2023 (6) TMI 972 - AT - Income Tax

Revision u/s 263 - Receipts against sale of plots - Mismatch between the amount disclosed by the assessee and amount shown as per 26AS - Method of accounting - HELD THAT - As in the present case, the assessee furnished a reply in response to the question raised by the AO and had taken a plausible stand explaining the mismatch in Form 26AS and the amount received and also had submitted the year of taxation of the receipts and further had made out a case that the assessee has opted for percentage completion method and therefore, the accounting treatment given by the assessee to the receipts is in accordance with law. How the method of accounting opted by the assessee was erroneous and prejudicial to the interest of the Revenue when the method of accounting opted by the assessee was proper under AS-7 and further the learned PCIT has also failed to bring on record after making the inquiries how the order of the AO has become prejudicial to the interest of the revenue and erroneous. More particularly, when all the receipts are duly reflected in the subsequent A.Ys by following the percentage completion method. The view of the AO is a plausible view and merely because the PCIT holds a different view, then that of the AO this cannot be a ground to cancel the order of the AO being erroneous and prejudicial to the interest of Revenue. There is a difference between inadequate inquiries and lack of inquiry. In the present case sufficient and adequate enquiries were made by the AO. Merely because the AO had not written a detailed and elaborate order for accepting the submissions of the assessee, the same cannot be a ground to declare the order of the Assessing Officer as nonest. PCIT had only pointed out the alleged mismatch between the payment accounted for and TDS deducted. The above-said mismatch had been duly explained by the assessee during the assessment proceedings as well as in the revision proceedings, as the said payment (difference) was reflected in the subsequent year. In view of the above, it cannot be said that the order of the Assessing Officer was prejudicial to the interest of the Revenue. Therefore, the order passed by the learned PCIT u/s 263 of the Act being not in accordance with law is cancelled. Appeal filed by the assessee is allowed.

Summary

Issues involved:
The judgment involves issues related to the assessment order passed by the Assessing Officer, discrepancies in receipts from the sale of flats compared to Form 26AS, application of percentage completion method in accounting, and the jurisdiction of the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act.

Assessment Order by Assessing Officer:
The assessee, engaged in construction and sale of flats, filed its return for A.Y. 2016-17, with the Assessing Officer accepting the income returned. The PCIT later observed discrepancies in receipts from flat sales compared to Form 26AS, leading to further scrutiny.

Discrepancies in Receipts:
The PCIT noted differences in receipts from various flat sales as per the assessee's records and Form 26AS. The PCIT set aside the assessment order, directing the Assessing Officer to verify the differences and treat unaccounted receipts as taxable if not substantiated by the assessee.

Application of Percentage Completion Method:
The assessee explained that it followed the percentage method of accounting instead of project completion method for flats sold, with differences in TDS reconciliation due to flats valued below Rs.50 lakhs. The PCIT, however, found the explanation insufficient and deemed the assessment order erroneous.

Jurisdiction of PCIT under Section 263:
The PCIT invoked Section 263, stating that the Assessing Officer failed to thoroughly examine the discrepancies, leading to an erroneous assessment order prejudicial to revenue interests. The PCIT set aside the order for further verification.

Tribunal's Decision:
The Tribunal considered the arguments of both parties and found that the Assessing Officer had conducted adequate inquiries and the assessee had provided explanations for the discrepancies. The Tribunal held that the PCIT's view differed from the Assessing Officer's plausible view and canceled the PCIT's order under Section 263.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, stating that the PCIT's order under Section 263 was not in accordance with the law. The Tribunal emphasized the adequacy of inquiries made by the Assessing Officer and the explanations provided by the assessee, leading to the cancellation of the PCIT's order.
This summary provides a detailed breakdown of the issues involved in the legal judgment, including the discrepancies in receipts, application of accounting methods, and the jurisdiction of the PCIT under Section 263. It highlights the Tribunal's decision to cancel the PCIT's order based on the adequacy of inquiries and explanations provided during the assessment proceedings.