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2022 (8) TMI 1166 - AT - Income TaxRevision u/s 263 by CIT - AO accepted claim of genuineness of Share Capital Investment by various persons without making inquiries or verification of the claim, as prescribed in clause (a) (b) of first proviso to Section 68 - HELD THAT - Though the original assessment order passed by the Assessing Officer is a cryptic order without much discussion on the verifications made by the A.O. and the explanation offered by the assessee. As can been seen from the Paper Book filed by the assessee, wherein assessee s detailed reply wherein details above the unsecured loans remained outstanding at the end of the 31.03.2018 with copy of the Ledger account, Income Tax Return of the respective parties, computation of income, balance sheet, Profit and Loss account were enclosed. Assessee also replied that no commercial production is started during this assessment year, therefore raw material on purchased is shown as closing stock in the books of accounts and no other expenses debited in the profit and loss account. Assessee also further submitted name and addresses of the sundry creditors and sundry debtors. Further contra ledger of sundry creditors also filed. Similarly, the assessee enclosed list of shareholders with shareholding pattern in assessee s company with copy of the ledger account, copy of the Income Tax Return and copy of the bank statement were submitted to the Assessing Officer vide Exhibit-H. It is further seen on these documents were electronically uploaded by the assessee in reply to the 143(2) notice, the A.O. having been satisfied with the explanation offered by the assessee. AO has accepted the explanations and completed the assessment order u/s. 143(3) of the Act. It is not the case of the assessee that the A.O. has not conducted necessary inquiry, verification before passing the assessment order. The assessing officer has verified the share application money which were being routed through banking channels and the respective Income Tax Return by the investors were also been verified by the Assessing Officer. Similarly, on the unsecured loans the same were received by the assessee company through banking channels by way of cheques and the bank statements were also been produced before the Assessing Officer for verification along with Return of Income filed by the respective assessees/creditors. Thus, the Assessing Officer accepted the genuineness of the share application money and unsecured loans received by the assessee. Such a view of the Assessing Officer was a plausible view and the same cannot be considered as erroneous or prejudicial to the interest of revenue. Thus it is not open to the Ld. PCIT to revise the issues on mere apprehensive and surmises that the A.O. has not made proper verification before passing the assessment order. It is settled principle of law by the Hon ble Apex Court in the case of CIT vs. Shreeji Prints (P.) Ltd. 2021 (9) TMI 108 - SUPREME COURT when Assessing Officer made enquiries in detail and accepted the genuineness of loan received by the assessee such view of the Assessing Officer was a plausible view and same cannot be considered as erroneous or prejudicial to the interest of revenue. Thereby the revision proceedings initiated invoking to Explanation 2 to Section 263 of the Act is held to be invalid and the same is not sustainable in law. Thus it is evident that the ld. Assessing Officer has made due inquiries by issuing notices and the assessee also filed detailed submissions with evidences. Even though the assessment order does not discuss all these aspects in detail with regards to the submissions of the assessee, it cannot be held the assessment order is erroneous and prejudicial to the interest of the Revenue. - Decided in favour of assessee.
Issues Involved:
1. Whether the assessment order passed by the Assessing Officer (A.O.) was erroneous and prejudicial to the interest of the Revenue. 2. Whether the Principal Commissioner of Income Tax (PCIT) was justified in invoking Section 263 of the Income Tax Act, 1961. 3. Whether the A.O. conducted proper inquiries and verification regarding the share capital, unsecured loans, and sundry creditors. 4. Whether the PCIT's reliance on the judgment in the case of PCIT vs. NRA Iron & Steel Pvt. Ltd. was appropriate. 5. Whether the PCIT had the authority to revise the assessment order based on a different opinion than that of the A.O. Issue-wise Detailed Analysis: 1. Whether the assessment order passed by the A.O. was erroneous and prejudicial to the interest of the Revenue: The A.O. accepted the genuineness of the share capital investment and unsecured loans without making adequate inquiries or verification as required under the Income Tax Act. The PCIT found that the A.O. did not properly verify the identity, creditworthiness, and genuineness of the shareholders and creditors. This lack of proper inquiry rendered the assessment order erroneous and prejudicial to the interest of the Revenue. 2. Whether the PCIT was justified in invoking Section 263 of the Income Tax Act, 1961: The PCIT invoked Section 263, arguing that the A.O.'s order was erroneous and prejudicial to the interest of the Revenue due to the lack of proper inquiries and verification. The PCIT issued a detailed show cause notice to the assessee, highlighting the deficiencies in the A.O.'s assessment order. The PCIT's action was based on the provisions of Explanation 2 to Section 263, which deems an order erroneous if it is passed without making inquiries or verification that should have been made. 3. Whether the A.O. conducted proper inquiries and verification regarding the share capital, unsecured loans, and sundry creditors: The A.O. issued notices under Sections 143(2) and 142(1) and received submissions from the assessee. However, the PCIT found that the A.O. did not conduct proper inquiries or verification regarding the share capital and unsecured loans. The PCIT noted that the A.O. accepted the genuineness of the transactions without verifying the bank statements, confirmations, and the financial capacity of the investors and creditors. 4. Whether the PCIT's reliance on the judgment in the case of PCIT vs. NRA Iron & Steel Pvt. Ltd. was appropriate: The assessee argued that the facts of the NRA Iron & Steel Pvt. Ltd. case were different, as it involved shareholder companies that were just paper companies, whereas the present case involved individual investors. The PCIT, however, relied on the principle that an order passed without proper inquiry is deemed erroneous and prejudicial to the interest of the Revenue, as upheld in various judicial precedents. 5. Whether the PCIT had the authority to revise the assessment order based on a different opinion than that of the A.O.: The assessee contended that the PCIT cannot revise an order merely because he holds a different opinion. The PCIT, however, emphasized that the revision was not based on a different opinion but on the lack of proper inquiry and verification by the A.O. The PCIT's revision was justified under Explanation 2 to Section 263, which allows revision if the order is passed without making necessary inquiries or verification. Conclusion: The Tribunal concluded that the A.O. had made due inquiries by issuing notices and receiving detailed submissions with evidence from the assessee. The assessment order, although cryptic, was based on proper inquiries and verification. The Tribunal held that the PCIT's revision under Section 263 was not justified, as the A.O.'s view was a plausible one and not erroneous or prejudicial to the interest of the Revenue. The Tribunal quashed the revision order dated 24-03-2021 and allowed the appeal filed by the assessee.
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