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2022 (4) TMI 1076 - AT - Income TaxRevision u/s 263 - unsecured loans u/s 68 - HELD THAT - The Parliament had conferred the power of revision on the Commissioner of Income Tax u/s 263 of the Act in case the assessment order passed is erroneous and prejudicial to the interests of revenue. To invoke the power of revision, the above two conditions are required to be satisfied cumulatively. References in this regard can be made to the decision in the case of Malabar Industrial Co. Ltd. 2000 (2) TMI 10 - SUPREME COURT and in the case of CIT vs. Max India Ltd. 2007 (11) TMI 12 - SUPREME COURT . The error in the assessment order should be one that it is not debatable or plausible view. In a case where the AO examined the claim took one of the plausible views, the assessment order cannot be termed as an erroneous . The issue i.e. required to be examined by us is whether or not the AO carried out any enquiry and verification on the issue of source of cash deposits as well as genuineness of the loans creditors and the assessment of gains arising on sale of shops should be under the head of business or capital gains . Source of cash deposit - The fact that the AO had examined the source of cash deposits is evident from the very impugned order as the ld. PCIT has reproduced the cash flow statements furnished before the AO. Further, it is an admitted position that the ld. PCIT had mistaken the cash withdrawals from banks as the cash deposits. PCIT had initiated the revision proceedings on wrong assumption of facts. PCIT was justified in exercising the powers of revision on the issue of source of cash deposits. Thus, the revision is not maintainable on the issue of sources of cash deposits into bank. As regards, the unsecured loan creditors, AO during the course of assessment proceedings had called for the details of loan creditors in order to satisfy himself as to the genuineness of the loan creditors. The appellant also furnished the full details before the AO by filing the ledger extract, particular of PAN of the loan creditors in whose names the loan is outstanding in the books of account. The said ledger extract was certified to be true by respective sundry creditors. AO having considered the information filed before him chosen not to make any addition. No doubt, the assessment order is silent on this issue. Merely because the assessment order is silent on this issue, it cannot be said that the Assessing Officer had not examined the issue. Once a query has been raised by the AO during the assessment proceedings and the assessee has responded to that query, it would necessarily follow, that the AO has accepted the assessee's submissions, so as to not deal with that issue in the assessment order. Hon ble Bombay High Court in the case of GKN Sinter Metals Ltd. vs. Ms. Ramapriya Raghavan, Asstt. CIT 2015 (1) TMI 832 - BOMBAY HIGH COURT had occasion to deal with the identical situations, wherein, after referring to its earlier decision in the case of Idea Cellular Ltd. 2008 (2) TMI 146 - BOMBAY HIGH COURT and in the case of Aroni Commercials Ltd. 2014 (8) TMI 390 - BOMBAY HIGH COURT It cannot be said that there is total lack of enquiry on the part of the Assessing Officer, nor was it the case of the ld. PCIT that the Assessing Officer should have conducted further enquiry. We are of the considered opinion that the power of revision cannot be exercised in respect of credits of loan creditors. As regards to the issue of assessment of gains arising on sale of shops. This issue was subject-matter of appeal before the CIT(A) as well as before the ITAT in assessment year 2011-12 in assessee s own case wherein, both the CIT(A) as well as the Tribunal had concurrently held that the gains arising from sale of shops should be assessable under the head of business . The fact that this issue was subject-matter of appeal before the CIT(A) who confirmed the stand of appellant. On further appeal before the ITAT stand of appellant was upheld it goes to prove that the issue is debatable. It can thus be seen that the view taken by Assessing Officer that gains arising on sale of shops can be assessed under the head business is plausible view. Therefore, it is not open to ld. PCIT to exercise the power of revision on this, in view of settled position of law, if after proper enquiries, the Assessing Officer adopted a view which is a plausible view, such view could not be open to revision by Commissioner. We are of the considered opinion that the ld. PCIT was not justified in exercising the power of revision u/s 263 in respect of above three items. Therefore, we hereby quash the order passed u/s 263 - Thus, the grounds of appeal raised by the assessee in all the above three appeals stand allowed.
Issues Involved:
1. Source of cash deposits in bank accounts. 2. Genuineness of unsecured loans. 3. Assessment of gains arising from the sale of shops. Detailed Analysis: Source of Cash Deposits: The appellant, a builder, did not file returns for the assessment years 2008-09, 2009-10, and 2010-11, prompting the Assessing Officer (AO) to issue notices under Section 148 of the Income Tax Act, 1961. Upon filing returns, the AO completed assessments but the Principal Commissioner of Income Tax (PCIT) later found discrepancies, particularly large cash deposits in bank accounts which the AO allegedly did not verify. The PCIT issued a show-cause notice under Section 263, deeming the AO's order erroneous and prejudicial to the revenue's interest. The appellant argued that the cash deposits were from accumulated balances and withdrawals, but the PCIT insisted on a lack of verification by the AO. Upon review, it was evident that the AO had examined the source of cash deposits, which the PCIT had mistakenly identified as cash withdrawals. Thus, the revision proceedings were based on incorrect facts, making the PCIT's revision on this issue unjustified. Genuineness of Unsecured Loans: The PCIT also questioned the unsecured loans shown by the appellant, claiming the AO accepted them without verification. However, the appellant provided detailed submissions during the assessment, including ledger extracts and confirmation letters from creditors. The AO, after examining these, did not make any additions, indicating acceptance of the genuineness of the loans. The assessment order's silence on this issue does not imply a lack of examination. Legal precedents establish that if an AO raises a query and the assessee responds satisfactorily, the AO's acceptance of the claim is implicit. Thus, it cannot be said that there was a total lack of enquiry. The power of revision under Section 263 is applicable only in cases of no enquiry, not inadequate enquiry. Therefore, the PCIT's revision on this issue was not maintainable. Assessment of Gains from Sale of Shops: The PCIT contended that gains from the sale of shops should be assessed under "capital gains" rather than "business income," as the shops were not part of stock-in-trade. However, this issue had already been adjudicated in the appellant's favor for the assessment year 2011-12 by both the CIT(A) and the ITAT, which held that such gains should be assessed under "business income." Given this precedent, the AO's view was plausible and debatable, making it inappropriate for the PCIT to invoke revisionary powers under Section 263. Legal principles dictate that if the AO adopts a plausible view after proper enquiry, it cannot be subject to revision. Conclusion: The Tribunal concluded that the PCIT was not justified in exercising revisionary powers under Section 263 for any of the three issues. The AO had conducted adequate enquiries, and the PCIT's assumptions were either incorrect or involved debatable issues already settled by higher authorities. Consequently, the Tribunal quashed the PCIT's order dated 17.03.2017, allowing the appellant's appeals for the assessment years 2008-09, 2009-10, and 2010-11.
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