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2021 (6) TMI 600 - AT - Income TaxRevision u/s 263 - non application of mind by AO on search figures of income - PCIT stated that assessing officer has not applied his mind and he accepted the figure explained by the assessee during survey proceedings, therefore order passed by the assessing officer is erroneous and prejudicial to the interest of revenue - HELD THAT - Assessee has explained the survey team about the meaning of brief amount recorded in the diary, say for example 400 L means 4 lacs and 200 L means 2 lacs. The said cited interpretation has been accepted by the survey team. AO also gone through these answers and questions and applied his mind while passing the assessment order under section 143(3) of the Act dated 20.12.2016. Since the Assessing Officer has taken into account, the survey material and the question and answers asked during the survey proceedings and explanations of the assessee and thus made adequate inquiry and then after he has passed the order under section 143(3) of the Act dated 20.12.2016, therefore order passed for AO should not be erroneous. The Learned Counsel also submitted before us an affidavit which is placed at page no.53 of the paper book wherein assessee has mentioned the additional income and stated that he had declared additional income for the current financial year. PCIT has not brought any material to justify the alleged income of ₹ 210 crores.Thus, we note that allegation made by the ld PCIT is based merely on suspicion and conjecture. A mere observation that no proper details have been obtained, cannot be sufficient to come to a conclusion that the assessing officer did not make proper and adequate inquiries which he ought to have made in the given facts and circumstances of this case. AO has examined other issues raised by ld PCIT, such as returned income, the pre-survey period and post -survey expenses and sundry creditors for land development and land leveling expenses. In the conclusion, we are of the view that none of the reasons set out by the ld PCIT for invoking the jurisdiction under section 263 of the Act are sustainable. The impugned order of ld PCIT has to be quashed for the reason that order of the assessing officer sought to be revised in the impugned order was neither erroneous nor prejudicial to the interest of the revenue for the reason of any lack of inquiry that the assessing officer ought to have made in the given facts and circumstances of the case. We accordingly quash the order under section 263 of the Act and allow the appeal of the assessee.
Issues Involved:
1. Validity of jurisdiction exercised under Section 263 of the Income Tax Act, 1961. 2. Alleged undisclosed income of ?210 crores versus ?2.10 crores declared during the survey. 3. Examination of land development and land leveling expenses. 4. Examination of sundry creditors for land development and land leveling expenses. 5. Adequacy of inquiries conducted by the Assessing Officer (AO) during the assessment proceedings. Detailed Analysis: 1. Validity of Jurisdiction Exercised under Section 263 of the Income Tax Act, 1961: The assessee challenged the correctness of the order passed by the Learned Principal Commissioner of Income Tax (Ld.PCIT) under Section 263 of the Income Tax Act, 1961. The main contention was that the conditions stipulated for invoking such extraordinary jurisdiction were not satisfied. The assessee argued that the Ld.PCIT erred in revising the assessment and directing a fresh assessment on issues already considered and decided during the original assessment proceedings under Section 143(3) of the Act. 2. Alleged Undisclosed Income of ?210 Crores versus ?2.10 Crores Declared During the Survey: The primary dispute revolved around the interpretation of figures noted in the assessee's diary impounded during the survey. The Ld.PCIT contended that the amount declared in the survey, ?2.10 crores, should be interpreted as ?210 crores. The Ld.PCIT argued that the figures in the diary, such as 400L, should be read as 400 lakhs (?4 crores) and not 4 lakhs. This interpretation was based on the usual practice of recording larger amounts in abbreviated forms. The assessee, however, maintained that the figures were correctly interpreted as lakhs during the survey and that the total additional income disclosed was ?2.10 crores, which was accepted by the AO. 3. Examination of Land Development and Land Leveling Expenses: The Ld.PCIT noted discrepancies in the land development and land leveling expenses reported by the assessee. Specifically, the expenses for the pre-survey period (six months) were ?34.82 lakhs, while the post-survey period expenses were ?1.19 crores. The Ld.PCIT argued that the AO failed to properly examine these expenses and their implications on the assessee's income. 4. Examination of Sundry Creditors for Land Development and Land Leveling Expenses: The Ld.PCIT observed that the sundry creditors for land development and land leveling expenses were shown as outstanding at the end of the year, but no details of the parties were furnished before the AO. The Ld.PCIT contended that the AO did not make necessary inquiries regarding these outstanding creditors. 5. Adequacy of Inquiries Conducted by the AO During the Assessment Proceedings: The Ld.PCIT argued that the AO failed to make proper inquiries and verifications regarding several aspects, including the interpretation of figures in the impounded diary, the land development and leveling expenses, and the sundry creditors. The Ld.PCIT held that the AO's assessment order was erroneous and prejudicial to the interest of the revenue due to the lack of adequate inquiries. Tribunal's Findings: The Tribunal examined the submissions and evidence presented by both parties. It noted that the AO had issued a detailed questionnaire and conducted thorough inquiries during the assessment proceedings. The AO had accepted the additional income of ?2.10 crores disclosed by the assessee after verifying the documents and evidence. The Tribunal found that the Ld.PCIT's interpretation of the figures in the diary as lakhs instead of crores was not supported by any discrepancy in the financial statements or any material evidence. The Tribunal also noted that the AO had examined other issues raised by the Ld.PCIT, such as the returned income, pre-survey and post-survey expenses, and sundry creditors. The Tribunal concluded that the AO had made sufficient inquiries and that the assessment order was neither erroneous nor prejudicial to the interest of the revenue. Therefore, the Tribunal quashed the order passed by the Ld.PCIT under Section 263 of the Act and allowed the appeal of the assessee. Conclusion: The appeal of the assessee was allowed, and the order of the Ld.PCIT under Section 263 of the Income Tax Act, 1961, was quashed. The Tribunal held that the AO had conducted adequate inquiries and that the assessment order was not erroneous or prejudicial to the interest of the revenue.
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