2023 (1) TMI 1394 - AT - Income Tax

Revision u/s 263 - unaccounted investment in the three properties should be brought to tax and the assessment order should be revised - HELD THAT - A perusal of the questions put by the Inv. Wing during the course of search reveals that the partners have admitted the cash amount paid for the purchase of the properties as their undisclosed income and offered the same to tax. AO in the assessment order has considered the cheque amount paid and the registration expenses in the hands of the firm whereas he has not brought to tax the cash portion in the hands of the partnership firm but added the same as undisclosed income in the hands of the partners, a fact not disputed by the PCIT in the order passed u/s 263. Once the cash amount is brought to tax in the hands of the partners as per their admission before the Investigation Wing at the time of search, the same should not have been brought to tax in the hands of the firm because that would have amounted to double taxation. Therefore, the view taken by the AO in the instant case cannot be said to be not a possible view or that a view which cannot be said to be unsustainable in law. When the AO has taken a possible view, merely because the PCIT does not agree with the view taken by the AO, he cannot invoke the jurisdiction u/s 263. Once the AO has brought to tax the amounts as per the sale deeds in A.Y 2015-16 2016-17 in the hands of the assessee firm, a fact brought on record by the PCIT himself, therefore, we are of the considered opinion that the PCIT was not justified in invoking the jurisdiction u/s 263 - we set aside the order of the PCIT and the grounds raised by the assessee are allowed.

Summary

Issues Involved:
1. Validity of the order passed under Section 263 of the Income Tax Act, 1961.
2. Examination of the unaccounted investment in properties.
3. Double taxation concerns.
4. Jurisdictional validity of the Principal Commissioner of Income Tax (PCIT) to invoke Section 263.

Detailed Analysis:

1. Validity of the Order Passed Under Section 263:
The appeal filed by the assessee challenges the order dated 16.03.2022 passed under Section 263 of the I.T. Act, 1961, by the learned PCIT (Central) Hyderabad for the Assessment Year (A.Y.) 2014-15. The PCIT initiated proceedings under Section 263, asserting that the assessment order dated 12.12.2019 was erroneous and prejudicial to the interest of the Revenue as it failed to bring to tax the unaccounted investment in three properties purchased in the name of the assessee firm. The assessee contended that the PCIT's order was invalid as it did not satisfy the twin conditions of being erroneous and prejudicial to the interest of the Revenue.

2. Examination of the Unaccounted Investment in Properties:
The PCIT noted that the assessee purchased three properties for substantial amounts, primarily paid in cash, which were unaccounted for. The partner, in his statement recorded under Section 132(4) during a search, admitted that the payments were unaccounted and offered the same as undisclosed income for A.Y. 2014-15. However, the Assessing Officer (AO) did not bring this unaccounted investment to tax in the assessment order, leading the PCIT to issue a show-cause notice under Section 263.

The assessee objected, arguing that the sale deeds were already taxed in A.Y. 2014-15 in the hands of the partner and in subsequent years in the hands of the firm. The PCIT, however, found the AO's view patently wrong, noting that the entire consideration for the properties was paid on or before 11.02.2014, falling in A.Y. 2014-15, and should be taxed in that year.

3. Double Taxation Concerns:
The assessee argued that taxing the same income in multiple years would lead to double taxation, which is not permissible. The AO had already taxed the amounts paid in cash for the properties in the respective years of registration, and the partners had admitted and were taxed on the unaccounted income in their individual returns. The Tribunal found that the AO's view of taxing the amounts in the hands of the partners and in the years of registration was a possible view, and taxing the same income again in the hands of the firm would result in double taxation.

4. Jurisdictional Validity of the PCIT to Invoke Section 263:
The assessee contended that the PCIT could not invoke Section 263 after dropping the initial proceedings. The Tribunal noted that the AO had taken a possible view after thorough examination, and the PCIT's action amounted to a mere change of opinion, which is not permissible under Section 263. The Tribunal relied on various judicial precedents, including the Hon'ble Supreme Court and High Court decisions, which held that when the AO has taken one of the possible views, the order cannot be said to be erroneous or prejudicial to the interest of the Revenue.

Conclusion:
The Tribunal concluded that the PCIT was not justified in invoking jurisdiction under Section 263, as the AO had taken a possible view, and the order was neither erroneous nor prejudicial to the interest of the Revenue. The Tribunal set aside the PCIT's order and allowed the appeal filed by the assessee. The decision emphasized that double taxation should be avoided, and the tax rate uniformity in the present and subsequent years rendered the dispute academic.