2021 (7) TMI 568 - AT - Income Tax

Revision u/s 263 - AO has passed the assessment order without making enquiries or verification - HELD THAT - This is not a case where the AO has passed the assessment order without any enquiry, but the AO has taken one of the possible views taking into consideration the facts and circumstances of the case and the submissions made in the light of the cases relied upon by the assessee. As department has accepted the return of the assessee in the assessment years 2011-12 and 2012 -13 in which the similar issues were involved. The assessee has demonstrated the same by furnishing copies of computations and assessment orders passed u/s 143(3) of the Act. Further, the assessee has also placed on record the copy of notice issued by the AO u/s 142 of the Act issued during the assessment proceedings for the assessment year 2018-19, copy of reply to the said notice and the copy of assessment order passed by the AO u/s 143(3) read with sections 143(3A) 143(3B) of the Act for the assessment year 2018-19 to demonstrate the consistent stand of the revenue in the previous years and the subsequent year. Perusal of the said documents reveal that the department has accepted the plea of the assessee in the assessment years 2011-12, 2012-13 and 2018-19. The Ld. PCIT has not pointed out any material change in the facts of the present case. Claim of deduction u/s 54B 54F - As per the decision of Mahendra Rajnikant Zaveri 2018 (1) TMI 182 - ITAT JAIPUR in the light of the CBDT Circular No 791 dated 02. 06. 2000 and taking into consideration the impossibility of the assessee being able to invest the amount, has held that the period of 6 months for the purposes of investment in specified assets must be reckoned from the date of receipt of consideration. So, we are of the considered view that since the AO had taken a possible view after hearing the assessee in the light of the cases relied upon by the assessee, the Ld. PCIT has wrongly exercise the jurisdiction u/s 263 of the Act and set aside the assessment order. As per the settled law u/s 263 of the Act, the CIT has power to examine an assessment order to ascertain as to whether it is erroneous and prejudicial to the interest of the revenue. Section 263 of the Act does not confer jurisdiction to rectify each and every mistake in the assessment order. Therefore, the assessment order can be revised only where the order is erroneous as well as prejudicial to the interest of the revenue and not for rectification of mistakes in the order. In the present case, since the AO had passed the assessment order after making enquiries and had taken a possible view consistent with the stand of the department in assessee s own cases for the preceding assessment years 2012- 13 and 2011-12 and subsequent assessment year 2018-19, the Ld. PCIT has wrongly invoked the jurisdiction u/ s 263. Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Validity of the assessment order passed under section 143(3) of the Income Tax Act, 1961.
2. Justification for invoking section 263 by the Principal Commissioner of Income Tax (PCIT).
3. Examination of deductions claimed under sections 54B and 54F of the Income Tax Act.
4. Principle of consistency in assessment orders across different assessment years.
5. Applicability and interpretation of Explanation 2 to section 263 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of the Assessment Order Passed Under Section 143(3):
The assessee filed a return declaring taxable income under various heads. The return was processed under section 143(1), and the case was selected for scrutiny. The Assessing Officer (AO) issued notices under sections 143(2) and 142(1), and after examining the documents and details furnished by the assessee, passed the assessment order under section 143(3). The PCIT, however, cancelled this order, claiming it was erroneous and prejudicial to the interest of the revenue due to lack of proper enquiry.

2. Justification for Invoking Section 263 by the PCIT:
The PCIT issued a notice under section 263, directing the assessee to show cause why the assessment should not be cancelled. The grounds included the AO's acceptance of deductions under sections 54B and 54F without proper enquiry and discrepancies in contract receipts as per Form 26AS. The assessee contended that the deductions were justified and that the contract receipts were duly reflected in the profit and loss account. Despite this, the PCIT cancelled the assessment, directing the AO to reframe the order after proper enquiry.

3. Examination of Deductions Claimed Under Sections 54B and 54F:
The assessee claimed deductions under sections 54B and 54F related to the sale of agricultural land and subsequent investments. The AO had queried the assessee regarding immovable assets and accepted the claims after verification. The assessee argued that similar claims had been accepted in previous years (2011-12 and 2012-13) and the subsequent year (2018-19), demonstrating consistency in the department's stand. The Tribunal noted that the AO had taken a possible view based on the facts and circumstances, and the PCIT's action was not justified.

4. Principle of Consistency in Assessment Orders:
The assessee highlighted that the department had accepted similar claims in previous and subsequent assessment years. The Tribunal referred to the Delhi High Court's judgment in CIT vs. M/s Escorts Ltd., emphasizing the principle of consistency. The court ruled that the CIT should not deviate from a consistent approach without special circumstances. The Tribunal found that the PCIT did not consider the consistent stand of the department in earlier years, making the revision under section 263 unjustified.

5. Applicability and Interpretation of Explanation 2 to Section 263:
The PCIT invoked Explanation 2 to section 263, claiming the AO had not conducted necessary enquiries. However, the Tribunal referred to the Delhi Bench's decision in Brahma Centre Development Pvt. Ltd., which held that Explanation 2 is prospective and not applicable to the present case. The Tribunal concluded that the AO had conducted sufficient enquiries and taken a possible view, and the PCIT's invocation of section 263 was incorrect.

Conclusion:
The Tribunal allowed the assessee's appeal, setting aside the PCIT's order. It held that the AO had conducted necessary enquiries and taken a possible view consistent with previous assessment years. The PCIT's action under section 263 was deemed unjustified, and the assessment order passed by the AO was upheld. The appeal of the assessee was allowed, and the PCIT's order was set aside.