2022 (12) TMI 1127 - AT - Income Tax

Revision u/s 263 - According to PCIT, the AO failed to verify the excess allowance of bad debts - HELD THAT - As this being limited scrutiny assessment framed by the AO for the purpose of verification of large business loss incurred in the money lending. We noted that the AO has gone into the details and noted in the assessment order - We also noted that all the debtors have confirmed while summoned and statements were taken from them. Some of them could not attend in person but confirmed in writing. We noted that the AO has formed an opinion and now PCIT, should not have invoked the powers of revision u/s.263 of the Act on the same issue which is examined by the AO in detail. Hence, we find that the revision order passed by PCIT is bad in law and hence, the same is quashed. Appeal filed by the assessee is allowed.

Issues:
1. Delayed appeal filing due to Covid-19 pandemic.
2. Revision order passed by PCIT under section 263 of the Income Tax Act.
3. Verification of bad debts and money lending activity.
4. Genuine nature of money lending activity and documentation.
5. Acceptance of bad debts without proper examination.
6. Reconsideration of limited scrutiny assessment by PCIT.

Detailed Analysis:
1. The appeal was delayed by 619 days due to the Covid-19 pandemic, and the delay was condoned based on directions from the Hon'ble Supreme Court regarding the period from 15.03.2020 to 14.03.2021. The Tribunal admitted the appeal for adjudication after condoning the delay.

2. The main issue in the appeal was the revision order passed by the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act, challenging the assessment order framed by the Assessing Officer (AO) for the assessment year 2015-16. The PCIT found the assessment order to be erroneous and prejudicial to the interest of Revenue, specifically regarding the set off of business loss against long-term capital gains.

3. The PCIT directed the AO to re-do the assessment after verifying the excess allowance of bad debts and examining the money lending activity and capital account of the assessee. The PCIT concluded that the AO had not adequately enquired into these aspects during the original assessment, leading to the revision order.

4. The PCIT raised concerns about the genuineness of the money lending activity, lack of necessary licenses, absence of documentary evidence for loans, and inadequate security for the loans provided by the assessee. The PCIT also questioned the acceptance of promissory notes without proper examination and the treatment of loans as bad debts without sufficient evidence or recovery measures.

5. The Tribunal noted that the original assessment was a limited scrutiny assessment focusing on verifying the set off of business loss against other heads of income, including capital gains. The AO had examined the nature of the business, money lending activity, and summoned debtors during the assessment process. The Tribunal found that the PCIT's revision order re-examined the same issues already considered by the AO, leading to the quashing of the revision order.

6. After considering the arguments from both sides, the Tribunal concluded that the PCIT should not have invoked the powers of revision under section 263 on the same issue already examined by the AO in detail during the limited scrutiny assessment. Therefore, the Tribunal allowed the appeal filed by the assessee, quashing the revision order passed by the PCIT.

This comprehensive analysis covers the delayed appeal filing, the grounds for the revision order, the verification of bad debts and money lending activity, the genuineness of the money lending business, acceptance of bad debts without proper examination, and the reconsideration of the limited scrutiny assessment by the PCIT, leading to the final decision by the Tribunal.

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