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2023 (3) TMI 668 - AT - Income TaxRevision u/s 263 - addition u/s 68 - HELD THAT - AO, during the course of assessment proceedings, called for the relevant records, also issued notices to the persons to whom the alleged cotton sales were made and after due consideration of material on hand, treated 50% of the agricultural income as unaccounted income taxable under section 68 r.w.s. 115 BBE of the Act. Therefore, in our view it is not a case where the AO had not made due enquiries and also not the case where the AO had not applied his mind during the course of assessment proceedings on the issue in hand. Regarding the scope of proceedings u/s 263 of the Act, if an inquiry made by the Assessing Officer is considered inadequate by the Commissioner of Income Tax, this itself cannot make the order of the AO erroneous. In our view, the order can be erroneous if the AO fails to apply the law rightly on the facts of the case. As far as adequacy of inquiry is considered, there is no law which provides the extent of inquiries that are required to be made by the AO - It is Assessing Officer s prerogative to make inquiry to the extent he feels proper. The Commissioner of Income Tax by invoking revisionary powers under section 263 of the Act cannot impose his own understanding of the extent of inquiry. Delhi High Court in the case of CIT Vs. Sunbeam Auto 2009 (9) TMI 633 - DELHI HIGH COURT made a distinction between lack of inquiry and inadequate inquiry. The Hon ble court held that where the AO has made inquiry prior to the completion of assessment, the same cannot be set aside u/s 263 on the ground of inadequate inquiry. It is a well-settled principle of law that 263 proceedings cannot be taken recourse to only for the purpose of supplanting the view of the PCIT in place of the view taken by the AO during the course of proceedings simply on the ground that the alternate view would have levelled higher rate of taxation on the assessee or the alternate view taken by the PCIT seems to be more plausible view in the instant set of facts. The AO, in the instant set of facts had applied his mind to the issue under consideration and had taken a view, which in our view, was not a legally implausible view. Genuineness of 50% agricultural income - The second issue for consideration before us that the assessee had appealed against the order passed by AO before Ld. CIT(Appeals), who on consideration of material on hand had passed an order on the issue under consideration. Therefore, once the issue under consideration has already been adjudicated by the Ld. CIT(Appeals), then the question that arises for our consideration is whether the PCIT can again pass order under section 263 of the Act with respect to the taxability of the same agricultural income (although from a different perspective) and substitute his opinion by holding that the original assessment order was erroneous and prejudicial to the interests of the revenue. In our considered view, once the issue of taxability of agricultural income has been examined by the AO and also by the Ld. CIT(Appeals) in appellate proceedings, the PCIT is precluded from taxing the same agricultural income, albeit from a different perspective, since the subject income has already been taken into consideration by Ld. CIT(Appeals) in the appellate proceedings. ITAT Rajkot in the case of Parin Furniture Ltd. 2022 (7) TMI 957 - ITAT RAJKOT held that when an appeal is preferred by the assessee under section 250 of the Act for CIT Appeals is pending against order passed by the learned AO under section 147 of the Act, the same cannot be revised under section 263 of the Act. In view of the above observations, since the issues is in respect of which 263 proceedings were initiated and the order passed by the AO was held to be erroneous and prejudicial to the interest of revenue, have been adjudicated upon by Ld. CIT(Appeals) in appeal filed by the assessee under section 250 of the Act, then, the Principal CIT cannot proceed to simultaneously assume jurisdiction with respect to the same issues which have been considered before CIT(Appeals). - Decided in favour of assessee.
Issues Involved:
1. Validity of the order under Section 263 of the Income Tax Act, 1961. 2. Examination of agricultural income and expenses. Summary: Issue 1: Validity of the order under Section 263 of the Income Tax Act, 1961 The assessee contested the initiation and passing of the order under Section 263 by the Principal Commissioner of Income Tax (PCIT), Rajkot-1, which set aside the original assessment order under Section 143(3). The PCIT argued that the Assessing Officer (AO) erred in adding only 50% of the agricultural income as unexplained income, and should have treated the entire agricultural income as unexplained under Section 68 of the Act. The PCIT also contended that the AO should have disallowed the entire agricultural expenses since cotton was not grown. The Tribunal examined whether the AO had made adequate inquiries and applied his mind during the assessment proceedings. Citing various judicial precedents, including the Delhi High Court in CIT Vs. Sunbeam Auto and the Supreme Court in Principal Commissioner of Income-tax, Surat-2 v. Shreeji Prints (P.) Ltd., the Tribunal concluded that the AO had indeed conducted inquiries and taken a plausible view. Therefore, the order could not be deemed erroneous merely because the PCIT had a different opinion. Issue 2: Examination of agricultural income and expenses The Tribunal noted that the AO had examined the agricultural income and expenses during the assessment proceedings. The AO had treated 50% of the agricultural income as unaccounted and taxable under Section 68, after issuing notices and considering the relevant records. The Tribunal emphasized that the AO's decision was based on a reasonable inquiry and was not a case of lack of inquiry or non-application of mind. Furthermore, the Tribunal addressed whether the PCIT could re-examine the issue of agricultural income when it had already been adjudicated by the CIT(Appeals). Citing judicial precedents, such as Smt. Renuka Philip v. ITO and CIT v. Vam Resorts & Hotels (P.) Ltd, the Tribunal held that once the issue had been considered in appellate proceedings, the PCIT could not assume jurisdiction under Section 263 to re-tax the same income from a different perspective. Conclusion: The Tribunal set aside the order passed by the PCIT under Section 263, deeming it unsustainable. The appeal of the assessee was allowed, and the original assessment order was upheld. Order pronounced in the open court on 14-03-2023.
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