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2021 (10) TMI 1136 - AT - Income TaxRevision u/s 263 by CIT - validity of declaration made under IDS - Before issuing the notice under section 153C of the Act, the assessee made disclosure under income disclosure scheme (IDS) - understatement of income of the project - HELD THAT - The phrase 'prejudicial to the interests of the revenue' is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the revenue. If due to an erroneous order of the Income-tax Officer, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue. The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Income-tax Officer is unsustainable in law. There must be material available on the record called for by the Commissioner to satisfy him prima facie that the aforesaid two requisites are present. If not, he has no authority to initiate proceedings for revision. Exercise of power of su motu revision under such circumstances will amount to arbitrary exercise of power. It is well-settled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on record to satisfy it in that regard. If the action of the authority is challenged before the Court, it would be open to the Courts to examine whether the relevant objectives were available from the records called for and examined by such authority. The decision of the ITO could not be held to be 'erroneous' simply because in his order he did not make an elaborate discussion in that regard. Moreover, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous, he simply asked the ITO to re-examine the matter, which was not permissible. After affording ample and adequate opportunities of being heard to the assessee, assessment proceedings have been completed on the basis of the submissions and details collected and in consequence upon the conclusion of proceeding and hearing of evidences, assessment is made by this order . A perusal of show cause notice under section 263 dated 08.03.2021, clearly demonstrate that the ld PCIT identified all the issues which were the subject matter of the notice under section 142(1) and the questionnaire attached thereto, except the issue of initiation of penalty 271D and validity of IDS. The ld PCIT in his show cause notice (SCN) under section 263 has accepted that the AO made detailed questionnaire (para -5) dated 03.12.2018. And on perusal record and details /evidences available on record, the PCIT noted that AO has not made further inquiry. Thus, the ld. PCIT has not made a case that there was no enquiry or lack of inquiry rather recorded that the AO called detailed inquiry. We find that the ld. PCIT has not specified that what kind of further inquiry was required, when the income disclosed in IDS was duly accepted by higher authority. And the acceptance of IDS was never questioned by Board or other superior authority then PCIT. It is the AO who has to take a conscious decision if any further inquiry is required or not. Furthermore, the assessment order was duly approved by the ld JCIT. There in not finding of ld PCIT that the approval granted by the JCIT is not proper or non-application of proper procedure. AO has made required inquiry and came to a possible conclusion in allowing the claims to the assessee. Non initiation of penalty under section 271D/ 271E - We find that in case of CIT Vs Suresh G. Shah 2006 (8) TMI 101 - HIGH COURT, GUJARAT and CIT Vs Parmanand M. Patel 2005 (7) TMI 72 - GUJARAT HIGH COURT it was held that CIT cannot exercise his jurisdiction under section 263 for the purpose of initiation of penalty proceedings. Otherwise also we find that the assessee has specifically in its reply to the SCN to the ld PCIT has stated that the cash was received only against the booking and no loan or such transaction was undertaken by them. PCIT failed to specify the transaction on which initiation of penalty either under section 271D or 271E was warranted. And on the issues of validity of discloser in IDS, the ld PCIT has not specified that while making declaration the assessee made any misrepresentation of any facts. Once the IDS in all cases were accepted by ld. PCIT, the AO or the Range head no authority to relook or power to revoke or to examine its validity. We further find that the ld PCIT while directing the AO has not himself revoked the IDS nor directed to refund the payment of tax to the assessee. In the IDS the assessee has paid more tax to the revenue then the rate of normal tax, so there is no loss of revenue. At the cost of repetition, we note that the AO while passing the assessment order in all years have made inquiry and took reasonable, plausible and legally sustainable view. The Hon ble Delhi High Court in CIT Vs Kelvinator of India Ltd 2002 (4) TMI 37 - DELHI HIGH COURT held that if the AO has adopted one of the course permissible in law, which resulted in loss of revenue or where two view is possible and the AO has taken one view with which the CIT does not agree, it cannot be treated as erroneous order prejudicial to the interest of revenue unless view taken by the AO is not sustainable in law. At the cost of repetition, we may note that the ld PCIT neither in his show cause notice nor in ultimate / final order has held that the order passed by the AO is unsustainable in law. We are of the considered view that the ld PCIT was not justified in subjecting the assessment order for all three years to revision proceedings by taking view that the AO has not made further inquiry, therefore we quash the revision order (s) in all three assessment years.- Decided in favour of assessee.
