2024 (2) TMI 53 - HC - Income Tax

Validity of Revision u/s 263 - unexplained loan as detailed enquiries were not made by the assessing officer with respect to source of source - ITAT set aside revision proceedings - HELD THAT - It is true, the observations made by the Principal Commissioner are generally relevant considerations. What may have however completely missed the attention of the PCIT is, in any case, other than the hypothetical circumstance of such transactions being disbelieved, if due enquiry being made, no cogent material existed before the PCIT to prima facie doubt the genuineness of such transactions. Here it is relevant to note that tax liability in that case would be about Rs. 18,00,000/- Thus, though it is true, by virtue of Explanation-2 added to Section 263 of the Act, a presumption exists as to the assessment order being erroneous and prejudicial to the interest of revenue, it does not empower the Commissioner of Income Tax to exercise revisional powers in each and every case. We find the present is not a fit case to offer interference. No substantial question of law is seen to exist in the context of tax dispute not exceeding Rs. 18,00,000/- that may otherwise exist. Under the prevailing litigation policy of the Union Government, such a dispute may not be brought to the High Court. As to the legality of the reasoning offered by the Tribunal, we leave it open to be tested in an appropriate case. In the context of the present dispute, the findings recorded by the Tribunal are well reasoned and based on material on record. - Decided against revenue.

Summary

Issues involved:
The appeal filed by the revenue under Section 260A of the Income Tax Act, 1961, challenging the order of the Income Tax Appellate Tribunal, which set aside the order of the Principal Commissioner of Income Tax under Section 263 of the Act.

Detailed Judgment:

Issue 1: Source of Funds Investigation
The Principal Commissioner of Income Tax raised concerns about the lack of detailed inquiries by the assessing officer regarding the source of a loan of Rs. 80,00,000 obtained by the assessee from M/s Sanwaria Trade Link Pvt. Ltd., Kolkata. The Principal Commissioner highlighted the need for thorough investigations into the source of funds. However, the Tribunal noted that despite the presumption of the assessment order being erroneous, there was no concrete evidence to doubt the genuineness of the transactions, especially in the absence of material to support such doubts. The Tribunal emphasized that the mere expectation of the Commissioner of Income Tax (CIT) was not sufficient grounds for revisional action under Section 263 of the Act.

Issue 2: Revisional Powers of CIT
The Tribunal observed that the CIT had not conducted minimal inquiries into the issues himself and failed to demonstrate any fallacy in the actions of the assessing officer that would render the order erroneous and prejudicial to revenue. The Tribunal emphasized that the CIT's invocation of Explanation 2(a) from June 1, 2015, was not applicable to the current assessment year. It was noted that the assessing officer had made inquiries, albeit not in the exact manner preferred by the CIT, but this was not a valid reason for assuming jurisdiction under Section 263 of the Act. The Tribunal concluded that the CIT's order could not be sustained, setting it aside and ruling in favor of the assessee.

Conclusion:
The High Court found no substantial question of law in the tax dispute, which did not exceed Rs. 18,00,000, warranting interference. The Court acknowledged the well-reasoned findings of the Tribunal, based on the available material on record. The appeal lacked merit and was dismissed accordingly. The Court left open the possibility of testing the legality of the Tribunal's reasoning in a suitable case but found no grounds for intervention in the present dispute.