2024 (9) TMI 289 - AT - Income Tax

Ex-parte revisionary order u/s 263 - assessee would like to make us believe that it was not given any opportunity of defending its case - HELD THAT - It has been noted that the present revisionary order has arisen only on account of an order issued by this tribunal to the PCIT to read judicate the matter. Needless to say the appellant had not complied with the notices of the tribunal also. Coming to the principle controversy as to whether the PCIT has passed an ex-parte order without providing adequate opportunity, it is seen that in Para-4 of his impugned order the PCIT has clearly mentioned that finally the assessee has filed its return submissions dated 23.02.2024 . DR submitted that there is nothing on record to indicate that assessee s right to natural justice of being heard was violated and that it is the assessee which is a habitual defaulter. PCIT has duly considered the defence offered by the assessee and the blame of passing an ex-parte order without affording adequate opportunity of being heard cannot be rested on his shoulder. The argument of the assessee therefore fails. Order was passed beyond available statutory time and without jurisdiction and hence deserves to be quashed - Section 263 of the Act empowers a PCIT to exercise his revisionary powers in respect of orders passed under any proceedings of the Act if he holds the view that the impugned order is erroneous in so far is it is prejudicial to the interest of the Revenue. The only limitation imposed upon is that no order can be passed after the expiry of two years from the end of the Financial Year in which the order sought to be revised was passed. Facts of the case indicate that the assessment order u/s 143(3) was passed by the AO on 21.12.2019. Thus the relevant financial year ended on 31.03.2020. Further material available on record shows that the first revisionary order was passed by the PCIT on 23.03.2022 well before the end of statutory time limit on 31.03.2022. The revisionary order dated 08.03.2024 presently contested by the appellant is on account of directions of this tribunal 2022 (7) TMI 1534 - ITAT CHENNAI . Thus no case of revisionary action taken by the PCIT beyond the available statutory time limit is made out against the Revenue. Revisionary order suffering from the want of jurisdiction - Revisionary Jurisdiction gets vested in a PCIT if the order to be revised is found to be erroneous in so far as it is prejudicial to the interest of the Revenue. Material on records indicate that the case selected for complete scrutiny under CASS on the issue of cash deposits made in its bank accounts during demonetization period. The PCIT noted that copies of ledger of the assessee showed cash payments in excess of Rs. 20,000/-. Section 40A(3) of the Act mandates disallowance of expenses cash expenses in excess of Rs. 20,000/-. The assessee had admitted before the PCIT in revisionary proceedings that it had entered into cash transactions exceeding the limits prescribed u/s 40A(3) but its case was falling within the exemption clause of business expediency. The order of the Ld. AO nowhere indicates that any of the issues discussed by the Ld. PCIT in the revisionary order were enquired into by him during assessment proceedings. The Ld. AO has passed a very cryptic order alluding towards lackadaisical approach. There is nothing in the order to indicate as what was to be examined and how was it examined. There is not even an whimper of evidence to suggest that the cash transactions for which complete scrutiny was ordered was at all examined by the Ld. AO. To the extent the order of the Ld. AO falls within the mischief of an order being erroneous in so far as it is prejudicial to the interest of the Revenue as mandated in section 263. Arguments of assesses qua existence of element of business expediency have been adequately countered by the PCIT in his revisionary orders. Material available on records indicate that this was a case of complete scrutiny under CASS to examine the issue of cash deposits. Consequently, it was incumbent upon the Ld. AO to have examined assessee s affairs carefully, inter-alia, including inspection and examination of Form-3CD enclosed with the return of income. The Ld. CIT(A) has drawn his conclusions indicating that the same was not enquired into by the Ld. AO. To the extent the order suffers from erreonity of being an order prejudicial to the interest of Revenue. Further, the copies of the ledger examined and discussed by the PCIT in his revisionary order were produced before the Ld. AO during assessment proceedings and evidently they were not examined qua cash payments of about Rs. 13,99,815/-. Thus once again the order of the Ld. AO becomes erroneous in so far as it is prejudicial to the interest of the Revenue and the PCIT would be rightly assuming its revisionary powers. We are therefore hold the view that the PCIT had lawful revisionary jurisdiction to be exercised in the case. The arguments of the appellant therefore fails. Matter concerning applicability of section 40A(3) was considered by the Ld. AO in original proceedings - DR held view that no such fact is available in the assessment order. Upon hearing the Ld. Counsel for the assessee we hold the view that the impugned assessment order is totally silent that the Ld. AO considered any matter concerning applicability of section 40A(3). The only addition made by the Ld.AO was an account of unsubstantiated purchases - The arguments of the appellant therefore fails on this aspect as well. Examination of applicability of penal provisions in terms of 269SS and 269T could not be subject matter of revisionary proceedings and that in the absence of satisfaction recorded in the original order, the same cannot be substituted by way of a revisionary order - It is noted that the PCIT has, in principle, pointed towards two mistakes firstly being that expenses amounting to Rs. 13,99,815/- were falling under the purview of disallowance of u/s 40A(3) and repayment of loan was done by cash leading to presumption of application of provisions of section 269SS and section 269T r.w.s 271D. It is pertinent to note that PCIT has merely concluded that the above were the mistakes which contributed to the order falling in the category of an order being erroneous in so far as it is prejudicial to the interest of the Revenue and thus he exercising his revisionary authority u/s 263, set aside the order dated 21.12.2019 of the Ld. AO directing him to pass a fresh assessment order, inter-alia, including initiation of any consequential penalty as per law. In this view of the matter we hold the view that the PCIT has not transgressed his jurisdiction and the order under section 263 dated 08.03.2024 passed by him does not require any interference by us at this stage. Accordingly, all the grounds of appeal being 2 11, raised by the assessee are dismissed.

