2024 (12) TMI 499 - AT - Income Tax

Revision u/s 263 - AO s order is contrary to the provisions of section 56(2)(vii)(b) - HELD THAT - AO, in the present case, after issuing notice seeking explanation from the assessee and examining all the details such as bank statement, source of income, etc., made addition. Therefore, it cannot be said that the order passed by the AO is erroneous. We have also gone through the contents of the Paper Book filed by the assessee and we find that the assessee has filed all the details before the AO particularly which show that the assessee has discussed all the necessary facts before the AO. After considering the entire record, the AO has come to an opinion that there is escapement of income and accordingly, he taxed the assessee. We are of the opinion that it is not a fit case of invoking attaining jurisdiction u/s 263 of the Act by the learned PCIT. Thus, the order passed by the PCIT is hereby quashed. Appeal filed by the assessee is allowed.

Summary

Issues:
Appeal against order passed by Principal Commissioner of Income Tax under section 263 for assessment year 2016-17.

Analysis:
The appeal was filed by the assessee against the order passed by the Principal Commissioner of Income Tax, National Faceless Appeal Centre, Delhi, under section 263 for the assessment year 2016-17. The assessee raised several grounds challenging the legality and validity of the order passed under section 263. The facts of the case revealed that the assessment was re-opened under section 147 of the Income Tax Act as the assessee had not initially filed the return of income. The Assessing Officer found discrepancies in the assessee's disclosure regarding the purchase of an immovable property. The assessment was completed by the National Faceless Assessment Centre (NaFAC) under section 147 r/w section 144B of the Act, making an addition on account of unexplained investment. However, the Principal Commissioner of Income Tax found the assessment order erroneous and prejudicial to the interest of revenue as the source of investment in the property was not adequately verified. The Principal Commissioner set aside the assessment for fresh adjudication by the Assessing Officer. The assessee objected to the revision proceedings initiated under section 263, citing various reasons and legal precedents to support their contentions. The Principal Commissioner, after considering the submissions, directed a fresh assessment focusing on income from other sources, cash payment for property purchase, and the source of investment in the property. The Tribunal, after hearing both parties, concluded that the Assessing Officer had examined all necessary details before making the addition, and hence, the order passed under section 263 was quashed, allowing the appeal filed by the assessee.

This case highlights the importance of thorough examination and verification of facts by the Assessing Officer before making additions in assessments. The Principal Commissioner's power under section 263 to revise orders that are erroneous and prejudicial to revenue was exercised in this instance due to inadequate verification of the source of investment in the property purchase. The assessee's objections and submissions were considered during the revision proceedings, emphasizing the need for proper documentation and legal support to challenge assessment orders. The Tribunal's decision to quash the Principal Commissioner's order underscores the significance of providing all necessary details and explanations during assessment proceedings to avoid revision under section 263. The case serves as a reminder of the procedural and substantive requirements in income tax assessments and revisions, ensuring fair and accurate determination of tax liabilities.