2022 (10) TMI 817 - AT - Income Tax

Revision u/s 263 by CIT - Addition u/s 68 - HELD THAT - We can see that learned AO made proper enquiry and during assessment proceedings, all details such as, i. list of unsecured loan received during the years; ii. list of share holders; iii. Copy of ledger accounts of each share holder. Iv. Copy of ledger accounts of each lender in its books; v. copies of contra confirmation; vi. Copy of bank statement; vii. Copy of bank account; 8. Copy of income tax return alongwith computation of income ix. Copy of PAN were submitted. We have noticed that Company was formed in 2013 for vitrified files and stated commercial production in 2016. The co-ordinate bench in case of Hitendra A. Nanavati 2010 (10) TMI 1076 - ITAT AHMEDABAD it has been held that where learned AO was satisfied with explanation of assessee, a change of opinion or view would not enable CIT to exercise jurisdiction u/s 263 of the Act Thus share capital, share application money and unsecured loan in the present case can never be regarded as undisclosed income of the assessee under S.68 of the Act. Thus, we hold that in present case the revision under S.263 of the Act is not permissible. Appeal filed by the Assessee is allowed.

Summary

Issues Involved:
1. Validity of the order under Section 263 of the Income Tax Act.
2. Consideration of submissions by the appellant regarding the assessment order's correctness.
3. Direction for de-novo assessment concerning verification of equity share capital and fresh unsecured loans.

Issue-wise Detailed Analysis:

1. Validity of the order under Section 263 of the Income Tax Act:
The assessee challenged the order under Section 263 of the Act, arguing it was "bad in law." The Principal Commissioner of Income Tax (PCIT) found that the Assessing Officer (AO) failed to make necessary inquiries regarding the identity, creditworthiness, and genuineness of the transactions involving equity share capital and unsecured loans. The PCIT highlighted discrepancies, such as shareholders investing amounts significantly higher than their declared incomes without adequate explanations. The Tribunal, however, noted that the AO had conducted proper inquiries, and all necessary documents were submitted during the assessment proceedings. Citing precedents, the Tribunal emphasized that a mere difference in opinion does not justify revision under Section 263, especially when the AO's view is legally sustainable.

2. Consideration of submissions by the appellant regarding the assessment order's correctness:
The appellant argued that the assessment order was neither erroneous nor prejudicial to the interest of revenue. The Tribunal observed that the AO had examined various documents, including lists of unsecured loans, shareholders, ledger accounts, bank statements, and income tax returns. The Tribunal referenced several judicial pronouncements, including Supreme Court decisions, to support the view that when the AO adopts one of the permissible courses of action, it cannot be deemed erroneous merely because the PCIT disagrees. The Tribunal concluded that the AO's inquiries were adequate and thorough, thus invalidating the PCIT's contention of lack of inquiry.

3. Direction for de-novo assessment concerning verification of equity share capital and fresh unsecured loans:
The PCIT had directed a de-novo assessment to verify the equity share capital and unsecured loans, questioning the genuineness and creditworthiness of the transactions. The Tribunal found that the AO had already scrutinized these aspects during the original assessment. The Tribunal cited the principle that revision under Section 263 is not justified if the AO's view is one of the possible legal views. The Tribunal also noted that the share capital and loans were received before the commencement of commercial operations, aligning with judicial precedents that such amounts cannot be deemed undisclosed income under Section 68. Consequently, the Tribunal set aside the PCIT's order for a de-novo assessment.

Conclusion:
The Tribunal allowed the appeal, setting aside the PCIT's order under Section 263, and upheld the original assessment order. The Tribunal emphasized that the AO had conducted adequate inquiries and that the PCIT's revision was not justified, as it was based on a mere difference of opinion rather than any legal or factual error in the original assessment.