2023 (4) TMI 525 - AT - Income Tax

Revision u/s 263 - estimation of agricultural income derived by the assessee - i n respect of Tomato crop, the PCIT disputed estimation made by the AO only for the reason that the estimation made by the AO is higher than the estimation made by the assessee - HELD THAT - PCIT has not brought on record any cognizant reason and also explained how the assessment order passed by the AO on the issue of estimation of income from Tomato crop, is incorrect. In our considered view, when the AO has completed best judgment assessment in terms of provisions of section 144 of the Act, it is as good as the AO has applied his mind to relevant facts in right perspective of law and has taken a plausible view. The view taken by the AO may not be acceptable to the PCIT - unless view taken by the AO is unsustainable in law, it cannot be open to the PCIT to assume his jurisdiction and revise the assessment order. It is not a case of PCIT that the AO has not carried out necessary enquiries in the given facts and circumstances of the case, because as per available records, the AO has discussed at length in assessment order and also obtained certain details from the public domain including from National Horticultural Board and arrived at a conclusion that the probable yield of a particular crop grown by the assessee is approximately at particular quantity. Estimation made by the AO may not be accurate, but if the AO has applied a scientific method for estimation of income in the given facts and circumstances of the case and said estimation is based on certain reliable information available as per public domain, in our considered view, the PCIT cannot exercise his power conferred u/s. 263 of the Act, and set aside assessment order only on the ground that the estimation made by the AO on a particular crop is higher than the estimation made by the assessee. PCIT, has conveniently ignored other two crops, where estimation made by the assessee is more than the estimation made by the AO, whereas, questioned one crop where the estimation made by the AO is higher than the estimation made by the assessee. Thus assumption of jurisdiction by the PCIT is incorrect - Decided in favour of assessee.

Issues involved:
The legal judgment by Appellate Tribunal ITAT Chennai involved the following Issues:
1. Jurisdiction of Principal Commissioner under section 263 of the Income-tax Act, 1961.
2. Validity of revision order directing the Assessing Officer to frame the assessment afresh.
3. Time limitation for passing the revision order.
4. Requirement of error and prejudice causing revenue loss for assumption of jurisdiction.
5. Consideration of detailed discussion and findings in the assessment order.
6. Proper consideration of reply filed to the show cause notice.
7. Satisfaction of essential prerequisites for assumption of jurisdiction under section 263 of the Act.
8. Compliance with principles of natural justice in passing the order.

Details of the Judgment:

1. The appeal challenged the order passed by the Principal Commissioner of Income Tax under section 263 of the Act for the assessment year 2017-18. The assessee contended that the revision order was contrary to law, facts, and the circumstances of the case.

2. The Assessing Officer estimated agricultural income based on information from the National Horticultural Board. The Principal Commissioner of Income Tax (PCIT) initiated revision proceedings under section 263, alleging that the assessment order was erroneous and prejudicial to the revenue due to the higher yield estimation for tomatoes compared to the assessee's estimate.

3. The PCIT issued a show cause notice, questioning the AO's judgment on tomato yield. The assessee argued that the AO had applied best judgment assessment and considered relevant details. The PCIT set aside the assessment order concerning tomato yield, leading to the appeal.

4. The Tribunal observed that the AO had conducted necessary inquiries and estimated income based on available information. The PCIT's focus on the tomato crop yield discrepancy was deemed insufficient to declare the assessment order erroneous. The Tribunal held that unless the AO's view was unsustainable in law, the PCIT could not revise the order.

5. The Tribunal emphasized that the AO's application of a scientific method for estimation, even if not entirely accurate, was valid if based on reliable information. The PCIT's selective criticism of the tomato crop estimation while ignoring other crops' estimates was deemed unreasonable.

6. Ultimately, the Tribunal concluded that the assessment order was neither erroneous nor prejudicial to revenue interests. The PCIT's assumption of jurisdiction was deemed incorrect, leading to the quashing of the order under section 263 of the Act.

7. Consequently, the appeal filed by the assessee was allowed, and the order was pronounced in Chennai on 24th March 2023.

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