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2022 (12) TMI 163 - AT - Income TaxRevision u/s 263 by CIT - unaccounted income taxed u/s 69 - assessee during the survey proceeding has admitted the unaccounted income - As per CIT, AO had not verified this issue while finalizing the assessment proceeding and hence, the AO had not levied the tax as per the provision of section 115BBE - HELD THAT - As it is not the case that the AO has not made any enquiry. Indeed the Pr. CIT initiated proceedings under section 263 on the ground that the AO has not made enquiries or verification which should have been made in respect of applicability of section 115BBE of the Act. It is not the case of the Pr. CIT that the Ld. AO did not apply his mind to the issue on hand or he had omitted to make enquiries altogether. In the instant set of facts, the AO had made enquiries and after consideration of material placed on record accepted the genuineness of the claim of the assessee. PCIT in his order passed under section 263 of the Act has made reference to the explanation 2 of section 263 of the Act. It was attempted by the learned PCIT to hold that there were certain necessary enquiries which should have been made by the AO during the assessment proceedings but not conducted by him. Therefore, on this reasoning the order of the AO is also erroneous insofar prejudicial to the interest of revenue PCIT has not invoked the explanation 2 of section 263 of the Act in the show cause notice about the same. Therefore, the opportunity with respect to the explanation 2 of section 263 of the Act was not afforded to the assessee. Thus, on this count the learned PCIT erred in taking the course of such provisions while deciding the issue against the assessee. Secondly, the learned PCIT has also not specified the nature and the manner in which the enquiries which should have been conducted by the AO in the assessment proceedings. Thus, in the absence of any specific finding of the learned PCIT with respect to the enquiries which should have been made, we are not convinced by his order passed under section 263 Thus we hold that there is no error in the assessment framed by the AO under section 143(3) of the Act, causing prejudice to the interest of revenue. Thus, the revisional order passed by the learned PCIT is not sustainable - Decided in favour of assessee.
Issues Involved:
1. Whether the assessment order under section 143(3) of the Income Tax Act, 1961, was erroneous and prejudicial to the interest of the Revenue under section 263 of the Act. 2. Whether the Principal Commissioner of Income Tax (PCIT) was justified in invoking section 263 for lack of inquiry or inadequate inquiry by the Assessing Officer (AO) regarding the unaccounted income and applicability of section 115BBE. Issue-wise Detailed Analysis: 1. Erroneous and Prejudicial Assessment Order: The primary issue raised by the assessee was that the PCIT erred in holding the assessment framed under section 143(3) as erroneous and prejudicial to the interest of the Revenue under section 263. The assessee argued that the AO had properly inquired into the unaccounted income of Rs. 40,00,000/- declared during the survey proceedings and had accepted the return income without modification after considering the submissions and replies provided by the assessee. 2. Justification for Invoking Section 263: The PCIT initiated proceedings under section 263 on the grounds that the AO did not verify the nature of the unaccounted income and its taxability under section 115BBE, which mandates a higher tax rate for unexplained income. The assessee contended that the AO had indeed made inquiries, issued notices under section 142(1), and considered the assessee's explanations regarding the sources of unaccounted income, which included off-market transactions and investments. In-depth Details and Legal Terminology: Assessment Proceedings: The AO issued notices under sections 143(2) and 142(1) and accepted the return income after considering the assessee's submissions. The PCIT, however, found that the AO did not verify the unaccounted income of Rs. 40,00,000/- declared during the survey under section 133A and did not levy tax under section 115BBE, which was amended to increase the tax rate to 60%. PCIT's Observations: The PCIT observed that the AO failed to verify the nature of the unaccounted income based on documents found during the survey, the statement recorded, and the outcome of inquiries. The PCIT held that the AO's failure to conduct these verifications rendered the assessment order erroneous and prejudicial to the interest of the Revenue, thus invoking section 263. Assessee's Defense: The assessee argued that the AO had made adequate inquiries and had applied his mind before finalizing the assessment. The assessee provided explanations for the unaccounted income, including details of off-market transactions and investments. The assessee also highlighted that the tax rate under section 115BBE was 30% at the time of disclosure and had paid the amount instantly. Tribunal's Analysis: The Tribunal examined whether the AO's order was erroneous and prejudicial to the Revenue. It noted that an inquiry deemed inadequate by the PCIT does not automatically render the AO's order erroneous. The Tribunal cited various judicial precedents, emphasizing the distinction between lack of inquiry and inadequate inquiry. It concluded that the AO had made necessary inquiries and that the PCIT could not impose his own understanding of the extent of inquiry required. Judicial Precedents: The Tribunal referred to several judgments, including: - CIT Vs. Sunbeam Auto (Delhi High Court): Emphasized the distinction between lack of inquiry and inadequate inquiry. - Gabriel India Ltd. (Bombay High Court): Highlighted that the Commissioner cannot initiate proceedings for fishing and roving inquiries. - Sh. Narayan Tatu Rane Vs. ITO (Mumbai ITAT): Discussed the scope of inquiry under Explanation 2(a) to section 263. - Principal Commissioner of Income-tax 2 v. Shree Gayatri Associates (Supreme Court): Affirmed that detailed inquiries by the AO cannot be set aside under section 263. - Principal Commissioner of Income-tax-2, Meerut v. Canara Bank Securities Ltd (Supreme Court): Held that 263 proceedings are invalid when the AO has made inquiries and taken a plausible view. Conclusion: The Tribunal concluded that the AO had made necessary inquiries and applied his mind to the issue of unaccounted income. The PCIT's invocation of section 263 was not justified as the AO's order was not erroneous or prejudicial to the Revenue. The Tribunal quashed the PCIT's order, allowing the assessee's appeal. Result: The appeal filed by the assessee was allowed, and the revisional order passed by the PCIT was quashed. The assessment framed by the AO under section 143(3) was upheld as valid and not causing prejudice to the interest of the Revenue.
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