2023 (8) TMI 1255 - AT - Income Tax

Revision u/s 263 - case of no enquiry as understood by Ld. PCIT - Assessee claimed deduction of interest expenditure against interest income chargeable under the head Income from Business but the same was not allowable since the assessee had taken loan in personal capacity and not for business and PCIT noted that the AO has not verified this point and passed assessment-order - HELD THAT - On a careful consideration of various documents placed there is no dispute or rebuttal by revenue. Clearly, therefore, it is discernible that the Ld. AO has considered those replies / submissions and thereafter taken a plausible view. Further, the action of AO in accepting the replies / submissions of assessee does not lack bonafides and cannot be said to be faulty. Thus, everything hinges on the point as to whether the assessment-order can be said to be erroneous-cum-prejudicial to the interest of revenue merely for the reason that the AO has not discussed those issues in the assessment-order or in other words not written his assessment-order as a perfectionist. In our considered view, the writing of assessment-order is a task of AO and the same is neither controlled nor helped by the assessee. In fact, the assessee has no hand or mind in writing the assessment-order. Being so, we are afraid to accept the pleading of Ld. DR that the assessment-order could be said to be erroneous-cum-prejudicial for that reason. Regarding introduction of Explanation 2 to section 263, as claimed by Ld. PCIT in his order, we only need to submit that the said Explanation does not give unfettered power to the PCIT to assume revisional-jurisdiction to revise every order of the AO to re-examine the issues already examined during assessment-proceeding. As judicially interpreted in several decisions that the intention of legislature behind introduction of Explanation 2 could not have been to enable the PCIT to find fault with each and every assessment-order in unlimited terms since such an interpretation would lead to unending litigation and there would not be any point of finality of assessment-proceeding done by Ld. AO. Thus we are persuaded to hold that the facts of the present case do not warrant application of section 263. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the revision order under Section 263 of the Income-tax Act, 1961.
2. Adequacy of inquiries conducted by the Assessing Officer (AO).
3. Interpretation and application of Explanation 2 to Section 263.

Summary:

1. Validity of the Revision Order under Section 263:
The assessee appealed against the revision order dated 25.03.2022, passed by the Principal Commissioner of Income-Tax-1, Indore (PCIT) under Section 263 of the Income-tax Act, 1961, which set aside the assessment order dated 16.12.2019 for AY 2017-18. The PCIT deemed the assessment order erroneous and prejudicial to the interest of revenue, as the AO allegedly failed to verify the deduction of interest expenditure claimed by the assessee.

2. Adequacy of Inquiries Conducted by the AO:
The assessee contended that during the assessment proceedings, the AO raised specific queries regarding the deduction claimed under Section 57 and the nexus between the loan taken from M/s Neena Motors and the investment in M/s Prince Motors. The assessee provided detailed replies and supporting documents, including a revised computation of income. The AO considered these submissions and accepted the assessee's explanation, indicating that the inquiries were adequate.

3. Interpretation and Application of Explanation 2 to Section 263:
The PCIT invoked Explanation 2 to Section 263, asserting that the assessment order was deemed erroneous if passed without necessary inquiries or verification. However, the tribunal found that the AO had indeed conducted sufficient inquiries and the assessee had provided all relevant details. The tribunal emphasized that the mere absence of detailed reasoning in the assessment order does not render it erroneous. The tribunal referenced several judicial precedents, including the Hon'ble ITAT, Mumbai in Reliance Payment Solutions Ltd. Vs. Pr. CIT and Hon'ble ITAT, Rajkot in M/s Pramukh Realty, Junagadh, to support the view that an AO's decision, if based on adequate inquiries and a plausible view, cannot be deemed erroneous merely due to lack of detailed discussion in the order.

Conclusion:
The tribunal concluded that the revision order under Section 263 was not valid, as the AO had conducted adequate inquiries and the assessment order was not erroneous or prejudicial to the interest of revenue. The tribunal quashed the revision order and restored the original assessment order. The appeal was allowed in favor of the assessee.