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2022 (4) TMI 329 - AT - Income TaxRevision u/s 263 by CIT - unsecured loans obtained - HELD THAT - AO made the requisite enquiries, therefore, it is not a case of no enquiry and if the CIT was not satisfied with the enquiries made by the AO, he should have conducted the enquiries himself to record the findings that the assessment order was erroneous and he should not have simply set aside the order passed by the AO directing him to conduct the further enquiries. AO had made enquiry regarding unsecured loans and had also enquired into the issue of melting loss and the assessee too had responded to the query and had submitted details and evidences in support of its contention before the AO. The same was duly brought to the notice of the Ld. PCIT also in response to the show cause notice issued u/s.263 - PCIT did not consider the submissions of the assessee to be of any good. There was a due application of mind on the part of the AO and that adequate and proper enquiries had been conducted by the AO in this regard and, therefore, the impugned order passed u/s. 263 has no feet to stand on. Accordingly, we hold that the proceedings u/s. 263 were bad in law and we quash the revisionary proceedings for the reason that he AO had already made adequate enquiries on the issues raised by the PCIT and further the PCIT had not conducted any independent enquiry on his own before coming to an incorrect conclusion that the assessment order was erroneous as being prejudicial to the interest of the revenue and was liable to be set aside. Appeal of assessee allowed.
Issues Involved:
1. Jurisdiction of the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act. 2. Adequacy of inquiries and verification conducted by the Assessing Officer (AO) regarding unsecured loans and refining loss in old gold ornaments. 3. Requirement of independent inquiry by the PCIT before invoking section 263. 4. Validity of the assessment order passed under section 143(3) of the Income Tax Act. 5. Necessity of revising the approval obtained under section 153D of the Income Tax Act. Issue-wise Detailed Analysis: 1. Jurisdiction of the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act: The appeal challenges the jurisdiction assumed by the PCIT under section 263 of the Income Tax Act, which allows the PCIT to revise an order if it is erroneous and prejudicial to the interests of the revenue. The assessee argued that the PCIT erred in setting aside the AO's order under section 143(3) with directions for a fresh assessment. The tribunal observed that the PCIT must be satisfied with twin conditions: the order is erroneous and prejudicial to the revenue. The tribunal concluded that the PCIT's assumption of jurisdiction was incorrect as the AO had conducted adequate inquiries and applied due diligence. 2. Adequacy of inquiries and verification conducted by the Assessing Officer (AO) regarding unsecured loans and refining loss in old gold ornaments: The assessee contended that the AO had made detailed inquiries and verifications regarding unsecured loans and refining loss in old gold ornaments. The AO issued notices and detailed questionnaires, and the assessee responded with relevant evidence, including audit reports, trading accounts, and confirmations of unsecured loans. The tribunal found that the AO had made specific queries and received comprehensive responses, indicating due application of mind. The tribunal noted that the AO's inquiries were adequate and supported by evidence, contrary to the PCIT's assertion of inadequate verification. 3. Requirement of independent inquiry by the PCIT before invoking section 263: The tribunal emphasized that the PCIT should conduct an independent inquiry to establish that the AO's order is erroneous and prejudicial to the revenue. The PCIT's mere disagreement with the AO's findings without conducting further inquiries is insufficient. The tribunal cited several judicial precedents, including CIT Vs. Sunbeam Auto Ltd. and ITO Vs. DG Housing Projects Ltd., to support this view. The tribunal concluded that the PCIT failed to conduct independent inquiries and relied solely on the AO's proposal, making the invocation of section 263 invalid. 4. Validity of the assessment order passed under section 143(3) of the Income Tax Act: The tribunal reviewed the assessment order and found that the AO had conducted adequate inquiries and applied due diligence. The AO's order was based on comprehensive evidence and responses from the assessee. The tribunal cited the Hon'ble Supreme Court's judgment in Malabar Industries vs. CIT, which held that an order is not erroneous if the AO has adopted one of the permissible views. The tribunal concluded that the AO's order was valid and not erroneous or prejudicial to the revenue. 5. Necessity of revising the approval obtained under section 153D of the Income Tax Act: The assessee argued that the PCIT could not set aside the AO's order without revising the approval obtained under section 153D. The tribunal noted that since it had already quashed the PCIT's order under section 263, it did not need to adjudicate on the necessity of revising the section 153D approval. The tribunal also refrained from commenting on the initiation of proceedings based on the AO's proposal. Conclusion: The tribunal allowed the assessee's appeal, quashing the PCIT's order under section 263. The tribunal held that the AO had conducted adequate inquiries and applied due diligence, and the PCIT failed to conduct independent inquiries before invoking section 263. The tribunal concluded that the AO's order was valid and not erroneous or prejudicial to the revenue.
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