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2025 (4) TMI 201 - AT - Income TaxRevision u/s 263 - PCIT said AO has failed to conduct enquiries on some other issues while framing the reassessment - HELD THAT - We observe that in this case the proceedings u/s. 147 were initiated on the ground that the assessee has made certain payments from his credit card and verification of these payments is required as assessee did not file any return of income. As observed elsewhere that the AO issued 133(6) notice to the banks and also called for the reply from the banks. We observe that the assessee explained that the payments were made on behalf of the company and the company in turn reimbursed these expenses to the assessee. AO satisfied with the reply of the assessee as well as information received from the banks and has taken a pragmatic view and accepted the returned income of the assessee. It is settled position of law that if the point on which jurisdiction u/s. 148 has been assumed could not call for any addition then the AO is not empowered to make other additions de hors the main ground on the basis of which jurisdiction has been assumed u/s. 148 of the Act. AO has duly discharged his duties as an investigator by framing the assessment and the AO has also acted in a judicious manner while discharging his duties of an adjudicator. Therefore the view of ld. PCIT that the AO has failed to conduct enquiries on some other issues while framing the reassessment is patently wrong. PCIT cannot enlarge the scope of enquiries in reassessment proceedings particularly when the point on which jurisdiction for 147 has been assumed is not taxable in law and on facts. AO has taken one of the plausible views after calling for information from the banks and the assessee and hence the view of PCIT vis-a-vis investigation on other issues by AO is not tenable. Assessee appeal allowed.
ISSUES PRESENTED and CONSIDERED
The core legal issue considered in this judgment revolves around the assumption of jurisdiction under Section 263 of the Income-tax Act by the Principal Commissioner of Income-tax (PCIT). Specifically, whether the order of the Assessing Officer (AO) was erroneous and prejudicial to the interest of the Revenue, thereby justifying the intervention of the PCIT under Section 263. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The legal framework pertinent to this case involves Section 263 of the Income-tax Act, which empowers the PCIT to revise any order passed by an AO if it is deemed erroneous and prejudicial to the interests of the Revenue. The proceedings were initiated under Section 147, which pertains to income escaping assessment, and Section 148, which involves the issuance of a notice for reassessment. The court referenced precedents such as CIT vs. Jet Airways (I) Ltd. and Ranbaxy Laboratories Ltd. vs. CIT to support the principle that additional issues cannot be added if the primary reason for reassessment does not warrant any addition. Court's Interpretation and Reasoning The Tribunal observed that the AO had initiated proceedings under Section 147 based on payments made by the assessee via credit cards, which required verification as the assessee had not filed a return of income. The AO issued notices under Section 133(6) to banks and received satisfactory replies from both the banks and the assessee, concluding that the payments were made on behalf of the company and reimbursed to the assessee. The Tribunal emphasized that the AO had acted judiciously and fulfilled his duties as an investigator and adjudicator. The Tribunal further reasoned that the PCIT's view of enlarging the scope of enquiries was incorrect, particularly when the primary reason for reassessment was found to be non-taxable. Key Evidence and Findings The evidence considered included the replies from banks and the assessee regarding credit card payments, interest on fixed deposits, and the number of bank accounts maintained by the assessee. The Tribunal found that the AO had adequately addressed these issues during the reassessment proceedings. The Tribunal also noted that the PCIT failed to demonstrate any specific error or prejudice to the Revenue resulting from the AO's order. Application of Law to Facts The Tribunal applied the legal principles established in the cited precedents to the facts of the case, concluding that the AO had taken a plausible view based on the evidence and information available. The Tribunal held that the PCIT's attempt to expand the scope of the investigation was not justified under the circumstances. Treatment of Competing Arguments The Tribunal considered the arguments presented by the learned CIT/DR, who contended that the AO failed to conduct necessary enquiries. However, the Tribunal found these arguments unpersuasive, as the AO had addressed the primary issue for which jurisdiction under Section 147 was assumed, and no additional taxable income was identified. Conclusions The Tribunal concluded that the AO's order was neither erroneous nor prejudicial to the interest of the Revenue. The Tribunal quashed the order under Section 263, finding no error in the AO's investigation or adjudication. SIGNIFICANT HOLDINGS The Tribunal held that the PCIT cannot enlarge the scope of enquiries in reassessment proceedings when the primary issue for which jurisdiction was assumed is not taxable. The Tribunal emphasized that it is incumbent upon the PCIT to identify specific errors and demonstrate prejudice to the Revenue. The Tribunal further noted that fishing and roving enquiries are not permissible under the Income-tax Act. The Tribunal's final determination was to quash the order under Section 263, thereby allowing the appeal in favor of the assessee.
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