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2021 (3) TMI 217 - AT - Income TaxRevision u/s 263 - addition u/s 68 - HELD THAT - In the case on hand, the Assessing Officer considered the specific directions given by the ld. CIT(A in his order u/s. 263 of the Act dt. 23/08/2016 and based on the same had issued questionnaires to the assessee company which is in Annexure-A of the assessment order. Summons were issued u/s. 131 of the Act to the directors of the share holding company M/s. Lakshmi Dealmark Private Limited. The actions taken in compliance with the directions given by the ld. Pr. CIT are given at page 5 to 7 of the assessment order. A perusal of the same demonstrates that the directions were carried out. This is not a case of non-applicability of mind or non-verification. The Assessing Officer has taken a possible view. When the Assessing Officer follows the direction of the Ld. Pr. CIT, in his order passed u/s. 263 of the Act, no revision can be done u/s. 263 of the Act on the ground that the Assessing Officer has not travelled beyond these directions. We have to necessarily hold that the exercise of the revisionary powers by the Ld. Pr. CIT u/s. 263 is bad in law. Hence, we quash the same.
Issues Involved:
1. Legitimacy of the addition under Section 68 of the Income Tax Act, 1961, concerning share capital and share premium received by the assessee. 2. Validity of the revisionary powers exercised by the Principal Commissioner of Income Tax (Pr. CIT) under Section 263 of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Legitimacy of the Addition under Section 68 of the Income Tax Act, 1961: The case revolves around the assessee company, which filed its return of income for the Assessment Year 2013-14, declaring a total loss of ?96,30,335. The Assessing Officer (AO) initially completed the assessment under Section 143(3) of the Income Tax Act, 1961, determining the assessed income at ?5,04,94,158, including an addition under Section 68 concerning share capital and share premium received. The AO, in compliance with the directions from the Pr. CIT, conducted detailed inquiries, including issuing summons under Section 131 to the directors of the shareholding company, M/s. Lakshmi Dealmark Private Limited. The AO verified the identity, creditworthiness, and genuineness of the transactions through various documents, including bank statements, statements recorded under oath, and reports from departmental inspectors confirming the existence of the shareholding entities. The AO concluded that the share capital and premium were genuine and aligned with generally accepted accounting principles (GAAP). The Pr. CIT, however, issued a show-cause notice under Section 263, proposing to revise the assessment order on the grounds of lack of adequate inquiry. The Pr. CIT contended that merely accepting submissions without logical verification rendered the assessment order erroneous and prejudicial to the interests of the revenue. 2. Validity of the Revisionary Powers Exercised by the Pr. CIT under Section 263: The assessee argued that the AO had meticulously followed the directions given by the Pr. CIT in the initial revision order and conducted comprehensive inquiries. The assessee provided detailed submissions and documents to substantiate the genuineness of the share capital and premium. The counsel for the assessee cited several judicial precedents, including the Hon'ble Delhi High Court's judgment in CIT vs. K.L. Ahuja, to argue that the AO could not go beyond the directions of the Pr. CIT. The Tribunal examined the facts and circumstances of the case, including the AO's detailed inquiries and findings. It was noted that the AO had followed the directions of the Pr. CIT and conducted adequate inquiries, including issuing summons and verifying the identity and creditworthiness of the shareholding companies. The Tribunal emphasized that an assessment order could not be revised merely because the Pr. CIT had a different opinion on the adequacy of the inquiries conducted by the AO. The Tribunal referred to its own decision in the case of Amritrashi Infra Pvt. Ltd. vs. PCIT, where it was held that the AO's view, based on detailed inquiries and verification of documents, was a plausible view and could not be termed as unsustainable in law. The Tribunal reiterated that the AO had conducted a thorough investigation and that the Pr. CIT's observations regarding the lack of adequate inquiry were factually incorrect. The Tribunal concluded that the exercise of revisionary powers by the Pr. CIT under Section 263 was not justified, as the AO had conducted adequate inquiries and followed the directions given in the initial revision order. The Tribunal quashed the Pr. CIT's order dated 21/02/2020, thereby allowing the assessee's appeal. Conclusion: The Tribunal held that the AO had conducted adequate inquiries and followed the directions of the Pr. CIT in the initial revision order. The Pr. CIT's exercise of revisionary powers under Section 263 was deemed unjustified, and the order dated 21/02/2020 was quashed. The appeal of the assessee was allowed.
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