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2020 (2) TMI 1021 - HC - Income TaxRevision u/s 263 - unexplained unsecured loans taken by assessee - ITAT held that the PCIT was not empowered and entitled to revise assessment order u/s. 263 of the Act r/w Explanation 2 - HELD THAT - Tribunal observed that the PCIT has not mentioned in the show cause notice to invoke the Explanation 2 of Section 263 of the Act 1961. Therefore, by invocation of Explanation in the order without confronting the assessee and giving an opportunity of being heard to the assessee is not appropriate and sustainable in law. Thus, the Tribunal has considered in detail the aspect of revisional power to be exercised by the PCIT in the facts of the case and has given a finding of facts that the Assessing Officer has made inquiries in detail and after applying mind, accepted the genuineness of loans received by the respondent assessee from the aforesaid two companies and such view of the Assessing Officer is a plausible view, and therefore, the same cannot be said to be erroneous or prejudicial to the interest of the Revenue. No substantial questions of law arise.
Issues Involved:
1. Whether the Principal Commissioner of Income Tax (PCIT) was empowered to revise the assessment order under Section 263 of the Income Tax Act, 1961. 2. Whether the Income Tax Appellate Tribunal (ITAT) was correct in canceling the order under Section 263 of the Act and allowing the grounds of the assessee. Issue-wise Detailed Analysis: 1. Empowerment of PCIT to Revise the Assessment Order under Section 263: The Revenue filed the Tax Appeal under Section 260-A of the Income Tax Act, 1961 against the ITAT's order. The PCIT invoked Section 263 to revise the assessed income of the respondent assessee, noting that the unsecured loans obtained by the respondent were shown as investments in the share application and balance-sheet of the respective companies. The PCIT directed the Assessing Officer (AO) to pass a fresh assessment order regarding these unsecured loans. The Tribunal found that the AO had made detailed inquiries about the unsecured loans from M/s. Georgette Tradecom Pvt. Ltd (GTPL) and M/s. Purba Agro Food Pvt. Ltd (PAFPL). The AO had asked for information regarding the details of unsecured loans and received comprehensive responses, including ledger accounts, income acknowledgments, bank statements, and other relevant documents. The AO, after verifying these details, accepted the genuineness of the loans. The Tribunal observed that the PCIT did not mention the invocation of Explanation 2 to Section 263 in the show-cause notice, which was later included in the order. This was deemed inappropriate and unsustainable in law. 2. ITAT's Decision to Cancel the Order under Section 263: The Tribunal concluded that the AO had made full inquiries and accepted the genuineness of the loans after detailed verification, which indicated that the AO's order was neither erroneous nor prejudicial to the interest of the Revenue. The Tribunal noted that the PCIT's invocation of Explanation 2 without confronting the assessee was not appropriate. The Tribunal emphasized that the revisional powers under Section 263 cannot be exercised merely to direct a fuller inquiry unless the view taken by the AO is wholly unsustainable in law. The Tribunal also referred to various judicial precedents, highlighting that the PCIT must establish that the assessment order is erroneous and prejudicial to the Revenue's interest. The Tribunal found that the AO had taken a plausible view after due inquiries, which is valid in law, and therefore, the twin conditions for invoking jurisdiction under Section 263 were not satisfied. Conclusion: The Tribunal's detailed analysis established that the AO had conducted due inquiries and accepted the genuineness of the loans based on substantial evidence. The Tribunal found that the PCIT's order under Section 263 was not justified as the AO's assessment was neither erroneous nor prejudicial to the Revenue's interest. Consequently, the Tribunal canceled the PCIT's order under Section 263, allowing all grounds of appeal of the assessee. The High Court, agreeing with the Tribunal's findings, dismissed the Revenue's appeal, stating that no substantial questions of law arose from the Tribunal's order.
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