2023 (11) TMI 581 - AT - Income Tax

Revision u/s 263 by CIT - inadequate enquiry made by AO - whether at all any enquiry was carried out by the Ld. AO on the allowability of expenses towards Event management, Package Tour, purchase of air tickets etc. ? - HELD THAT - From the given details more particularly the details of various expenses in tabular form enclosed it is clearly found that the assessee had given the nature of expenditure, the entire details of the client for whom the said expenditure has been incurred; expenditure incurred on the various heads together with the respective amounts thereon. Hence, it is clear that assessee had furnished the client wise income and corresponding expenses incurred thereon client wise, before the Ld. AO. AO after making enquiries of the same and being satisfied with the details furnished by the assessee, concluded that the claim of the assessee to be genuine. Accordingly, he had decided not to make any disallowance of expenses thereon. Even if Explanation-2 is being sought to be invoked by the Ld. PCIT by stating that in the opinion of the Ld. PCIT, the requisite enquiries had not been carried out by the Ld. AO, then it is bounden duty of the Ld. PCIT to atleast state what are the requisite enquiries that are to be carried out by the Ld. AO and where the Ld. AO has failed in his duty. In the instant case, no such recording of facts and no finding thereon is given by the Ld. PCIT in his order with objective reasons. Thus more than adequate enquiries were indeed made by the Ld. AO while completing the assessment and if the Ld. PCIT is of the opinion that the enquiries carried out by the Ld. AO were inadequate, then it is the duty of the Ld. PCIT to conduct an enquiry before proceeding to treat the order of the Ld. AO as erroneous. Thus no hesitation in quashing the revision order passed by the Ld. PCIT u/s 263 - Decided in favour of assessee.

Summary

Issues involved:
The judgment deals with the revision jurisdiction under section 263 of the Income Tax Act, focusing on whether the Principal Commissioner of Income Tax (PCIT) was justified in invoking the revision jurisdiction in the given case.

Grounds of Appeal:
The appellant raised multiple grounds of appeal challenging the order passed by the PCIT, including lack of proper opportunity for being heard, errors in holding the assessment order as erroneous, and invoking provisions of Explanation 2 to section 263 of the Act.

Facts and Circumstances:
The assessee, engaged in conference and event management and travel business, filed a return of income in 2015. The assessment completed by the Assessing Officer (AO) was later sought to be revised by the PCIT, who alleged that the AO allowed expenses without adequate verification, leading to the revision jurisdiction under section 263.

Assessment Proceedings:
The AO had issued detailed questionnaires and the assessee provided comprehensive details of expenses, income, and client-wise expenditure. The AO, after thorough enquiries, concluded that the expenses were genuine and decided not to disallow them.

Judicial Analysis:
The Tribunal found that the AO had conducted adequate enquiries during assessment proceedings, contrary to the PCIT's claim of lack of enquiries. It emphasized that the PCIT cannot treat an order as erroneous without objectively satisfying the conditions prescribed in section 263(1) of the Act.

Legal Precedents and Decision:
Citing a High Court decision, the Tribunal highlighted that if the PCIT believes the enquiries were inadequate, they must conduct further enquiry before deeming the AO's order as erroneous. The Tribunal quashed the revision order, emphasizing that the PCIT must establish the error in the AO's order before invoking section 263.

Conclusion:
The Tribunal allowed the appeal, stating that the PCIT had not shown the AO's order to be erroneous and unsustainable in law. By emphasizing the necessity of objective findings and proper enquiry before invoking revision jurisdiction, the Tribunal set aside the PCIT's revision order.