would show that it has not been denied or disputed that all relevant information including books of accounts have been furnished / obtained in the course of assessment proceedings. We note that section 263 of the Act cannot be invoked to make deeper enquiry. We note that notice u/s. 263 of the Act issued by the Pr. CIT is vague and only for making deeper enquiry and re-considering the evidences already on record duly considered during assessment proceedings based on purported proposal that fresh facts have been emerged subsequent to the order of assessment which is factually incorrect and untenable and the conditions or the factors enabling the Ld. Pr. CIT to invoke his jurisdiction u/s 263 have not been satisfied. There must be positive material for the Commissioner to consider objectively and not subjectively that the order of the Assessing Officer was erroneous, in so far as it was prejudicial to the interest of revenue. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the order passed under Section 263 of the Income Tax Act, 1961 by the Principal Commissioner of Income Tax (Pr. CIT).
2. Examination of whether the Assessing Officer (AO) conducted adequate inquiries during the reassessment proceedings.
3. Determination of whether the AO's order was erroneous and prejudicial to the interests of the revenue.

Issue-wise Detailed Analysis:

1. Validity of the Order Passed Under Section 263:
The appeal was filed by the assessee against the Pr. CIT's order dated 18/21-01-2019, which was issued under Section 263 of the Income Tax Act, 1961. The Pr. CIT had set aside the AO's reassessment order dated 16.12.2016, directing a fresh assessment after providing the assessee an opportunity to be heard. The Pr. CIT contended that the AO's order was "erroneous in so far as prejudicial to the interest of revenue" due to the alleged accommodation entry of ?1,50,00,000/- that escaped assessment.

2. Examination of Whether the AO Conducted Adequate Inquiries:
The AO reopened the assessment based on information from the Investigation Wing, New Delhi, indicating that the assessee received an accommodation entry of ?1,50,00,000/- from M/s Virgin Capital Services Pvt. Ltd., controlled by entry operators. The AO issued notices under Sections 148, 143(2), and 142(1) of the Act, and the assessee's Authorized Representative (AR) provided necessary documentary evidence. The AO accepted the assessee's claim and completed the assessment at NIL income. The Tribunal noted that the AO had thoroughly examined the case, made necessary inquiries, and was satisfied with the explanation provided by the assessee.

3. Determination of Whether the AO's Order Was Erroneous and Prejudicial to the Interests of the Revenue:
The Pr. CIT issued a show cause notice under Section 263, alleging that the AO's order was erroneous and prejudicial to the revenue's interest. The Pr. CIT argued that the AO did not adequately examine whether the ?1,50,00,000/- transaction was an accommodation entry. However, the Tribunal observed that the AO had conducted proper inquiries, issued various notices, and received detailed replies from the assessee. The Tribunal emphasized that the AO's decision, based on the inquiries and evidence, could not be deemed erroneous merely because the Pr. CIT had a different opinion. The Tribunal cited several judicial precedents, including the Delhi High Court's rulings in CIT vs. Leisure Wear Exports Ltd. and ITO vs. DG Housing Project Ltd., which held that an AO's order could not be revised under Section 263 merely for deeper inquiries or on presumptions without concrete evidence.

The Tribunal concluded that the AO's order was neither erroneous nor prejudicial to the revenue's interest. The Pr. CIT's order under Section 263 lacked jurisdiction and was based on assumptions without substantial evidence. Consequently, the Tribunal quashed the Pr. CIT's order dated 18/21-01-2019.

Conclusion:
The Tribunal allowed the assessee's appeal, holding that the Pr. CIT's order under Section 263 was not sustainable in law. The AO's reassessment order was upheld as it was based on proper inquiries and evidence, and the Pr. CIT's directive for a fresh assessment was quashed. The appeal filed by the assessee was allowed, and the Pr. CIT's order dated 18/21-01-2019 was quashed.