2024 (12) TMI 865 - HC - Income Tax

Validity of Revision u/s 263 - excess claim of exemption of dividend income and that of unsecured loans - Tribunal was of the opinion that after undertaking an exhaustive exercise, AO reached to the conclusion that no adverse inference against the assessee can be drawn with regard to any of the issues examined by him - HELD THAT - Once the Tribunal on thorough scrutiny of the record has come to the conclusion that the reasons recorded by the PCIT based on Explanation 2 to Section 263 pertaining to failure of the AO in making inquiries or verification was without any basis and contrary to the record and has allowed the appeal on finding that the order passed by the PCIT was without jurisdiction, in relation to which learned counsel for the appellants failed to point out any perversity, we do not find that the facts of the present case give rise to any substantial question of law as suggested by counsel for the appellants. The appeal has no substance. The same is, therefore, dismissed.

Summary

Issues:
Appeal against order under Section 260A of the Income Tax Act, 1961 regarding Assessment Year 2017-18.

Analysis:
The respondent-assessee, engaged in trading shares and securities, filed its return for AY 2017-18, selected for scrutiny due to excess claim of exemption of dividend income and increase in unsecured loans. The AO accepted the returned income after detailed examination and issued the assessment order under Section 143(3) of the Act. The PCIT found the assessment order erroneous and prejudicial to revenue, invoking powers under Section 263, directing the AO to conduct specific inquiries. The Tribunal, after hearing, concluded that the AO's order was not erroneous or prejudicial, quashing the PCIT's order.

The appellant argued that the PCIT observed the assessment order lacked inquiries or verifications, falling under Explanation 2 of Section 263(1), raising substantial questions of law. The respondent contended that the assessment was done diligently under Section 143(3), with detailed questionnaires and evidence. The Tribunal found the AO conducted thorough inquiries and verifications, reaching valid conclusions on the issues raised.

The PCIT's order under Section 263 cited lack of required inquiries and verifications by the AO, triggering jurisdiction under the Act. The Tribunal noted the AO issued multiple notices and questionnaires, with detailed responses from the assessee, totaling about 300 pages. The Tribunal found the AO's conclusions well-founded based on documentary evidence provided by the assessee.

After detailed scrutiny, the Tribunal concluded that the PCIT's reasons for invoking Section 263 were baseless, as the AO had diligently conducted inquiries and verifications. The Tribunal dismissed the appeal, finding no substantial question of law raised by the appellant's counsel. The judgment upheld the Tribunal's decision, emphasizing the lack of merit in the appeal and dismissing it accordingly.