Issues Involved:
1. Understatement of income of the project. 2. Non-verification of cash loan of ?12.16 crore. 3. Unaccounted cash payment for purchase of land. 4. Non-disallowance under section 40A(3). 5. Non-initiation of penalty under section 271D. 6. Non-mentioning reference of seized document/evidence in the satisfaction note under section 153C. 7. Validity of disclosure made under Income Tax Disclosure Scheme (IDS). 8. Non-verification of unsecured loan (AY 2017-18 only). 9. Non-verification of investment in immovable property (AY 2017-18 only). Detailed Analysis: 1. Understatement of Income of the Project: The Principal Commissioner of Income Tax (Pr.CIT) identified that the cost of the project was not verified, and certain evidence indicated cash receipts. The Assessee argued that they had already declared more profit under the IDS than the actual profit based on impounded material. The Tribunal found that the Assessee had made a reasonable declaration under IDS, which was more than the actual profit, and thus, the assessment on this issue was neither erroneous nor prejudicial to the interest of the Revenue. 2. Non-verification of Cash Loan of ?12.16 Crore: The Pr.CIT noted that the Assessing Officer (AO) did not verify the cash loans reflected in the impounded material. The Assessee explained that these amounts were booking advances received in the relevant financial years. The Tribunal found that the AO had thoroughly examined the issue and accepted the explanation, thus the assessment order was neither erroneous nor prejudicial to the interest of the Revenue. 3. Unaccounted Cash Payment for Purchase of Land: The Pr.CIT identified unaccounted cash payments for land purchases. The Assessee contended there was no evidence of such payments in the impounded material and that the transactions were covered by the total on-money receipts disclosed under IDS. The Tribunal held that the AO had considered the Assessee’s submissions and took a reasonable view, making the assessment order neither erroneous nor prejudicial. 4. Non-disallowance under Section 40A(3): The Pr.CIT observed that the AO failed to disallow certain expenses under section 40A(3). The Assessee argued that once income is declared under IDS, the provisions of section 40A(3) are not applicable. The Tribunal agreed with the Assessee, citing case law that supports the non-applicability of section 40A(3) when income is estimated, thus the assessment order was not erroneous. 5. Non-initiation of Penalty under Section 271D: The Pr.CIT noted the AO’s failure to initiate penalty proceedings under section 271D. The Assessee argued that the amounts involved were booking advances, not loans, and thus section 271D was not applicable. The Tribunal found that non-initiation of penalty proceedings cannot be a ground for revision under section 263, citing jurisdictional High Court decisions, and thus the assessment order was not erroneous. 6. Non-mentioning Reference of Seized Document/Evidence in the Satisfaction Note under Section 153C: The Pr.CIT held that the AO did not reference seized documents in the satisfaction note under section 153C. The Assessee argued that the AO verified all seized material before framing the assessment order. The Tribunal noted that if the assessment was invalid due to this reason, it could not be revised under section 263, making the Pr.CIT’s revision order unsustainable. 7. Validity of Disclosure Made under IDS: The Pr.CIT questioned the validity of the disclosure made under IDS. The Assessee contended that the IDS declaration was made before the issue of notice under section 153C and was accepted without objection. The Tribunal held that once the IDS was accepted, the AO had no authority to question its validity, and the assessment order was not erroneous. 8. Non-verification of Unsecured Loan (AY 2017-18 Only): The Pr.CIT identified non-verification of unsecured loans. The Assessee provided details of unsecured loans in the tax audit report and during the assessment proceedings. The Tribunal found that the AO had made a reasonable inquiry and accepted the Assessee’s explanation, making the assessment order not erroneous. 9. Non-verification of Investment in Immovable Property (AY 2017-18 Only): The Pr.CIT noted non-verification of investment in immovable property. The Assessee had provided the ledger account and registered purchase deed during the assessment proceedings. The Tribunal held that the AO had fully examined the facts and passed the assessment order after considering the material evidence, thus it was not erroneous. Conclusion: The Tribunal quashed the revision orders of the Pr.CIT for all three assessment years, holding that the AO had made necessary inquiries and taken reasonable views. The appeals for AY 2015-16, 2016-17, and 2017-18 were allowed.
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