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TMI Blog2024 (7) TMI 1229X X X X Extracts X X X X X X X X Extracts X X X X ..... failure to make necessary inquiries would render an order erroneous. We noted the contention of the assessee that the AO s inquiry was neither inadequate nor insufficient. AO verified the identity, creditworthiness, and genuineness of the transactions in terms of Section 68 - AO s decision to accept the assessee's submissions after thorough verification cannot be deemed erroneous. We have also reviewed the judicial pronouncements relied upon by the assessee. These judicial precedents establish that revisionary action u/s 263 of the Act is not justified on grounds of inadequate inquiry if the AO has conducted sufficient inquiries and taken a permissible view. PCIT has not demonstrated that the AO's insufficient investigation has led ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration on 30-09-2018 and revised return on 31-10-2018 declaring total income at Rs. NIL. The assessee-firm was converted into a Private Limited Company, Aaravi Developers Private Limited on 31.10.2018. 2.1. The assessment under Section 143(3) of the Act was completed on 22-04-2021 accepting the returned income of the assessee. Subsequently, a notice under Section 263 of the Act was issued on 04-01-2024 by the PCIT, Ahmedabad proposing the revision of the assessment order dated 22.04.2021 on the ground that the Assessing Officer (AO) had not verified the creditworthiness of two depositors; Festino Vincom Limited and Kirit Bavishi (HUF), from whom the assessee had taken unsecured loans amounting to Rs. 6,25,00,000/-. 2.2. The PCIT set as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. [2018] 97 taxmann.com 574 and decision of Delhi Tribunal in case of Varnika RPG Trust Vs. PCIT, Gaziabad [2021] 133 taxmann.com 32. 5. The Ld.Departmental Representative (DR) contented that in the faceless regime, the AO cannot make any changes in the name and other details to consider the change in the constitution due to conversion of the firm into company and, therefore, the order is in the name of the firm. The Ld.DR also pointed out that this issue is not a ground of appeal. Also, this issue was not taken before the PCIT and, hence, should not be entertained. 5.1. On the merits of the review by the PCIT, the Ld.Counsel for the assessee, submitted that the AO had made detailed inquiries regarding the unsecured loans during the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s issue as a ground before us and also before the PCIT. We also note that the assessee has responded to all the notices of the AO and the PCIT in proper spirit. In the case of conversion of firm into a company, the outer shell of the firm is undoubtedly destroyed; it ceases to exist. Yet, in every other sense of the term, the venture continues enfolded within the new entity. In other words, the business, on a going concern basis, lives on but within the new company. It is, therefore, essential to look beyond the mere concept of destruction of entity which brings to an end or terminates any assessment proceedings. The cause of action or the complaint does not per se cease depending of course, upon the structure and objective of enactment. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions in terms of Section 68 of the Act. The AO s decision to accept the assessee's submissions after thorough verification cannot be deemed erroneous. We have also reviewed the judicial pronouncements relied upon by the assessee. These judicial precedents establish that revisionary action under Section 263 of the Act is not justified on grounds of inadequate inquiry if the AO has conducted sufficient inquiries and taken a permissible view. In the case of CIT vs. Hindustan Marketing Advertising Co. Ltd. - 46 DTR 109 (Delhi High Court), it was held that if the AO has made inquiries and the Commissioner believes more inquiries should have been made, it does not justify revision under Section 263 of the Act. Similarly, in the case of Meta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Works Pvt. Ltd.(supra) is well-placed. These rulings support the assessee s contention that the AO s order, based on due inquiry and verification, cannot be revised under Section 263 of the Act merely because the PCIT holds a different view. 6.8. We also note that the PCIT has not demonstrated that the AO's insufficient investigation has led to an erroneous assessment. In our opinion, inadequate inquiry alone does not justify revision unless it results in a prejudicial outcome for the revenue. Thus, if the AO has conducted an inquiry, however minimal, the PCIT must provide concrete evidence of the resultant error and prejudice to the revenue to justify invoking Section 263 of the Act. 6.9. In light of the above findings and considering ..... X X X X Extracts X X X X X X X X Extracts X X X X
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