2021 (2) TMI 125 - AT - Income Tax

Revision u/s 263 - long term borrowings and other current liabilities which were not verified by the ld.AO while completing the assessment proceedings - Non-verification of the said details and non-enquiry thereon had caused prejudice to the interests of the revenue and also making the order of the ld. AO erroneous in the mind of the ld. PCIT - HELD THAT - Assessee had filed three undated replies before the ld.AO wherein in one of the replies the assessee had specifically furnished the entire details of long term borrowings along with confirmation of accounts ITR acknowledgement and balance sheet of loan creditors and in yet another reply it had also furnished the details of other current liabilities together with confirmation from parties ITR acknowledgements and balance sheet of the creditors. Assessee had furnished yet another reply before the ld.AO wherein specifically it had furnished the details of other current liabilities details of long term borrowings details of non-current investments details of loans and advances and details of other current assets. We are unable to persuade ourselves to accept to the finding recorded by the ld. PCIT that no enquiries per se were carried out by the ld. AO with regard to long term borrowings and other current liabilities in the scrutiny assessment proceedings - aforesaid details of long term borrowings and other current liabilities were admittedly filed before the ld. AO during the course of assessment proceedings and the ld. AO on examination of the same had arrived at the right conclusion that those liabilities are indeed genuine and had accordingly resorted not to make any addition thereon. Merely because there is no discussion in the assessment order regarding a particular item enquired by the ld. AO it does not make the order of the ld. AO erroneous. AO could be expected to address only those issues on which he is not in agreement with the submissions / claims made by the assessee in the return of income. Hence only disputed issue is the subject matter of discussions in the assessment order. We hold that the ld. AO is not required to write a thesis and record his finding in the assessment order on the aspects which he is accepting. What is required for the purpose of initiation of Section 263 proceedings is that whether due enquiries were indeed carried out by the ld. AO on a particular issue. The law is very well settled that the revisionary jurisdiction u/s.263 of the Act could be initiated by the PCIT only for lack of enquiry on the part of the ld. AO and not for inadequate enquiry. We find from the perusal of the entire order of the ld. PCIT that the ld. PCIT had alleged that the ld. AO had not made any enquiry at all on the issue of long term borrowings and other current liabilities. It is not the case of the PCIT that the ld. AO had indeed made enquiries but he had not made requisite entries thereon. Hence in our considered opinion the ld. PCIT grossly erred in invoking revisionary jurisdiction which is against the settled legal principles and more so in the facts and circumstances of the instant case. CIT had recorded finding that assessee had furnished all those details pertaining to long term borrowings and other current liabilities on 19/04/2018 which we find is factually incorrect. On one hand in para 3 the ld. PCIT says that assessee has furnished three undated letters before the ld. AO which admittedly contained the details of long term borrowings and other current liabilities as stated supra. But in para 4 the same PCIT says that the same details were furnished before the ld. AO only on 19/04/2018. From the perusal of the paper book we find that the letter dated 19/04/2018 filed before the ld. AO was only in respect of penalty proceedings initiated by the ld. AO u/s.271(1)(c) of the Act giving reply to show-cause notice u/s. 274 r.w.s. 271(1)(c) of the Act and also requesting the ld. AO to adjust the refund available in assessee s case towards demand arising for A.Y.2015-16. Hence it could be safely concluded that the ld. PCIT had invoked revisionary jurisdiction in the instant case by incorrect assumption of fact which is not permissible in law. - Decided in favour of assessee.

Summary

Issues Involved:
1. Justification of invoking revisionary jurisdiction under Section 263 of the Income Tax Act by the Principal Commissioner of Income Tax (PCIT).

Detailed Analysis:

Issue 1: Justification of invoking revisionary jurisdiction under Section 263 of the Income Tax Act by the Principal Commissioner of Income Tax (PCIT)

The appeal concerns whether the PCIT was justified in invoking revisionary jurisdiction under Section 263 of the Income Tax Act for the assessment year 2015-16. The assessee, a non-banking financial company, filed its return of income on 31/10/2015 declaring a total income of ?65,330. The assessment was completed under Section 143(3) on 15/12/2017, determining the total income at ?5,98,08,120. The PCIT invoked Section 263 on the grounds that the Assessing Officer (AO) did not verify long-term borrowings of ?8,62,57,029 and other current liabilities of ?86,30,91,880, causing prejudice to the revenue.

The tribunal, upon hearing submissions and reviewing the records, found that the AO had indeed conducted enquiries regarding the long-term borrowings and other current liabilities during the scrutiny assessment proceedings. The AO issued a notice under Section 142(1) on 27/11/2017, specifically asking for details of loans and liabilities, which the assessee provided through multiple replies, including confirmations, ITR acknowledgements, and balance sheets. These details were acknowledged by the PCIT in the revision order.

The tribunal emphasized that merely because the assessment order did not discuss these items, it does not imply that the AO did not apply his mind. It is settled law that the AO is not required to document every accepted item in the assessment order. The tribunal cited the case of CIT vs. Nirav Modi, where it was held that if the AO raises queries and the assessee responds, the absence of discussion in the assessment order does not mean the AO did not consider the issues. The tribunal also referenced the Supreme Court's dismissal of a Special Leave Petition against this judgment, reinforcing its validity.

The tribunal found the PCIT's claim that no enquiries were made by the AO to be factually incorrect. The PCIT's assertion that details were furnished only on 19/04/2018 was also incorrect, as the records showed that the details were provided during the assessment proceedings. The tribunal concluded that the PCIT invoked revisionary jurisdiction based on an incorrect assumption of fact, which is not permissible.

In conclusion, the tribunal held that the PCIT erred in invoking revisionary jurisdiction under Section 263, and thus, the order was quashed. The appeal of the assessee was allowed, and the decision was pronounced on 21/12/2020.