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2022 (9) TMI 596 - AT - Income TaxRevision u/s 263 by CIT - Failure to produce documentary evidence in respect of agricultural receipts - case was selected for limited scrutiny under CASS guidelines for the reason of 'Large Agricultural Income' - Assessment was completed u/s. 143(3) at the returned income with the observation Large Agricultural Income Stands Explained - HELD THAT - AO has indeed conducted an in depth inquiry in respect of the various issues which the Ld. PCIT has pointed out in the impugned order. It is evident that the assessee has duly responded to the queries raised by the AO and has also substantiated such replies with necessary documentary evidences. Although, the extent of the inquiry having been conducted by the AO may not be apparent from a reading of the assessment order but that would not mean that the AO did not conduct any inquiry on the issue. It would also not mean that the AO has not applied his mind to the issue of large agricultural produce before him. It is settled law that elaborate discussion of the issue in the body of the assessment order would not mean that there has been a lack of inquiry or non-application of mind. Therefore, if the records prove otherwise, non-mentioning of the issues examined by the AO would not make the assessment order erroneous and prejudicial to the interest of the Revenue. In the present case no inquiry has been carried out by the Ld. PCIT and he has simply directed the Assessing officer to carry out detailed inquires. In our considered opinion, the Ld. PCIT, without making further inquiries on his own account, has simply stated in the impugned orders that the Assessing officer was required to make more inquiries. The Ld. PCIT has not pointed out as to what further inquiries was the AO required to make and as to how without those inquires the order of the AO were erroneous in so far as prejudicial to the interest of the Revenue. We are not inclined to agree with the observations of PCIT that the assessment order was passed without conducting any inquiry by the AO and, therefore, the same was erroneous in so far as being prejudicial to the interest of the Revenue - Decided in favour of assessee.
Issues Involved:
1. Assumption of jurisdiction under Section 263 of the Income Tax Act. 2. Consideration of replies and submissions by the Principal Commissioner of Income Tax (PCIT). 3. Application of mind by the Assessing Officer (AO) during the assessment. 4. Validity and sustainability of the PCIT's order. Issue-wise Detailed Analysis: 1. Assumption of jurisdiction under Section 263 of the Income Tax Act: The appeal was preferred by the assessee against the order dated 28.03.2019 passed under Section 263 of the Income Tax Act by the Principal Commissioner of Income Tax-3, Ludhiana, pertaining to the assessment year 2014-15. The PCIT issued a Show Cause Notice under Section 263, alleging that the assessee had shown gross agricultural income of Rs. 45,42,902/- but could only furnish vouchers for Rs. 37,17,517/-, leaving Rs. 8,25,385/- unexplained. The PCIT held that the AO had completed the assessment without appreciating the facts and without conducting a proper inquiry, thus making the assessment order erroneous and prejudicial to the interest of the Revenue. 2. Consideration of replies and submissions by the Principal Commissioner of Income Tax (PCIT): The assessee contended that detailed submissions and documentary evidence were provided during the assessment proceedings, which were not considered by the PCIT. The PCIT observed that the AO had blindly accepted the claims of the assessee without conducting any inquiry. However, the assessee argued that the AO had issued a detailed questionnaire and received comprehensive replies and documentary evidence before completing the assessment. 3. Application of mind by the Assessing Officer (AO) during the assessment: The Tribunal reviewed the records, including the questionnaires issued by the AO and the replies filed by the assessee. It was evident that the AO had conducted an in-depth inquiry into the issues flagged by the PCIT. The Tribunal noted that the AO had applied his mind to the facts and material on record, and the assessment order was completed after due consideration of the replies and documentary evidence provided by the assessee. 4. Validity and sustainability of the PCIT's order: The Tribunal referred to the judgment of the Hon'ble Apex Court in Malabar Industries vs. CIT (2000) 243 ITR 83 (SC), which held that for the exercise of jurisdiction under Section 263, the order must be both erroneous and prejudicial to the interests of the Revenue. The Tribunal also cited the Hon'ble Delhi High Court's judgment in ITO Vs. DG Housing Projects Ltd. [2012] 343 ITR 329 (Del), which stated that in cases of alleged inadequate inquiries, the CIT must conduct verification/inquiry himself. The Tribunal found that the PCIT had not conducted any further inquiries and had merely directed the AO to make more inquiries. Therefore, the Tribunal concluded that the PCIT had incorrectly assumed jurisdiction under Section 263. Conclusion: The Tribunal held that the PCIT's order was based on an incorrect assumption of facts and lacked a sound basis. The AO had conducted necessary inquiries and completed the assessment after applying his mind to the facts and material on record. Therefore, the assessment order was neither erroneous nor prejudicial to the interests of the Revenue. The Tribunal set aside the PCIT's order and allowed the appeal of the assessee. The order was pronounced on 10.08.2022.
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