2020 (12) TMI 1187 - AT - Income Tax

Revision u/s 263 - Unexplained investment in the residential property - HELD THAT - When the Assessing Officer adopts one of the course permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the Ld. CIT does not agree, it cannot be treated as an order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law. Reverting to the facts of the present case the AO has called for necessary details regarding the investment source in the said residential property and the assessee in their letter dt. 29.06.2016 received by the Department on 01-07-2016 has replied to all such queries and after such examination and enquiry only the AO has passed the assessment order, when investigation was done by the AO details/evidences regarding the house property were called for in such situation the order of the AO is not erroneous. Once the AO has taken a view after enquiry and the Ld. Pr. CIT is not agreeable to that view of the AO the assessment order cannot be treated as an order prejudicial to the interest of the revenue. That further the Ld. Pr. CIT has not specifically with evidences shown the reasons why the order of the AO is erroneous and prejudicial to the interest of the revenue. There is no satisfaction arrived at before assuming revisional jurisdiction by the Ld. Pr.CIT, no reasons have been enumerated in his order showing any nexus between his satisfaction arrived at and the assessment order being erroneous so as to be prejudicial to the interest of the revenue. Order passed u/s. 263 of the Act by the Ld. Pr. CIT in respect of both the assessee is arbitrary, ambiguous bad in law and liable to be quashed - Decided in favour of assessee.

Summary

Issues involved:
1. Validity of notice issued under section 263 of the Income Tax Act.
2. Legality and validity of the order passed under section 263.
3. Examination of the source of investment for a jointly purchased residential property.

Issue 1: Validity of notice under section 263:

The appeals challenged the validity of the notice issued under section 263 of the Income Tax Act, contending that the notice was invalid due to being signed by an incorrect authority. The appellants argued that the notice was served by an incorrect official, rendering it invalid. However, the tribunal found no technical defect in the notice issuance process and concluded that the purpose of the notice was effectively communicated to the assessees, allowing them to respond adequately. Consequently, the tribunal dismissed the legal grounds raised by the assessees in both appeals.

Issue 2: Legality of the order passed under section 263:

The appeals also raised concerns regarding the legality of the order passed under section 263 of the Income Tax Act. The Principal Commissioner of Income Tax (PCIT) had held that the assessment orders were erroneous and prejudicial to the revenue's interest due to inadequate verification of investment sources for a jointly purchased residential property. However, upon examination, the tribunal found that the Assessing Officer (AO) had indeed conducted a detailed inquiry into the source of investment, as evidenced by the submission of relevant documents by the assessees. The tribunal noted that the PCIT failed to demonstrate any specific errors in the AO's order or how it prejudiced revenue interests. Therefore, the tribunal deemed the PCIT's order under section 263 arbitrary, ambiguous, and bad in law, leading to its quashing.

Issue 3: Examination of source of investment for jointly purchased property:

The PCIT had raised concerns about the source of investment for a jointly purchased residential property, highlighting alleged discrepancies in the assessment process. The tribunal noted that the AO had diligently sought details and explanations from the assessees regarding the property investment, and the assessees had provided a comprehensive response, including relevant documents. The tribunal found that the AO's assessment order was based on thorough examination and inquiry, indicating no errors or prejudice to revenue interests. Consequently, the tribunal concluded that the PCIT's revisional jurisdiction under section 263 lacked a valid basis and ordered the appeals to be partly allowed.

This comprehensive analysis of the judgment addresses the issues related to the validity of notices, legality of orders under section 263, and the examination of investment sources for a jointly purchased property, providing a detailed insight into the tribunal's decision-making process and legal reasoning.