2022 (10) TMI 624 - AT - Income Tax

Revision u/s 263 - difference between value of imports shown by the assessee in the books of accounts and value determined by the CBEC for the purpose of payment of customs duty - As per CIT, AO has failed to consider relevant materials to bring to tax, the difference in value of import made by the assessee for the relevant assessment years which rendered the assessment order passed by the AO is erroneous in so far as prejudicial to the interest of the Revenue - HELD THAT - According to the PCIT, said difference constitutes unexplained income of the assessee, which needs to be taxed. It was the explanation of the assessee that the aspect of import purchases has been examined by the AO, where the assessee has explained the reasons for difference in purchases. According to the assessee, he had purchased used machinery from abroad, for which, necessary invoices and other related documents have been produced. CBEC has not accepted the invoice value and determined separate value for the purpose of customs duty. Therefore, merely for the reason that the CBEC does not accept the value declared by the assessee, it does not mean that the assessee has understated the imports and difference between actual price paid for imports and value determined by the CBEC is undisclosed income of the assessee. AO after considering relevant facts has rightly concluded that there is no reason to make addition towards difference in value of imports. Since, the AO has already considered the issue and has taken a view, in our considered opinion, the PCIT cannot substitute his view and held that assessment order passed by the AO is erroneous in so far as prejudicial to the interest of the Revenue. Therefore, we quashed the order passed by the PCIT u/s. 263 of the Act. Appeal filed by the assessee is allowed.

Summary

Issues involved:
1. Condonation of delay in filing the appeal.
2. Validity of the assessment order passed by the AO under Sec. 143(3) of the Income Tax Act, 1961 for AY 2015-16.
3. Jurisdiction of the Principal Commissioner of Income Tax (PCIT) to invoke Sec. 263 of the Act.

Detailed Analysis:
1. Condonation of delay in filing the appeal:
The appeal filed by the assessee was initially barred by limitation, but a petition for condonation of delay was submitted explaining the reasons for the delay. The Tribunal, after hearing both sides, considered the reasons provided by the assessee as a reasonable cause for condonation of delay under the Act. Consequently, the delay was condoned, and the appeal was admitted for adjudication.

2. Validity of the assessment order passed by the AO:
The assessee, engaged in the import and sale of used printing and paper cutting machines, filed the return of income for AY 2015-16. The assessment under Sec. 143(3) was completed, and the returned income was accepted. Subsequently, the PCIT initiated revision proceedings under Sec. 263, contending that the AO failed to tax the difference in the value of imports, as determined by CBEC, which was higher than the value declared by the assessee. The PCIT set aside the assessment order, directing the AO to re-do the assessment. However, the Tribunal noted that the AO had considered the issue and accepted the purchases declared by the assessee after examining the relevant facts. Therefore, the Tribunal held that the PCIT could not substitute his view and deemed the assessment order as not erroneous or prejudicial to the interest of the Revenue, thereby allowing the appeal filed by the assessee.

3. Jurisdiction of the PCIT to invoke Sec. 263 of the Act:
The PCIT invoked Sec. 263 based on the difference in the value of imports declared by the assessee and determined by CBEC. The PCIT opined that the AO failed to make necessary inquiries and passed the order without due diligence, rendering it erroneous and prejudicial to the Revenue's interest. However, the Tribunal disagreed, stating that the AO had considered the issue and accepted the purchases declared by the assessee after due examination. Therefore, the Tribunal held that the PCIT could not substitute his opinion for that of the AO, ultimately quashing the order passed by the PCIT under Sec. 263.

In conclusion, the Tribunal allowed the appeal filed by the assessee, emphasizing that the assessment order passed by the AO was not erroneous or prejudicial to the Revenue's interest, thereby rejecting the PCIT's invocation of Sec. 263.