Summary

Issues Involved:
1. Ex-parte revisionary order u/s 263.
2. Jurisdiction and statutory time limit of the revisionary order.
3. Examination of cash transactions and applicability of Section 40A(3).
4. Examination of loans and applicability of Sections 269SS, 269T, and 271D.
5. Adequacy of the Assessing Officer's original assessment order.

Detailed Analysis:

1. Ex-parte Revisionary Order u/s 263:
The appellant contended that the Principal Commissioner of Income Tax (PCIT) passed an ex-parte revisionary order without providing an adequate opportunity for defense. However, the Tribunal found that the appellant was a habitual defaulter in responding to statutory notices. The PCIT had provided multiple opportunities for the appellant to present its case, including the appellant's written submissions dated 23.02.2024. The Tribunal concluded that the PCIT had duly considered the appellant's defense and the argument of inadequate opportunity was rejected.

2. Jurisdiction and Statutory Time Limit:
The appellant argued that the revisionary order was passed beyond the statutory time limit and without jurisdiction. The Tribunal clarified that Section 263 of the Income Tax Act empowers the PCIT to revise orders that are erroneous and prejudicial to the interest of the Revenue within two years from the end of the financial year in which the order sought to be revised was passed. The original assessment order was passed on 21.12.2019, and the first revisionary order was passed on 23.03.2022, within the statutory limit. The contested revisionary order dated 08.03.2024 was a result of Tribunal directions and was within the lawful jurisdiction and time limit.

3. Examination of Cash Transactions and Applicability of Section 40A(3):
The PCIT noted that the appellant made cash payments exceeding Rs. 20,000, which should have been disallowed under Section 40A(3). The appellant admitted to these cash transactions but claimed they were due to business expediency. The Tribunal found that the Assessing Officer (AO) did not examine these transactions during the original assessment, rendering the order erroneous and prejudicial to the Revenue. The Tribunal upheld the PCIT's revisionary jurisdiction to address these issues.

4. Examination of Loans and Applicability of Sections 269SS, 269T, and 271D:
The PCIT identified violations of Sections 269SS and 269T, as the appellant received and repaid loans in cash. The appellant argued that these issues could not be introduced in revisionary proceedings. The Tribunal noted that the PCIT highlighted these as errors contributing to the order being erroneous and prejudicial to the Revenue. The PCIT directed the AO to pass a fresh assessment order, including the initiation of any consequential penalties. The Tribunal found no transgression of jurisdiction by the PCIT.

5. Adequacy of the Assessing Officer's Original Assessment Order:
The appellant claimed that the AO had considered the applicability of Section 40A(3) during the original assessment. The Tribunal found no evidence in the assessment order indicating such consideration. The AO's order was deemed cryptic and lacked examination of the appellant's cash transactions and loans. The Tribunal concluded that the AO's order was erroneous and prejudicial to the Revenue, justifying the PCIT's revisionary action.

Conclusion:
The Tribunal dismissed the appeal, upholding the PCIT's revisionary order under Section 263. The Tribunal found that the PCIT acted within the statutory time limit and jurisdiction, and the AO's original assessment lacked adequate examination of critical issues, warranting revision. The appellant's grounds of appeal were rejected, and the revisionary order was sustained.