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2022 (3) TMI 1343 - AT - Income TaxRevision u/s 263 by CIT - Bogus purchases - HELD THAT - When the assessment order which was subject matter of section 263 of the Act was passed after discreet enquiry and applying its mind the same cannot be revised under section 263 of the Act. Since order passed by the Ld. PCIT does not fulfill the condition laid down under section 263 of the Act the same is not sustainable in the eyes of law, so far as issue as to the bogus sub-contract expenses claimed by the assessee are concerned. We are unable to agree with this reasoning given by the Ld. PCIT as well as by Ld. D.R. for the Revenue because power to reopen the assessment under section 147 of the Act is vested with the AO and not with the Ld. PCIT. For that matters limitation cannot be stretched beyond two years as laid down under section 263(2) of the Act. So assuming jurisdiction qua income from arbitration award under section 263 of the Act is hopelessly time barred and as such the impugned order in this regard is not sustainable. We are of the considered view that the said order was passed on the basis of settled principle of law but we are to decide this issue on the basis of particular facts of this case. In the instant case, we are of the considered view that when after due enquiry, the AO has taken plausible view on the issue in question by calling necessary information from the assessee, such assessment order cannot be held to be prejudicial to the interest of the revenue. So we are of the considered view that very initiation of proceedings by invoking the provisions contained under section 263 of the Act by the Ld. PCIT lacks jurisdictional error and as such not sustainable in the eyes of law. We are of the considered view that very initiation of the proceedings under section 263 of the Act are not sustainable in the eyes of law for lack of jurisdiction as required under section 263(2) to Explanation 1 of the Act, hence ordered to be quashed. Since the assessee has got the relief on legal issue, we find no need to go into the merits of this case. Resultantly, appeal filed by the assessee is allowed.
Issues Involved:
1. Addition on account of bogus sub-contract expenses. 2. Addition in respect of interest on arbitration awards. Detailed Analysis: Issue 1: Addition on account of bogus sub-contract expenses The assessee, M/s. Afcons Infrastructure Ltd., challenged the Principal Commissioner of Income Tax’s (PCIT) order under Section 263 of the Income Tax Act, 1961, which flagged the issue of bogus sub-contract expenses. The PCIT noted that the assessee made payments to M/s. Kumar Enterprises and M/s. Shivam Enterprises, which were found to be shell entities. The PCIT argued that the entire amount of ?7,93,68,000/- should have been disallowed instead of just 12.5%. The assessee contended that the Assessing Officer (AO) had already scrutinized the transactions, requested detailed documentation, and made discreet inquiries. The AO had concluded that the transactions were non-genuine and added 12.5% of the total amount as income. The Tribunal noted that the AO had made a plausible view after extensive inquiry and that merely having a different opinion does not justify invoking Section 263. The Tribunal emphasized that when two views are possible, and the AO has taken one view, the PCIT cannot revise the order simply because he disagrees. The Tribunal cited relevant case laws, including the Hon’ble Bombay High Court’s decision in Grasim Industries Ltd. vs. CIT, to support its conclusion. Consequently, the Tribunal held that the PCIT’s invocation of Section 263 was not sustainable as the AO had conducted a thorough investigation and applied his mind. Issue 2: Addition in respect of interest on arbitration awards The PCIT also flagged the issue of the assessee reducing ?6,57,89,000/- from its profit on account of arbitration credits, which was allowed by the AO without proper verification. The assessee argued that the PCIT’s order was time-barred under Section 263(2) of the Act, as it sought to revise the AO’s order dated 05.03.2014 beyond the permissible two-year period. The Tribunal agreed with the assessee, stating that the limitation period for invoking Section 263 had expired on 31.03.2016. The Tribunal rejected the PCIT’s reasoning that the entire assessment was reopened under Section 147, noting that the power to reopen assessments lies with the AO, not the PCIT. Moreover, the Tribunal found that the AO had made extensive inquiries into the arbitration awards and concluded that only ?37,75,265/- was final, with the rest still under dispute. The Tribunal noted that the AO had applied his mind and taken a plausible view, making the PCIT’s invocation of Section 263 unsustainable. The Tribunal also referenced its own decision in the assessee’s case for A.Y. 2014-15, where it quashed a similar order by the PCIT. The Tribunal concluded that the initiation of proceedings under Section 263 lacked jurisdictional basis and was not sustainable in law. Conclusion: The Tribunal quashed the PCIT’s order under Section 263 for both issues, holding that the AO had conducted a thorough investigation and applied his mind, making the PCIT’s invocation of Section 263 unjustified. The appeal filed by the assessee was allowed.
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