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2024 (8) TMI 1098 - AT - Income TaxRevision u/s 263 - as per CIT despite having information regarding accommodation entries no additions were made by the AO - HELD THAT - We have noted that the assessee provided detailed explanations and evidence to show that the transactions in question were conducted by M/s. Dee Are Products, a proprietorship firm of Divyaraj Madanlal Gupta and not by the assessee. Relevant documents, including ledger accounts, bank statements, and tax returns of M/s.Dee Are Products, were submitted to both the AO and the Ld.PCIT. PCIT, relying primarily on information available on the INSIGHT portal, concluded that there was ample evidence of transactions between the assessee and Sanjay Govindram Agrawal for accommodation entries, thus exercising jurisdiction under Section 263 - mere information on the Insight Portal cannot be considered as evidence based on which the Ld.PCIT assumed his jurisdiction especially when the assessee has explained that the transactions are not pertaining to the assessee company but pertains to another person. We note that the Ld.PCIT did not raise any query as to what enquiries were made by the Assessing Officer before proceeding to pass the assessment order in question. The opinion of the Ld.PCIT that the Assessing Officer had not made proper enquiries or verifications should be based on his objective satisfaction and not a subjective satisfaction from the assessment order. The reopening in this case was held on the basis of information received from Insight Portal, whereby, the AO asked the assessee to furnish the necessary details from time to time which were duly furnished by the assessee and after considering the same the Assessing Officer passed the assessment order. However, a perusal of the revision order passed by the Ld.PCIT shows that the Ld.PCIT has not pointed out any error or discrepancy in the explanations and details furnished by the assessee and without examining such evidence and without counter questioning the assessee on the relevant points and even without considering the submission of the assessee furnished in reply to the show-cause notice, the Ld.PCIT, in our view, was not justified in setting aside the order, simply stating that in his view more enquiries were needed to be carried out by the AO. The conditions necessary for invoking Section 263 of the Act, i.e., the order being erroneous and prejudicial to the interest of the revenue, are not satisfied in this case - Assessee appeal allowed.
Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act. 2. Erroneous and prejudicial assessment order. 3. Adequacy of inquiry by the Assessing Officer (AO). 4. Evidence of transactions involving the assessee and Sanjay Govindram Agrawal. 5. Reliance on information from the INSIGHT portal. Issue-wise Detailed Analysis: 1. Jurisdiction under Section 263 of the Income Tax Act: The primary issue addressed was whether the Principal Commissioner of Income Tax (Pr.CIT) was justified in invoking jurisdiction under Section 263 of the Act. The jurisdiction under this section can only be invoked if the order of the AO is found to be erroneous and prejudicial to the interests of the Revenue. The court noted that the Pr.CIT relied primarily on information available on the INSIGHT portal and concluded that there was ample evidence of transactions between the assessee and Sanjay Govindram Agrawal for accommodation entries. However, the court opined that mere information on the INSIGHT portal cannot be considered as evidence for assuming jurisdiction, especially when the assessee explained that the transactions pertained to another entity, M/s. Dee Are Products. 2. Erroneous and Prejudicial Assessment Order: The Pr.CIT held that the assessment order was erroneous and prejudicial to the interest of the revenue because the AO did not make any additions despite having specific information about accommodation entries. The court, however, found that the AO had made sufficient inquiries and verified the issue under consideration, and thus the assessment order was neither erroneous nor prejudicial to the interests of the Revenue. 3. Adequacy of Inquiry by the Assessing Officer (AO): The court examined whether the AO conducted adequate inquiries during the reassessment proceedings. The AO issued multiple notices under Section 142(1) of the Act, to which the assessee duly responded. The National Faceless Assessment Centre (NFAC) also requested relevant documents seized during the search. The court concluded that the AO conducted sufficient inquiries, formed an opinion based on the documents and explanations provided by the assessee, which included detailed evidence of transactions involving M/s. Dee Are Products. 4. Evidence of Transactions Involving the Assessee and Sanjay Govindram Agrawal: The court noted that the assessee provided detailed explanations and evidence showing that the transactions in question were conducted by M/s. Dee Are Products, a proprietorship firm of Divyaraj Madanlal Gupta, and not by the assessee. Relevant documents, including ledger accounts, bank statements, and tax returns of M/s. Dee Are Products, were submitted to both the AO and the Pr.CIT. The Pr.CIT did not refute this evidence with any concrete findings. 5. Reliance on Information from the INSIGHT Portal: The Pr.CIT relied on information available on the INSIGHT portal to conclude that there was ample evidence of transactions between the assessee and Sanjay Govindram Agrawal for accommodation entries. The court opined that reliance solely on the INSIGHT portal without further investigation does not meet the threshold required to invoke Section 263 of the Act. The court emphasized that the Pr.CIT's role is not to substitute his judgment for that of the AO but to identify clear errors that are prejudicial to the revenue's interests. Conclusion: The court set aside the order of the Pr.CIT invoking Section 263 of the Act and upheld the reassessment order passed by the AO under Section 147 read with Section 144B of the Act. The appeal filed by the Assessee was allowed. The judgment emphasized that the conditions necessary for invoking Section 263 of the Act, i.e., the order being erroneous and prejudicial to the interest of the revenue, were not satisfied in this case. The assessee provided substantial evidence to demonstrate that the transactions in question were not conducted by the assessee but by M/s. Dee Are Products. The Pr.CIT did not refute this evidence with any concrete findings.
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