2024 (3) TMI 1010 - AT - Income Tax

Revision u/s 263 - as per CIT AO has not examined increase in share capital - HELD THAT - As gone through the entire facts and noticed that the PCIT while revising the assessment has simpliciter gone through the original balance sheet which is part of the assessment record. But the AO has never acted upon on the original balance sheet but he accepted the correct balance sheet filed during the course of assessment proceedings. We find that the assessee has admitted the new balance sheet and the differentials between the original and rectified balance sheet which are part of assessee s paper-book. We noted that on merits also, the assessee has explained the differentials and hence, the assessment order is neither erroneous nor prejudicial to the interest of Revenue because of non-verification of assessment. AO has verified the complete details as it is evident from the assessee s paper-book that the AO asked for the entire details and the assessee replied the same on various dates. In view of the above, we allow the appeal of assessee and quash the revision order passed by the PCIT. Appeal filed by the assessee is allowed.

Issues involved:
The judgment deals with the revision order passed by the Principal Commissioner of Income Tax (PCIT) u/s 263 of the Income Tax Act, 1961, revising the assessment framed by the Assessing Officer (AO) u/s 143(3) of the Act. The main issue is the examination of the increase in share capital and whether the assessment order was erroneous and prejudicial to the interest of revenue.

Revision Order u/s 263:
The PCIT revised the assessment as the AO did not examine the increase in share capital, alleging that the assessment order was erroneous. The PCIT found that the AO had not verified the facts related to the increase in capital, leading to an order that was considered prejudicial to the interest of revenue. The PCIT's finding was that the assessment order was made without proper verification of facts, which necessitated intervention to rectify the errors.

Assessee's Arguments:
The assessee contended that the financial statements initially filed did not reflect the accurate financial position. The revised balance sheet, submitted during assessment proceedings, provided correct details including capital accounts and ledger accounts. The increase in capital was attributed to profits from selling jewelry to ARK Jewellers, following the inheritance of gold from the assessee's mother. The assessee maintained that the AO had thoroughly examined both the original and revised balance sheets, ensuring no lack of inquiry or verification.

PCIT's Response:
The CIT-DR highlighted the existence of two sets of balance sheets, with the original sheet showing a significant differential in proprietor's capital. However, the correct balance sheet filed by the assessee detailed the capital introduction, with specific figures provided for capital accounts and application of funds. The PCIT's revision was based on the original balance sheet, overlooking the correct balance sheet accepted during assessment proceedings. The PCIT's revision lacked merit as the correct balance sheet had been submitted, and the AO had diligently verified the details provided by the assessee.

Conclusion:
Upon reviewing the facts, the Tribunal found that the AO had appropriately considered the correct balance sheet submitted by the assessee during assessment proceedings. The Tribunal noted that the assessee had explained the differences between the original and revised balance sheets, demonstrating no error or prejudice in the assessment order. Consequently, the Tribunal allowed the appeal of the assessee and annulled the revision order issued by the PCIT.

*This summary encapsulates the key issues, arguments, and conclusions of the legal judgment delivered by the Appellate Tribunal ITAT CHENNAI regarding the revision order passed under section 263 of the Income Tax Act, 1961.*

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