2023 (9) TMI 1343 - HC - Income Tax

Revision u/s 263 - claim deduction u/s 10AA - Tribunal held that it was not the case of PCIT that AO failed to make any additions/disallowance as he conducted enough inquiries to examine the debit and credit in the bank statement and he also examined the eligibility to claim deductions u/s 10AA of the Act and that is why he disallowed the deduction under section 10AA - HELD THAT - Having considered the order of the Tribunal in light of the findings of the Principal CIT, we find that the Assessing Officer had conducted sufficient inquiry and examined the eligibility to claim deduction under section 10AA of the Act. It was not a case of no inquiry or lack of inquiry . When an opinion is formed as a result of the inquiries, which was in the exclusive domain of the Assessing Officer, it is not open for the revisional authority to arrive at conclusions merely on the basis of a subjective exercise. Thus as perused the order of the Tribunal, no substantial questions of law arise.

Summary

Issues involved:
The judgment involves the challenge under Section 260A of the Income Tax Act, 1961 against the order passed by the Income Tax Appellate Tribunal for the assessment year 2012-13.

Issue 1:
The first issue raised in the appeal questions whether the ITAT was justified in quashing the order of the Principal CIT passed under section 263, considering the AO's failure to make necessary inquiries, leading to an erroneous assessment order prejudicial to revenue.

Issue 2:
The second issue questions whether the ITAT erred in not fulfilling the conditions for invoking revisional power under section 263, despite the AO's failure to investigate undisclosed bank transactions, leading to a disallowance under Section 10AA of the Act.

Issue 3:
The third issue questions the ITAT's reliance on prior decisions in quashing the order under section 263, without considering the impact of Explanation 2 introduced after those decisions.

Issue 4:
The fourth issue challenges the ITAT's characterization of the PCIT's exercise of jurisdiction under section 263 as wholly erroneous, despite the AO examining the issues raised and conducting necessary inquiries.

Judgment Summary:
The respondent firm filed its return for the assessment year 2012-13, which was later scrutinized, revealing undisclosed bank transactions. The AO disallowed a deduction claimed under Section 10AA, leading to a reassessment. The PCIT invoked section 263, setting aside the order for reassessment. The Tribunal held that the AO had conducted sufficient inquiries and assessments, dismissing the PCIT's exercise of jurisdiction under section 263. The Tribunal emphasized the AO's dual role as an investigator and adjudicator, concluding that the PCIT's intervention was unwarranted. The Tribunal found no substantial questions of law, resulting in the dismissal of the appeal.