2024 (10) TMI 169 - AT - Income Tax

Revision u/s 263 - AO passed the order u/s. 147 r.w.s. 144B - PCIT rejected the contentions of the assessee stating that details noted in incriminating documents i.e. excel sheet had proper details of KBG units such as number of unit, selling price of land, construction cost, amount received were matching with the unit of the assessee and the NODPL, on the basis of seized documents, accepted the receipt of On Money before the Settlement Commission and paid due taxes on it. HELD THAT - It is well-settled law that for invoking Section 263 PCIT must demonstrate that the order passed by the AO was erroneous and prejudicial to the interests of the Revenue. The primary reason cited by the PCIT for invoking Section 263 is that the AO did not sufficiently inquire into the alleged on-money payments. As evident from the assessment records that the AO had conducted an inquiry into the assessee s property purchase. Assessee provided documentary evidence, including the sale deed, bank account statements, and payment confirmations, which were duly examined by the AO. Assessee's name does not appear in the incriminating documents, and the AO did not question the explanation that the unit was purchased by the assessee's parents, and her name was added only for inheritance purposes. AO had accepted a large sum of unexplained cash deposits without any inquiry and the PCIT held that the entire amount should have been taxed, particularly in the absence of plausible explanations. In that case it was noted that the assessee made contradictory submissions-first, claiming the deposits did not belong to him, and second, stating that they were related to his business. AO accepted the latter without sufficient inquiry into either of these explanations. In contrast, the present case involves a detailed inquiry conducted by the AO into the property purchase, supported by documentary evidence, including the sale deed, bank statements, and confirmations from the developer. Assessee consistently denied making any on-money payments, and the AO found no direct evidence implicating the assessee. Therefore, unlike in the case of Prakashbhai Ishwarbhai Changela 2024 (4) TMI 1185 - ITAT RAJKOT the AO s assessment in the present case was based on a proper examination of all relevant facts and documents, and there were no contradictory explanations that warranted further inquiry. The facts of the present case are more akin to the decision in Divyesh Bhupendra Desai 2024 (10) TMI 77 - ITAT AHMEDABAD where the Tribunal held that when the AO has taken a plausible view based on inquiry and material on record, the invocation of Section 263 of the Act is unwarranted. Thus, the principles established by the judicial precedents, we find that the PCIT s order u/s 263 is unjustified. AO's original assessment was based on a proper examination of the relevant material, and there is no error or prejudice to the interests of the Revenue. Allow the appeals of the assessee.

Summary

Issues Involved:
1. Validity of the reopening of assessment under Section 147/148 of the Income Tax Act.
2. Adequacy of inquiry conducted by the Assessing Officer (AO).
3. Justification for invoking Section 263 by the Principal Commissioner of Income Tax (PCIT).

Issue-wise Detailed Analysis:

1. Validity of the reopening of assessment under Section 147/148 of the Income Tax Act:
The reopening of the assessment for AY 2015-16 and AY 2017-18 was based on allegations of "on-money" payments made by the assessee for the purchase of a property in the Kalhaar Blues and Greens (KBG) Project. This information came from a report by the Investigation Wing, which indicated that the builder, Navratna Organizers and Developers Pvt. Ltd. (NODPL), admitted to receiving cash payments for villas. The assessee contended that the entire consideration was fully disclosed in the Sale Deed and denied making any payments beyond what was declared. Despite repeated requests, the AO failed to provide the actual copy of the reasons recorded for reopening the assessment.

2. Adequacy of inquiry conducted by the Assessing Officer (AO):
The AO conducted a detailed inquiry during the reassessment proceedings. The assessee provided documentary evidence, including the sale deed, bank account statements, and payment confirmations. The AO examined these documents and found no direct evidence implicating the assessee in making "on-money" payments. The assessee's name did not appear in the incriminating documents, and the AO did not question the explanation that the unit was purchased by the assessee's parents, with her name added only for inheritance purposes. The assessee also highlighted discrepancies in the excel sheet cited by the Department and labeled it a "dumb document."

3. Justification for invoking Section 263 by the Principal Commissioner of Income Tax (PCIT):
The PCIT invoked Section 263, stating that the AO did not sufficiently inquire into the alleged "on-money" payments. However, it was evident from the assessment records that the AO had conducted an inquiry into the assessee's property purchase. The PCIT's reliance on the excel sheet found during a search in the premises of a third party was deemed insufficient. The Tribunal noted that the excel sheet lacked corroborative material or signatures, making it unreliable. The Tribunal also referred to judicial precedents, including the decision in Divyesh Bhupendra Desai Vs. PCIT, where it was held that when the AO has taken a plausible view based on inquiry and material on record, the invocation of Section 263 is unwarranted.

Conclusion:
The Tribunal found that the PCIT's order under Section 263 was unjustified. The AO's original assessment was based on a proper examination of the relevant material, and there was no error or prejudice to the interests of the Revenue. Accordingly, the Tribunal quashed the orders passed by the PCIT for both Assessment Years 2015-16 and 2017-18 and allowed the appeals of the assessee.

Judgment:
Both appeals of the assessee, ITA Nos. 775/Ahd/2024 and 776/Ahd/2024, were allowed, and the orders passed by the PCIT were quashed. The judgment was pronounced in the Open Court on 10th September 2024 at Ahmedabad.