2024 (9) TMI 578 - AT - Income Tax

Revision u/s 263 - addition u/s 68 - AO has not made any verification or inquiry in respect of gift received by the assessee - HELD THAT - As per notice u/s 142(1) AO has made enquiry related to the large increase in the capital for which the assessee has replied the same thereby stating that the details of NRE Account of assessee s sister as well as the receipt of the money from his sister including the Bank Statement of the assessee s sister. Source was explained of receipt and, therefore, the full enquiry was conducted on the said issue related to Gift from assessee s sister to the assessee. AO at the time of assessment proceedings u/s 143(3) of the Act, has conducted thorough enquiry and in fact has made disallowance where it was necessary to do so. Therefore, merely on the basis of taking different view by the PCIT that also which is outside the scope of Section 68 of the Act (source of source) if it has been explained already by the assessee, then invocation of Section 263 of the Act in the present assessee s case is not justifiable. In fact, Hon ble Apex Court in case of Shreeji Prints (P.) Limited 2021 (9) TMI 108 - SUPREME COURT has categorically mentioned that when enquiries conducted by the AO are in detail and the AO has taken plausible view the same cannot be considered erroneous and prejudicial to the interest of Revenue and invocation of Section 263 of the Act is not justifiable. Appeal of the assessee is allowed.

Summary

Issues:
1. Whether the order passed under section 143(3) was erroneous and prejudicial to the interest of revenue, leading to the invocation of section 263 of the Act.
2. Whether the Assessing Officer conducted a thorough inquiry regarding the gift received by the assessee of Rs. 2 crores.

Analysis:

Issue 1:
The appeal was filed by the assessee against the order passed by the PCIT, Vadodara-1 for the Assessment Year 2017-18. The PCIT observed that the Assessing Officer had not made any verification or inquiry regarding the gift received by the assessee of Rs. 2 crores. The PCIT invoked Section 263 of the Act and directed the Assessing Officer to pass a fresh Assessment Order. The assessee contended that the Assessing Officer had already made detailed inquiries and accepted the genuineness, creditworthiness, and identity of the gift while passing the original assessment order under section 143(3) of the Act. The assessee relied on legal precedents to support their argument that the original assessment order was not erroneous or prejudicial to the interest of revenue. The Tribunal held that the Assessing Officer had conducted a thorough inquiry during the assessment proceedings and had taken a plausible view. Therefore, the invocation of Section 263 of the Act by the PCIT was not justified.

Issue 2:
The Assessing Officer had issued a notice under Section 142(1) of the Act, enquiring about the large increase in the capital of the assessee. The assessee provided detailed explanations and documents regarding the gift received, including the NRE Account details of the sister and the bank statement. The Tribunal noted that the source of the gift of Rs. 2 crores was explained by the assessee during the assessment proceedings. The Tribunal emphasized that the Assessing Officer had conducted a full inquiry into the issue of the gift and had accepted the explanations provided by the assessee. The Tribunal further highlighted that the invocation of Section 263 of the Act is warranted only when the Assessing Officer fails to conduct a proper inquiry or when the assessment order is erroneous or prejudicial to the revenue. In this case, since the Assessing Officer had conducted a detailed inquiry and made necessary disallowances, the Tribunal concluded that the invocation of Section 263 was not justified.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing that the original assessment order was not erroneous or prejudicial to the interest of revenue. The Tribunal held that the Assessing Officer had conducted a thorough inquiry into the relevant issues, including the gift received by the assessee, and had taken a plausible view, thereby rejecting the PCIT's decision to invoke Section 263 of the Act.