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2023 (1) TMI 1111 - AT - Income TaxRevision u/s 263 - assessee has failed to explain the source of investment made for purchase of the immovable property - HELD THAT - Assessee had furnished return of income for the year under consideration under presumptive taxation under section 44AD and disclosed required particulars. The Assessing Officer while passing the order has categorically mentioned that he had verified and examined the reply and documents furnished by the assessee. AO has further mentioned that the assessee had furnished written reply, copy of Income-tax return with computation of income, profit and loss account, cash flow statement, confirmation of accounts, receipts for sale consideration, agreement for sale, sale deed dated July 20, 2011 bank statements, etc. This finding and recording of these facts is not disputed by PCIT. Initial reply furnished by the appellant vide letter dated June 20, 2019 wherein the appellant disclosed that the appellant deals in real estate business activity and that main source of business income is from real estate business. Appellant also furnished copy of purchase deed dated July 20, 2011 for Rs. 60,00,000 in respect of agricultural land purchased by the appellant. This information was furnished in compliance to notice dated June 13, 2019 issued under section 142(1) - From the copy of purchase deed it is apparent that the appellant purchased agricultural land from two ladies, paid consideration in cash which is acknowledged by the sellers of land, that purchased deed was signed on July 18, 2011 and got registered in the office of sub-registrar on July 19, 2011. The appellant paid stamp duty and registration expenses of Rs. 3,58,360 in cash. Therefore, genuineness of payment and identity of recipients got established and which has not been disputed even by the learned Principal Commissioner of Income-tax. Thereafter, the Assessing Officer issued another notice under section 142(1) Thus after carefully, analysing the facts and circumstances and the settled position of law, we hold that the revision order passed by the learned Principal Commissioner of Income-tax is not justified.
Issues Involved:
1. Invocation of Section 263 of the Income-tax Act by the Principal Commissioner of Income-tax (Pr. CIT). 2. Lack of inquiries by the Assessing Officer under Section 143(3) and Section 147. 3. Classification of land as stock-in-trade. 4. Setting aside the order of the Assessing Officer. 5. Disallowance under Section 40A(3) for cash payments exceeding Rs. 20,000. 6. Penalty under Section 271D for contravention of Section 269SS. Detailed Analysis: 1. Invocation of Section 263 of the Income-tax Act by the Pr. CIT: The Pr. CIT invoked Section 263, arguing that the assessment order dated December 17, 2019, was erroneous and prejudicial to the interests of the Revenue. The Pr. CIT observed that the assessee failed to explain the source of investment for the purchase of immovable property and noted discrepancies in the cash flow statement. The Pr. CIT held that due to lack of inquiry and incomplete appreciation of facts, the assessment order was erroneous. 2. Lack of Inquiries by the Assessing Officer under Section 143(3) and Section 147: The Pr. CIT contended that the Assessing Officer completed the scrutiny assessment without making proper inquiries. The Assessing Officer accepted the returned income without questioning the source of funds for the purchase of land or the cash flow statement provided by the assessee. The Pr. CIT emphasized that the Assessing Officer did not make the necessary inquiries into the issues raised in the revision order. 3. Classification of Land as Stock-in-Trade: The Pr. CIT held that the land purchased by the assessee should be considered as stock-in-trade because the assessee is a property dealer. The Pr. CIT noted that the entire purchase consideration was paid in cash, which contravenes Section 40A(3) of the Act, requiring disallowance of such expenditure. 4. Setting Aside the Order of the Assessing Officer: The Pr. CIT set aside the order of the Assessing Officer, directing that the assessment be suitably modified or revised. The Tribunal needed to evaluate whether the Pr. CIT's invocation of Section 263 was justified and whether the Assessing Officer's order was indeed erroneous and prejudicial to the interests of the Revenue. 5. Disallowance under Section 40A(3) for Cash Payments Exceeding Rs. 20,000: The Tribunal examined whether the disallowance under Section 40A(3) was warranted. The Tribunal noted that the Assessing Officer had made inquiries regarding the purchase of land in cash and the source of funds. The Tribunal found that the genuineness of the payment and the identity of the recipients were established, and the Assessing Officer had taken a possible view supported by judicial precedents. The Tribunal concluded that the mere non-mention of Section 40A(3) in the assessment order did not make it erroneous or prejudicial to the interests of the Revenue. 6. Penalty under Section 271D for Contravention of Section 269SS: The Pr. CIT observed that the assessee had accepted loans in cash exceeding Rs. 20,000, which contravened Section 269SS, making the assessee liable for penalty under Section 271D. The Tribunal noted that the Assessing Officer had inquired about the cash loans and accepted the explanations provided by the assessee. The Tribunal held that the non-initiation of penalty proceedings under Section 271D was a permissible view and could not be considered erroneous or prejudicial to the interests of the Revenue. Conclusion: The Tribunal concluded that the Pr. CIT's invocation of Section 263 was not justified. The Assessing Officer had made necessary inquiries and taken a possible view supported by judicial precedents. The Tribunal found that the Pr. CIT's order was not a speaking order and lacked detailed reasoning. The Tribunal allowed the appeal of the assessee, setting aside the revision order passed by the Pr. CIT.
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