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2021 (2) TMI 67 - AT - Income TaxRevision u/s 263 - As per CIT no proper enquiry was conducted by the AO in the case of the assessee for A.Y. 2005-06 and the AO has not considered the application of provisions u/s 68 or 69C of the IT Act for making of undisclosed income arising out of unexplained expenditure due to foreign visits - HELD THAT - Evidences, examined and analysed by the Assessing Officer during the course of assessment proceedings, further supported by thorough investigations/enquiries made by the Assessing Officer during the assessment proceedings, we are of the considered view that there remains nothing for the PCIT to assume jurisdiction u/s 263 to say that the assessment order is not only erroneous but prejudicial to the interest of the revenue. Since the facts of the instant case are identical to the facts of the case already decided by the Tribunal in the case of the spouse of the assessee, namely, Mrs. Shumana Sen, therefore, respectfully following the decision of the Tribunal in the case of the spouse of the assessee Mrs. Shumana Sen 2019 (11) TMI 1175 - ITAT DELHI we hold that the PCIT has wrongly assumed jurisdiction u/s 263 of the Act on these issues. Allegation of not conducting any enquiry regarding ESOP - We find the year under consideration is A.Y. 2005-06 and there was no provision in the Act to treat the ESOPs as perquisites in the hands of the assessee. The amendment in Section 17(2)(vi) of the Act was w.e.f. 01.04.2010 and prior to such amendment ESOPs were treated as capital receipts in the hands of the recipient and were taxable only after the sale of the shares. We find merit in the argument of assessee that the observation of the PCIT that the AO did not conduct any enquiry regarding tax on receipt arising out of ESOPs received from employer is not in accordance with law. Therefore, the PCIT, in our opinion, is not justified in assuming jurisdiction u/s 263 on the issue of non-examination of taxability of receipts of ESOPs from the employer. In the instant case, the AO after examining the facts on record and after conducting all possible enquiries had passed the order by making certain additions. Therefore, merely because the ld. PCIT does not agree with the order of the AO cannot make the order erroneous as long as the same was passed after all possible enquiries and due verification of facts on record. It is not a case of lack of enquiry or lack of investigation so as to invoke the provisions of section 263 of the IT Act, 1961. PCIT himself has not conducted any enquiry so as to give a definite finding that the order passed by the AO is erroneous. Even otherwise also when two views are possible and the AO has adopted one possible view, the order of the AO cannot be said to be erroneous so as to assume the jurisdiction u/s 263 since the twin conditions cannot be fulfilled. PCIT was not justified in assuming jurisdiction u/s 263 - Decided in favour of assessee.
Issues Involved:
1. Validity of the initiation of proceedings under Section 263 of the Income Tax Act. 2. Jurisdiction of the Principal Commissioner of Income Tax (PCIT) under Section 263. 3. Examination of foreign travel expenses and their taxability. 4. Examination of Employee Stock Option Plans (ESOPs) and their taxability. 5. Compliance with statutory directions under Section 144A of the Income Tax Act. 6. Allegations of inadequate enquiry by the Assessing Officer (AO). Detailed Analysis: 1. Validity of the initiation of proceedings under Section 263 of the Income Tax Act: The assessee challenged the initiation of proceedings under Section 263, arguing that the issues raised were already examined by the AO during the assessment proceedings. The Tribunal noted that the AO had made detailed enquiries regarding the assessee's foreign travels and ESOPs, and had come to a conclusion based on the evidence provided. The Tribunal found that the PCIT's initiation of proceedings under Section 263 was not justified as the AO had conducted a thorough investigation and the order was neither erroneous nor prejudicial to the interests of the Revenue. 2. Jurisdiction of the Principal Commissioner of Income Tax (PCIT) under Section 263: The Tribunal observed that the PCIT had assumed jurisdiction under Section 263 on the basis of a complaint by an IRS officer, which had already been examined and dismissed by the Vigilance Directorate of the Income Tax Department. The Tribunal held that the PCIT's assumption of jurisdiction was not justified as the AO had conducted proper enquiries and the assessment order was based on a correct application of law. 3. Examination of foreign travel expenses and their taxability: The AO had examined the foreign travel expenses of the assessee and her family, which were alleged to be unexplained perquisites. The AO had verified the expenses with the employer (NDTV Ltd.) and found that the expenses were part of the salary package of the assessee's spouse. The Tribunal noted that the AO had made a detailed examination of the foreign travel expenses and had come to a conclusion based on the evidence provided. Therefore, the Tribunal held that the PCIT's assumption of jurisdiction under Section 263 on this issue was not justified. 4. Examination of Employee Stock Option Plans (ESOPs) and their taxability: The Tribunal observed that during the relevant assessment year (2005-06), there was no provision in the Income Tax Act to treat ESOPs as perquisites in the hands of the recipient. The amendment to Section 17(2)(vi) of the Act, which made ESOPs taxable as perquisites, came into effect from 01.04.2010. Therefore, the Tribunal held that the AO's decision not to tax the ESOPs during the assessment year 2005-06 was in accordance with the law, and the PCIT's assumption of jurisdiction under Section 263 on this issue was not justified. 5. Compliance with statutory directions under Section 144A of the Income Tax Act: The Tribunal noted that the AO had followed the statutory directions under Section 144A during the assessment proceedings. The AO had examined the complainant and allowed cross-examination by the assessee. The Tribunal held that the PCIT's assumption of jurisdiction under Section 263 on the ground of non-compliance with Section 144A was not justified as the AO had conducted proper enquiries and followed the statutory directions. 6. Allegations of inadequate enquiry by the Assessing Officer (AO): The Tribunal held that the AO had conducted thorough and detailed enquiries regarding the issues raised in the assessment proceedings. The Tribunal observed that the AO had examined the evidence provided by the assessee, the employer (NDTV Ltd.), and other relevant parties. The Tribunal concluded that the AO had applied his mind to the facts and circumstances of the case and had come to a conclusion based on the evidence provided. Therefore, the Tribunal held that the PCIT's assumption of jurisdiction under Section 263 on the ground of inadequate enquiry was not justified. Conclusion: The Tribunal set aside the order of the PCIT passed under Section 263, holding that the AO had conducted proper enquiries and the assessment order was neither erroneous nor prejudicial to the interests of the Revenue. The Tribunal allowed the appeal filed by the assessee.
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