2022 (11) TMI 1130 - AT - Income Tax

Revision u/s 263 by CIT - Assessee claim of transaction pertaining to the shares and the resultant gain/profit/loss is not verifiable - HELD THAT - The gain or loss is attributed/allocated to different clients who had made trade in equity through the assessee with the main broker of Bombay. Thus non speculative loss as well as speculative profit were allocated and belonging to different clients/customers. The assessee has no right to have profit or loss on this equity trading account for the year under consideration. AO vide notice requested the assessee to furnish the source of investment with proper evidences. In the absence of any evidence why the same should not be added as the total income of the assessee as unexplained investment u/s. 69 and also requested to submit all the details mentioned in the trading statement provided by the assessee. The assessee responded stating that the total payments to the main broker was of Rs. 1,76,83,099/-. In the same account there is total receipt of Rs. 1,20,75,801/-. Thus the net payment was of Rs. 56,07,298/- for which the assessee was sending confirmatory contra accounts duly signed by the clients, their full address and Pan Number details and further the summery list shown clients name address Pan Number Aadhar Card Copy etc. As seen from the revision order that the Ld. PCIT after perusal of the material available on record and found that the issues pointed out in the show cause needs verification. PCIT held that the assessee s claim with regard to the transaction pertaining to the shares and the resultant gain/profit/loss is not verifiable. During the course of original assessment proceedings, the assessee failed to furnish the said details and evidences. That s why the assessee himself offered 8% of difference amount of bank credits and debits as presumptive income and entire amount was required to be treated as unexplained income and added to the total income of the assessee. Therefore invoking Explanation 2(a) of Section 263(1) PCIT set aside the assessment order passed by the Assessing Officer as erroneous and prejudicial to the interest of revenue. PCIT pointed out the issues mentioned in the show cause notice needs verification but it is seen from the Paper Book that all the details were filed by the assessee before the AO during the assessment proceedings and after detailed enquiry and verification of records, the assessing officer completed the assessment order. PCIT has not demonstrated in his order how the order passed by the AO as erroneous order. The Assessing Officer has adopted one of the courses permissible in law, if it has resulted in loss of revenue, the same cannot be treated as an erroneous order which requires revision u/s. 263 - Therefore in our considered view, the invocation of Revision proceedings u/s. 263 itself unjustifiable, against the provisions of law and therefore, the same is hereby quashed. Appeal of assessee allowed.

Summary

Issues Involved:
1. Delay in filing the appeal.
2. Legitimacy of the revision order under section 263 of the Income Tax Act, 1961.
3. Adequacy of the Assessing Officer's inquiry and verification.
4. Determination of erroneous and prejudicial assessment.

Issue-wise Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal was filed with a noted delay of 2 days. However, considering the COVID-19 pandemic, the Supreme Court extended the limitation period from 15.03.2020 to 28.02.2022. Consequently, there was no delay in filing the appeal before the Tribunal.

2. Legitimacy of the Revision Order under Section 263:
The Principal Commissioner of Income Tax (PCIT) revised the assessment order under section 263, citing that the Assessing Officer (AO) failed to verify details regarding the contract receipt of Rs. 56,06,360/-. The PCIT considered the AO's order erroneous and prejudicial to the interest of revenue, necessitating revision. The assessee challenged this, asserting that all necessary details were provided during the assessment, and the AO made a detailed inquiry before finalizing the assessment.

3. Adequacy of the Assessing Officer's Inquiry and Verification:
The assessee provided comprehensive details, including bank statements, demat accounts, trading statements, and confirmations from clients and brokers during the assessment proceedings. The AO verified these details and accepted the assessee's offered income. The PCIT argued that the AO did not make proper inquiries, but the assessee contended that the AO's inquiries were adequate and thorough.

4. Determination of Erroneous and Prejudicial Assessment:
The Tribunal noted that the AO issued multiple notices under section 142(1) and received detailed responses from the assessee. The AO's assessment included verification of trading statements and client confirmations, indicating a thorough inquiry. The Tribunal emphasized that an assessment order cannot be deemed erroneous merely because the PCIT holds a different view. The AO's approach was within the permissible legal framework, and the loss of revenue alone does not justify the revision under section 263.

Conclusion:
The Tribunal concluded that the PCIT failed to demonstrate how the AO's order was erroneous. The AO conducted adequate inquiries and adopted a permissible course of action. Consequently, the Tribunal quashed the revision proceedings under section 263, ruling them unjustifiable and against the provisions of law. The appeal filed by the assessee was allowed.