2025 (4) TMI 787 - AT - Income Tax

Revision u/s 263 - Unexplained sources of cash deposits during the demonetization period - HELD THAT - After having satisfied with the explanation as furnished by the assessee AO chose to accept the returned income of the assessee. The Ld. AO had raised a specific query on sources of cash deposits which was duly substantiated by the assessee. Thus it is a case of acceptance of one of the plausible views which was more on facts and the said view could not be said to be opposed to any law or statutory provisions. AO in our opinion had taken one of the plausible views in the matter and therefore Ld. Pr. CIT could not be said to be justified in substituting the view of Ld. AO with that of his own view. Simply because some further verification was required or simply because the verification was not done in a particular manner the same could not justify revision of the order unless it was shown that the view of Ld. AO was erroneous or opposed to any law. The Hon ble Supreme Court in Malabar Industrial Co. Ltd. 2000 (2) TMI 10 - SUPREME COURT has held that the phrase prejudicial to the interests of the revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of the revenue. Where two views are possible and AO has preferred one view against another view order could not be said to be erroneous or prejudicial to the interest of the revenue. Thus the impugned revision of assessment order could not be sustained in law. Decided in favour of assessee.

ISSUES PRESENTED and CONSIDERED

The primary legal question considered was whether the invocation of revisionary jurisdiction under Section 263 by the Principal Commissioner of Income Tax (Pr. CIT) was justified. This involved examining whether the assessment order passed by the Assessing Officer (AO) under Section 143(3) was erroneous and prejudicial to the interests of the revenue. Additionally, the Tribunal considered whether the delay in filing the appeal should be condoned.

ISSUE-WISE DETAILED ANALYSIS

Condonation of Delay

The Tribunal addressed the issue of a 304-day delay in filing the appeal. The appellant argued that the delay was due to incorrect advice from previous counsel and the appellant's lack of education. The Tribunal, referencing the principles laid down by the Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji & Ors., decided to condone the delay, emphasizing the importance of substantial justice over procedural technicalities.

Invocation of Revisionary Jurisdiction under Section 263

Relevant Legal Framework and Precedents

The legal framework involved Section 263 of the Income Tax Act, which allows the Pr. CIT to revise an assessment order if it is erroneous and prejudicial to the interests of the revenue. The Tribunal also referred to precedents such as Malabar Industrial Co. Ltd. vs. CIT and CIT vs. Max India Ltd., which establish that not every loss of revenue constitutes prejudice to the revenue's interests. An order is not erroneous if the AO has adopted one of the permissible legal views.

Court's Interpretation and Reasoning

The Tribunal noted that the AO had scrutinized the assessee's return under Section 143(3) specifically to examine the sources of cash deposits during the demonetization period. The AO had raised queries and received satisfactory explanations from the assessee, leading to the acceptance of the returned income. The Tribunal found that the Pr. CIT's revisionary order aimed to broaden the scope of enquiry without establishing how the AO's order was erroneous or prejudicial to the revenue's interests.

Key Evidence and Findings

The assessee provided detailed documentation, including bank statements, cash book, and explanations for cash deposits, which the AO had considered. The Tribunal found that the AO had exercised due diligence and accepted a plausible view based on the evidence presented.

Application of Law to Facts

The Tribunal applied the principle that when two views are possible, and the AO has taken one permissible view, the order cannot be deemed erroneous. The Tribunal found that the AO's acceptance of the assessee's explanations was a legitimate exercise of discretion.

Treatment of Competing Arguments

The Tribunal considered the Pr. CIT's argument that further verification was necessary and that the AO had not conducted enquiries in a specific manner. However, the Tribunal concluded that the Pr. CIT's concerns were based on mere apprehensions without concrete evidence of error or prejudice.

Conclusions

The Tribunal concluded that the revisionary order under Section 263 was unjustified, as the AO had taken a permissible view supported by evidence. The Tribunal restored the original assessment order.

SIGNIFICANT HOLDINGS

Core Principles Established

The Tribunal reinforced the principle that an assessment order is not erroneous or prejudicial if the AO has adopted one of the permissible views in law. It emphasized that revisionary jurisdiction cannot be invoked based on mere apprehensions or to direct enquiries in a specific manner.

Final Determinations on Each Issue

The Tribunal allowed the appeal, condoning the delay and setting aside the revisionary order under Section 263. The original assessment order by the AO was restored.

← Previous Next →