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2021 (3) TMI 73 - AT - Income TaxRevision u/s 263 - CIT observed that, AO had accepted the assessee's claim without making any verification with respect to the various expenses claimed against the capital gains and against its business income and since the same needed verification, the order passed by the Assessing Officer was, therefore, erroneous - HELD THAT - The basis for holding the assessment order erroneous by the Ld. PCIT, we find is that the details, evidences and explanation filed by the assessee in support of its claim of capital gains and business loss returned were accepted as such by the AO without conducting any inquiry and or verification. The entire thrust of the Ld. Pr.CIT is on this aspect of non-verification of the evidences, details and explanations filed by the assessee as is evident from the findings of the Ld. Pr.CIT. AO can be satisfied about the veracity and genuineness of the transaction basis the supporting documentary evidences and explanations filed with respect to the same. But at the same time if the evidences and documents raise suspicion then a case for further verification is compulsorily made out and the absence of the same surely makes the order erroneous so as to cause prejudice to the Revenue. But in the present case, sadly the Ld. Pr.CIT has failed to make out a case for further verification of the details and explanations filed by the assessee. Undisputedly the AO had examined the claim of capital gains and business losses returned by the assessee, during assessment proceedings. Even with regard to the issues flagged by the Ld. Pr.CIT, the AO had examined the same with the evidences, details and explanations filed by the assessee. There is no dispute with regard to the aforesaid. Even before the Ld. Pr.CIT the assessee had referred to the said evidences and explained the queries raised by the Ld. Pr.CIT. Without pointing out fallacy in the same so as to raise doubt regarding the veracity of the claim, thus calling for further verification, we cannot agree with the findings of the Ld. Pr.CIT that the issues required further verification and the absence of the same resulted in the assessment order so passed being erroneous. The order of the Ld. Pr.CIT, in the impugned case, falls grievously short of this requirement of pointing out the absence of enquiry which should have been made in the present case. And therefore, we hold, that there is no finding by the Ld. Pr.CIT of the assessment order being erroneous. The jurisdiction assumed by the Ld. Pr.CIT, therefore u/s. 263 of the Act for revising the assessment order therefore, is, we hold, not as per law and the order so passed by the Ld. Pr.CIT is accordingly set aside. - Decided in favour of assessee.
Issues Involved:
1. Exercise of revisionary powers under Section 263 of the Income Tax Act, 1961. 2. Alleged lack of enquiry by the Assessing Officer (AO) on the assessee's claims of Long Term Capital Gains and business losses. 3. Specific discrepancies in the expenses claimed by the assessee. 4. Justification and verification of various expenses claimed by the assessee. Issue-wise Detailed Analysis: 1. Exercise of Revisionary Powers under Section 263 of the Income Tax Act, 1961: The appeal was filed by the assessee against the order dated 12.3.2020 passed by the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, 1961. The PCIT assumed revisionary powers to revise the order of the Assessing Officer (AO) on the grounds that the AO had accepted the assessee's claims without proper enquiries and application of mind. The PCIT issued a notice to the assessee pointing out errors in the claims of Long Term Capital Gains and business losses. 2. Alleged Lack of Enquiry by the Assessing Officer (AO): The assessee contended that the AO had examined the issues during the assessment proceedings and had been satisfied with the details and evidences provided. The PCIT, however, held that the AO had accepted the assessee's claims without making any verification of the expenses claimed against the capital gains and business income, rendering the AO's order erroneous. 3. Specific Discrepancies in the Expenses Claimed by the Assessee: The PCIT noted several discrepancies in the expenses claimed by the assessee, including: - A bill from Mayank Gupta for repair expenses on a property listed as vacant land. - Two commission bills, one unsigned and appearing to be from the same party who issued the repair bill. - Lack of enquiry by the AO into the genuineness of these expenses. - Adjustment of capital gains against business loss without proper verification. 4. Justification and Verification of Various Expenses Claimed by the Assessee: The assessee provided detailed responses to each query raised by the PCIT, justifying the expenses claimed. These included: - Commission and brokerage expenses related to the sale of property. - Repair and maintenance expenses, including those for a closed factory. - Survey expenses for market research. - Professional and legal expenses for ongoing litigations. - Miscellaneous expenses, including the purchase of books and salary to security services. - Travelling expenses for business purposes. The assessee argued that the AO had conducted proper enquiries and had been satisfied with the explanations provided. The PCIT, however, did not address these responses in detail and held that the submissions needed further verification. Tribunal's Findings: The Tribunal examined the order of the PCIT and the documents submitted by the assessee. It found that the PCIT's basis for holding the assessment order erroneous was the alleged lack of verification by the AO. However, the Tribunal noted that the AO had examined the claims and had been satisfied with the evidences provided. The Tribunal held that the PCIT did not provide specific reasons for the need for further verification and failed to point out the absence of enquiries that should have been made. Conclusion: The Tribunal concluded that the PCIT's order did not meet the requirement of pointing out the absence of necessary enquiries and, therefore, the jurisdiction assumed by the PCIT under Section 263 was not as per law. The Tribunal set aside the PCIT's order and allowed the appeal of the assessee. The order was pronounced on 22.02.2021.
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