2022 (6) TMI 409 - AT - Income Tax

Revision u/s 263 - Penalty u/s 271D - unsecured loans taken from friends and relatives - offence u/s 269SS - loans to ascertain identity, genuineness of the transactions and creditworthiness of the parties - HELD THAT - What is clear is that the AO has accepted the fact of amount received by the assessee from his friends and relatives, is loan, which comes under the provisions of Sec.269SS of the Act. Therefore, once a particular receipt has been treated as loans and advances, then the very same receipts cannot be examined in light of provisions of Sec.68 of the Act, to treat the said amount as unexplained credit and income of the assessee. AO cannot blow hot and cold together. In this case, the AO has considered unsecured loans taken from friends and relatives as cash loans and also levied penalty for contravention of provisions of Sec.263 of the Act. On the other hand, the PCIT has taken up the revision proceedings on very same loans and advances in light of provisions of Sec.68 of the Act. In our considered view, powers exercised by the PCIT u/s.269SS of the Act, is not in accordance with law. It is a well settled principle of law that the PCIT can exercise the powers only in a situation, where the assessment order by passed the AO is erroneous in so far as it is prejudice to the interest of the Revenue. In this case, the assessment order passed by the AO is neither erroneous, because, the issue taken up by the PCIT, has been examined by the AO and further, the assessment order passed by the AO is nor prejudice to the interest of the Revenue, because, the Department has already considered amounts to question as loans and levied penalty u/s.271D of the Act. Further, the assessee had settled the tax dispute under Vivad Se Viswas Scheme, 2020 and paid necessary taxes. Therefore, from the above, it is very clear that there is no prejudice caused to the Revenue. We are of the considered view that the PCIT is erred in revision of assessment order u/s.263 of the Act, because the assessment order passed by the AO is neither erroneous nor prejudice to the interest of the Revenue. Hence, we quashed the revision order passed by the PCIT u/s.263 - Decided in favour of assessee.

Summary

Issues:
1. Condonation of delay in filing the appeal.
2. Jurisdiction of Principal Commissioner of Income Tax (PCIT) to revise assessment order under Section 263 of the Income Tax Act, 1961.

Condonation of Delay:
The appeal was filed by the assessee against the order of the Principal Commissioner of Income Tax-6, Chennai, dated 16.12.2019, pertaining to assessment year 2016-17. The delay in filing the appeal was 486 days. The assessee explained that the delay was due to a wrong understanding of the law regarding the need to file an appeal against the revision order passed by the PCIT. The delay was not intentional and was beyond the control of the assessee. The tribunal, after considering the reasons for the delay, agreed that the delay was not intentional and decided to condone the delay based on the principle that substantial justice prevails over technicalities, as established by various court decisions, including the Supreme Court's ruling in Collector Land Acquisition Vs. Mst. Katiji & Ors. The appeal was admitted for hearing after condoning the delay.

Jurisdiction of PCIT to Revise Assessment Order:
The PCIT had set aside the assessment order passed by the Assessing Officer (AO) under Section 143(3) of the Act and directed the AO to verify unsecured loans taken from friends and relatives in light of Section 68 of the Act. The assessee contended that since the issue of unsecured loans was already examined by the AO during assessment proceedings, there was no scope for the PCIT to revise the assessment order on the same issue. The tribunal observed that the AO had already considered the unsecured loans during assessment and levied a penalty under Section 271D of the Act. The PCIT's revision based on the same issue was deemed erroneous as the AO's assessment was neither erroneous nor prejudicial to the Revenue's interest. The tribunal quashed the revision order passed by the PCIT under Section 263 of the Act, thereby allowing the appeal filed by the assessee.

In conclusion, the ITAT Chennai, in its judgment, addressed the issue of condonation of delay in filing the appeal and the jurisdiction of the PCIT to revise the assessment order. The tribunal condoned the delay in filing the appeal based on the principle of substantial justice prevailing over technicalities. Additionally, the tribunal held that the PCIT erred in revising the assessment order as the AO's assessment was not erroneous or prejudicial to the Revenue's interest, ultimately quashing the revision order.