2023 (1) TMI 706 - AT - Income Tax

Revision u/s 263 - CIT excercising the power of revision for the purpose of directing the A.O. to hold another investigation when the A.O. had complied with the directions of the predecessor PCIT in the preceding order u/s 264 - HELD THAT - As gone through the impugned revision order passed u/s 263 of the Act and found that the entire order of the ld. Pr. CIT is a general order and the ld. Pr. CIT has not pointed out specifically as to why he was not satisfied and to which of the details, furnished by the assessee. Pr. CIT has neither mentioned the name and details of the share subscribers nor has he mentioned why he did not believe the identity or creditworthiness of a particular share subscriber, for directing the AO to make further enquiries. Once the Ld. Pr. CIT had proceeded to make an enquiry regarding the genuineness of the claim of the assessee, he was supposed to make a prima-facie opinion which may not be a concluding opinion to hold that the order of the AO in his view was erroneous so far as it was prejudicial to the interest of Revenue. The opinion of the Commissioner that the AO had not made proper enquiries or verifications should be based on his objective satisfaction and not a subjective satisfaction from the assessment order. Merely because, the assessment order in question is not a detailed order that itself, does not mean that the AO had not made enquiries in this respect. Admittedly, the AO asked the assessee to furnish the necessary details from time to time which were duly furnished by the assessee and after considering the same the AO passed the assessment order. It is pertinent to mention here that a deeming fiction has been created in section 263 of the Act by the amendment made by Finance Act, 2015 w.e.f. 01.06.15 wherein it has been mentioned that where the Commissioner is of the opinion that the AO had passed the order without making enquiries or a claim has been allowed without enquiring into the claim or that the same is not in accordance with any order or direction or instruction issued by CBDT, that shall be deemed to be erroneous in so far as its prejudicial to the interest of Revenue. The said deeming provisions, in our view, are not applicable for the assessment year under consideration i.e., A.Y. 2012-13. A perusal of the revision order passed by the ld. Pr. CIT shows that the ld. Pr. CIT has not pointed out any error or discrepancy in the evidence furnished by the assessee and without examining such evidence and without counter questioning the assessee on the relevant points and even without considering the submission of the assessee furnished in reply to the showcause notice, the ld. Pr. CIT, in our view, was not justified in setting aside the order, simply stating that in his view more enquiries were needed to be carried out by the AO. CIT without examining the details of the share applicants and the evidence furnished by the assessee has passed a general order observing that in his view the order passed by the AO was on an incorrect assumption of facts or incorrect application of law without mentioning as to what facts were incorrect what was the incorrect law, that was applied by the Assessing Officer. Simply because the ld. Pr. CIT felt that the AO should have made further enquiries on the same issue or that the case was to be examined from some another angle, the same, in our view, cannot be a valid ground to set aside the assessment order. If such an action is allowed by the ld. Pr. CIT in revision jurisdiction then, there would be no end to litigation and there would not be any finality to the assessment. As relying on Amritrashi Infra Private Ltd. case 2020 (8) TMI 407 - ITAT KOLKATA we do not find justification on the part of the ld. Pr. CIT in setting aside the impugned assessment order which was passed by the AO on the directions of the ld. Pr. CIT issued u/s 264 - Appeal of the assessee stands allowed.

Summary

Issues Involved:
1. Legality of the order passed by the Principal Commissioner of Income Tax (Pr. CIT) under section 263 of the Income Tax Act.
2. Justification for initiating proceedings under section 263.
3. Appropriateness of the Pr. CIT exercising revision jurisdiction for the second time to direct further investigation by the Assessing Officer (AO).

Issue-wise Detailed Analysis:

1. Legality of the order passed by the Principal Commissioner of Income Tax (Pr. CIT) under section 263 of the Income Tax Act:
The assessee challenged the legality of the Pr. CIT's order under section 263, arguing that it was bad in law and liable to be quashed. The Tribunal examined the sequence of events, noting that the AO had already re-examined and verified the details as directed by the Pr. CIT in an earlier revision order under section 264. The Tribunal found that the Pr. CIT's subsequent order directing further investigation was not justified, as the AO had already addressed the issues in compliance with the previous directions. The Tribunal emphasized that the Pr. CIT's order did not specify which details or evidence were unsatisfactory, making it a general and unsubstantiated directive.

2. Justification for initiating proceedings under section 263:
The Tribunal analyzed whether the Pr. CIT was justified in initiating proceedings under section 263. It was highlighted that the AO had conducted thorough enquiries and verifications during the assessment proceedings, responding to all notices and providing detailed evidence, including the identity and creditworthiness of share subscribers and the genuineness of transactions. The Tribunal concluded that the Pr. CIT's initiation of section 263 proceedings was unjustified, as the AO had already complied with the directions from the previous revision order and had made adequate enquiries.

3. Appropriateness of the Pr. CIT exercising revision jurisdiction for the second time to direct further investigation by the AO:
The Tribunal scrutinized the Pr. CIT's exercise of revision jurisdiction for the second time, directing the AO to re-examine the same issues. It was noted that the AO had already verified the details and passed a fresh assessment order as per the directions of the previous Pr. CIT. The Tribunal referred to relevant judicial decisions, emphasizing that the Pr. CIT should not have directed further enquiries without specifying what was lacking in the AO's previous enquiries. The Tribunal asserted that such actions would lead to endless litigation and lack of finality in assessments. The Tribunal also referenced the deeming fiction created by the amendment to section 263 by the Finance Act, 2015, which was not applicable to the assessment year under consideration.

Conclusion:
The Tribunal found that the Pr. CIT's order under section 263 was not sustainable as per law, as it was based on general observations without specific deficiencies. The Tribunal quashed the Pr. CIT's order, allowing the appeal of the assessee. The Tribunal reiterated the importance of finality in assessments and the necessity for the Pr. CIT to provide specific reasons for dissatisfaction with the AO's enquiries. The decision was consistent with the view taken by the Coordinate Bench of ITAT Kolkata in the case of Amritrashi Infra Private Ltd.