2021 (11) TMI 630 - AT - Income Tax

Revision u/s. 263 by CIT - assessment order passed u/s. 143(3) r.w.s. 153C - proof of no enquiry or lack of inquiry - HELD THAT - We find the there is no dispute that the AO while passing the assessment order accepted the claims of the assessee in non-speaking order. It is not the case of ld. PCIT that the AO is not allowed to accepted the return of income in non-speaking order. AO while passing the assessment order recorded that the Authorized representative of the assessee vide various order sheet entries have furnished the relevant details and information called for. 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 10.03.2021, 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, were issued by the assessing officer. The ld. PCIT in his show cause notice (SCN) under section 263 has accepted that the AO made detailed questionnaire dated 03.12.2018. And on perusal record and details/evidences available on record, the PCIT noted that AO has not made further inquiry. PCIT has not made a case that there was no enquiry or lack of inquiry rather recorded that the AO called detailed inquiry . PCIT has not specified that what kind of further inquiry was required, when the income disclosed in IDS was duly accepted by higher authority. We find that declaration made in IDS-16, was never questioned by Board or other superior authority of the revenue. In our view it is the discretion of the AO, having regards to the facts of the case and the material placed before him in response to the various show cause notices, to take a conscious decision if any further inquiry is required or not. Furthermore, we find that 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 and practice of the revenue. In the case in hand the AO has made required inquiry and came to a possible conclusion in allowing the claims to the assessee. We also find that 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. PCIT while directing the AO has not himself revoked the IDS nor directed to refund the payment of tax to the assessee - IDS the assessee has paid more tax to the revenue then the rate of normal tax, so there is no loss of revenue. AO while passing the assessment order has 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. - Decided in favour of assessee.

Summary

Issues Involved:

- Non-verification of cash credit of ?2.28 crore
- Non-verification of cash in hand of ?75 lakhs
- Understatement of income of the project
- Non-mentioning reference of seized document/evidence in the satisfaction note under section 153C of the Act
- Validity of declaration under IDS-2016

Issue-wise Detailed Analysis:

1. Non-verification of Cash Credit of ?2.28 Crore:
The Principal Commissioner of Income Tax (PCIT) identified that the Assessing Officer (AO) did not verify the unsecured loans during the assessment. The assessee contended that detailed submissions and explanations were provided to the AO, who verified and accepted them. The assessee argued that the AO had made adequate inquiries and that no evidence of bogus loans was found during the search and survey actions. The Tribunal noted that the AO had issued notices and received detailed replies from the assessee, which were verified. Thus, the AO's acceptance of the unsecured loans was found to be in order.

2. Non-verification of Cash in Hand of ?75 Lakhs:
The PCIT noted that the AO failed to verify the cash in hand and cash deposits. The assessee clarified that the actual cash deposit was ?6,00,000 and not ?20,20,000 as mentioned in the show cause notice. The AO had verified the complete cash book and bank book during the assessment proceedings. The Tribunal found that the AO had indeed verified the cash transactions, and the PCIT's observation was incorrect.

3. Understatement of Income of the Project:
The PCIT observed that the AO did not verify the understatement of income from the project. The assessee explained that all transactions were accounted for in the balance sheet and profit and loss account. The assessee had declared a closing work-in-progress (WIP) stock of ?4,07,504, which was reflected in the return of income. The Tribunal found that the AO had considered the disclosure made under the Income Disclosure Scheme (IDS), which was higher than the income reflected in the impounded material. Thus, the AO's assessment was not erroneous.

4. Non-mentioning Reference of Seized Document/Evidence in the Satisfaction Note under Section 153C:
The PCIT noted that the AO did not mention the reference of seized documents in the satisfaction note. The assessee argued that the AO had verified all the seized materials and framed the assessment order under the supervision of the Joint Commissioner of Income Tax (JCIT). The Tribunal held that even if the reference was not mentioned, the AO had conducted a thorough verification, and the assessment order was valid.

5. Validity of Declaration under IDS-2016:
The PCIT questioned the validity of the declaration made under IDS-2016. The assessee contended that the IDS declaration was made before the issuance of notice under section 153C and was accepted by the PCIT. The Tribunal noted that the IDS declaration was never questioned or revoked by the authorities, and the tax paid under IDS was not refunded. The AO had no authority to disregard the IDS declaration, which was valid and accepted.

Conclusion:
The Tribunal concluded that the AO had conducted adequate inquiries and verifications during the assessment proceedings. The PCIT's observations were not justified, as the AO's assessment order was neither erroneous nor prejudicial to the interests of the revenue. The Tribunal quashed the revision order under section 263 of the Act, allowing the appeal of the assessee.