2022 (9) TMI 49 - AT - Income Tax

Revision u/s 263 by CIT - Assessee purchased certain lands for development and incurred certain expenditure on it in the form of stamp duty and land development expenses - HELD THAT - There are no more sale deeds, the copies of which were not filed by the assessee during the original assessment proceedings. The observation made by CIT is totally wrong as he has not looked into this aspect that besides an amount of sale deed, the assessee had incurred certain development expenses and other expenses also, the details of which were submitted to him as well as were submitted to the AO during assessment proceedings. As regards the expenses incurred on these pieces of land, the AO, during assessment proceedings, required the assessee to produce bills/vouchers of such expenses and the assessee, vide letter dated 07/12/2017, placed at pages 33 34 of the paper book, vide reply No. 2, had produced for verification the vouchers of site development and land development etc. The copy of order sheet entry dated 01/12/2017 also supports this fact wherein the AO required the assessee to produce bills/vouchers of site development expenses and the order sheet entry dated 07/12/2017 states that the assessee has filed bills/vouchers of expenses, including lease rent, commission and land development expenses. All these details suggest that the AO has passed the order after taking into account and after examination of all the evidences with respect to amount debited in the purchase account of land. Therefore, there is no justification of initiating and passing order u/s 263 by learned Pr. CIT. For other issue of site wages and other expenses assessee had already filed copy of ledger account of such wages/development expenses vide reply wherein the assessee, in view of notice dated 16/01/2017, had submitted the copy of account of expenses including site wages expenses/development expenses. We further note from the order sheet dated 07/12/2017 that Assessing Officer has noted that details of expenses relating to business promotion, lease rent, commission, petrol, travelling etc. were filed by the assessee and which were checked. Therefore, in view of these facts and circumstances, we find that the Assessing Officer had carried out sufficient examination of the expenses relating to site wages and therefore, passing of order u/s 263 on this account is also not justified. In the present case, the order passed by Assessing Officer on these two issues is neither erroneous nor prejudicial to the interest of Revenue therefore, we cancel the order passed by Pr. CIT on these two issues. In respect of other objections of learned Pr. CIT, the Learned counsel for the assessee did not advance any argument therefore, we have not adjudicated on those issues. Therefore, the action of learned Pr. CIT on those issues, not argued by Learned counsel for the assessee, is upheld. Appeal of the assessee stands partly allowed.

Summary

Issues Involved:
1. Validity of the order passed under Section 263 of the I.T. Act by the Principal Commissioner of Income Tax (PCIT).
2. Consideration of pending appeal before CIT(A) and its impact on the jurisdiction under Section 263.
3. Examination of specific issues such as TDS, wage expenses, development expenses, lease rent, and purchase of land during the assessment proceedings.

Detailed Analysis:

1. Validity of the Order Passed Under Section 263:
The assessee contended that the PCIT erred in setting aside the assessment order under Section 263, arguing that the assessment was neither erroneous nor prejudicial to the interest of the revenue. The Tribunal examined whether the PCIT had valid grounds to invoke Section 263, which allows revision of orders that are erroneous and prejudicial to the revenue.

2. Consideration of Pending Appeal Before CIT(A):
The assessee argued that the PCIT wrongly exercised jurisdiction under Section 263 while an appeal was pending before CIT(A). The Tribunal noted that Clause (c) to Explanation 1 of Section 263 prohibits the exercise of jurisdiction under Section 263 when an appeal is pending before CIT(A). However, the Tribunal found that the issues addressed by the PCIT under Section 263 were not the same as those pending in the appeal before CIT(A). Therefore, the Tribunal rejected this ground.

3. Examination of Specific Issues:
- Cash Payments and Non-Deduction of TDS: The Tribunal noted that the Assessing Officer did not make any additions on these issues during the proceedings under Section 143(3)/263. Therefore, the assessee did not argue these points further.

- Purchase of Land: The PCIT observed that copies of sale deeds worth Rs.1,15,48,625/- were not provided by the assessee nor examined by the Assessing Officer. The Tribunal found that the assessee had submitted detailed replies and supporting documents during the assessment proceedings. The discrepancy noted by the PCIT was due to overlooking development and other expenses. The Tribunal concluded that the Assessing Officer had examined all relevant documents and the order was neither erroneous nor prejudicial to the revenue.

- Site Wage and Development Expenses: The PCIT claimed that the Assessing Officer did not adequately examine these expenses. The Tribunal found that the Assessing Officer had indeed required the assessee to furnish proof of expenses and had examined the bills and vouchers. The Tribunal held that the Assessing Officer had made sufficient enquiries and the order was not erroneous or prejudicial to the revenue.

- Legal Precedents: The Tribunal referenced several judgments, including those from the Hon'ble Allahabad High Court and the Hon'ble Supreme Court, which established that mere non-discussion of an issue in the assessment order does not imply non-application of mind by the Assessing Officer. The Tribunal emphasized that an order can only be revised under Section 263 if it is both erroneous and prejudicial to the interest of the revenue.

Conclusion:
The Tribunal concluded that the PCIT's order under Section 263 was not justified for the issues of purchase of land and site wage/development expenses. However, since the assessee did not advance arguments on other objections raised by the PCIT, the Tribunal upheld the PCIT's action on those unargued issues. The appeal was partly allowed, and the order was pronounced in the open court on 30/08/2022.