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2024 (12) TMI 805 - AT - Income TaxRevision u/s 263 - Addition of additional income as per provisions of section 115BBE - HELD THAT - As evident from the record that the internal audit party raised and audit objections to the levy of the tax in the case of the assessee. AO made a proposal before ld. PCIT to initiate the provisions of section 263 to charge that additional income as per provisions of section 115BBE of the Act. This shows that proposal has been sent by the AO to review of order passed by him, though a proposal sent by the AO - PCIT has invoked the provisions of section 263 based on that proposal so submitted by the ld. AO. As is evident that review of an order passed is not permitted and are bad in law. We get support of this view from the decision so cited by the assessee in the case of Jain Carrying Corporation v. PCIT 2024 (3) TMI 945 - ITAT JODHPUR since the ld. PCIT based on the borrowed information and has not established as to how the view taken by the ld. AO is not correct when the issue raised has already been form part of the proceeding before the ld. AO. Based on the discussion so recorded we are of the considered view that the proceeding initiated u/s. 263 is merely based on the audit objection, PCIT is not agreement with the ld. AO and the observation on the stock, in the audit reportal ready filed by the assessee. Thus, there is clear absence of his satisfaction and there is no independent view of the ld. PCIT even on merits thus, the assessee which has been completed there cannot be the second inning to the revenue without justifying the twin condition to the order passed by the AO. We quash the order passed by ld. PCIT u/s 263 of the Act. Appeal of the assessee is allowed.
Issues Involved:
1. Whether the order passed under Section 143(3) was erroneous and prejudicial to the interest of the revenue. 2. Applicability of Section 69A and Section 115BBE for taxing undisclosed income. 3. Legitimacy of invoking Section 263 based on audit objections. 4. Whether the Principal Commissioner of Income Tax (PCIT) exercised independent judgment in invoking Section 263. Detailed Analysis: 1. Erroneous and Prejudicial Order under Section 143(3): The primary issue was whether the assessment order passed under Section 143(3) was erroneous and prejudicial to the interest of the revenue. The PCIT held that the Assessing Officer (AO) failed to apply the provisions of Section 69A and Section 115BBE for taxing the undisclosed income of Rs. 40,00,000, which was admitted during the survey but taxed at normal rates. The PCIT deemed this as a failure to apply the mind to relevant material and an incorrect application of law, thereby justifying the revision under Section 263. The Tribunal, however, found that the AO had taken a plausible view, and merely because the PCIT disagreed with this view did not render the order erroneous or prejudicial to the revenue. 2. Applicability of Section 69A and Section 115BBE: The PCIT argued that the undisclosed income should have been taxed under Section 69A, read with Section 115BBE, which imposes a higher tax rate. The assessee contended that the income was declared during the survey and was treated as regular income, not falling under the purview of Section 69A. The Tribunal noted that the AO had accepted the return after scrutiny and the PCIT's attempt to reclassify the income under Section 69A was a mere change of opinion, which does not justify revision under Section 263. 3. Legitimacy of Invoking Section 263 Based on Audit Objections: The Tribunal examined whether the initiation of Section 263 proceedings based on audit objections was legitimate. The assessee argued that the PCIT's action was based on audit objections, lacking independent judgment. The Tribunal supported this view, citing precedents where reliance solely on audit objections without independent examination was deemed improper for invoking Section 263. The Tribunal quashed the PCIT's order, emphasizing that audit objections alone cannot form the basis for revision. 4. Independent Judgment by PCIT: The Tribunal assessed whether the PCIT exercised independent judgment in invoking Section 263. It was found that the PCIT's decision was primarily influenced by audit objections, lacking independent evaluation of the AO's order. The Tribunal highlighted that the PCIT must demonstrate how the AO's order was erroneous and prejudicial to the revenue, which was not established in this case. The Tribunal concluded that the PCIT's reliance on borrowed satisfaction from audit objections was insufficient for invoking Section 263. Conclusion: The Tribunal quashed the order passed by the PCIT under Section 263, allowing the appeal of the assessee. It was determined that the AO had taken a plausible view, and the PCIT's action was based on audit objections without independent application of mind. The Tribunal reiterated that mere disagreement with the AO's view does not justify revision under Section 263 unless both conditions of the order being erroneous and prejudicial to the revenue are satisfied.
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