2021 (10) TMI 1291 - AT - Income Tax

Tribunal quashes revision orders, upholds Assessing Officer's actions in favor of assessee

M/s. Radhika Construction Versus The Principal Commissioner of Income Tax-Central, Surat

The Tribunal quashed the revision orders under section 263 for three assessment years, ruling in favor of the assessee. The Tribunal found that the ... Revision u/s 263 by CIT - non-verification of cash loan received and repaid - eligible approval granted by the JCIT - search and survey of SRK group and it related parties, of which the assessee is also part, has resulted in to impounding of documents/ books of accounts and evidence related with evidence of undisclosed receipt and expenses in respect of project Radhika Homes - initiation of action under section 153C - PCIT held that AO while recording satisfaction for initiating assessment proceedings shown no reference of seized document/evidence - HELD THAT:- We find the there is no dispute that the AO while passing the assessment order accepted the claims of the assessee in non- speaking order. It is not the case of ld PCIT that the AO is not authorised (empowered) to accepted the return of income in nonspeaking order. We have seen that the AO while passing the assessment order recorded that “the Authorized representative of the assessee vide various order sheet entries have furnished the relevant details and information called for. After affording ample and adequate opportunities of being heard to the assessee, assessment proceedings have been completed on the basis of the submissions and details collected and in consequence upon the conclusion of proceeding and hearing of evidences, assessment is made by this order”. A perusal of show cause notice under section 263 dated 08.03.2021, clearly demonstrate that the ld PCIT identified all the issues which were the subject matter of the notice under section 142(1)and the questionnaire attached thereto, were issued by the assessing officer, except the issue of initiation of penalty 271D/ 271E . PCIT in his show cause notice (SCN) under section 263 has accepted that the AO made detailed questionnaire dated 03.12.2018. And on perusal record and details /evidences available on record, the PCIT noted that AO has not made further inquiry. Thus, the ld. PCIT has not made a case that there was “no enquiry” or “lack of inquiry” rather recorded that the AO called detailed inquiry. We find that the ld. PCIT has not specified that what kind of further inquiry was required, when the income disclosed in IDS was duly accepted by higher authority. And the acceptance of IDS was never questioned by Board or other superior authority then PCIT. It is the AO who has to take a conscious decision if any further inquiry is required or not. Furthermore, the assessment order was duly approved by the ld JCIT. There in not finding of ld PCIT that the approval granted by the JCIT is not proper or non-application of proper procedure. Non initiation of penalty under section 271D/ 271E we find that in case of CIT Vs Suresh G. Shah [2006 (8) TMI 101 - HIGH COURT, GUJARAT] and CIT Vs Parmanand M. Patel [2005 (7) TMI 72 - GUJARAT HIGH COURT] it was held that CIT cannot exercise his jurisdiction under section 263 for the purpose of initiation of penalty proceedings. Other also we find that the assessee has specifically in its reply to the SCN to the ld PCIT has stated that the cash was received only against the booking and no loan or such transaction was undertaken by them. The ld PCIT failed to specify the transaction on which initiation of penalty either under section 271D or 271E was warranted. And on the issues of validity of discloser in IDS, the ld PCIT has not specified that while making declaration the assessee made any misrepresentation of any facts. Once the IDS in all cases were accepted by ld. PCIT, the AO or the Range head no authority to relook or power to revoke or to examine its validity. We further find that the ld PCIT while directing the AO has not himself revoked the IDS nor directed to refund the payment of tax to the assessee. Further, we find that in the IDS the assessee has paid more tax to the revenue then the rate of normal tax, so there is no loss of revenue. Hon’ble Delhi High Court in CIT Vs Kelvinator of India Ltd [2002 (4) TMI 37 - DELHI HIGH COURT] held that if the AO has adopted one of the course permissible in law, which resulted in loss of revenue or where two view is possible and the AO has taken one view with which the CIT does not agree, it cannot be treated as erroneous order prejudicial to the interest of revenue unless view taken by the AO is not sustainable in law. At the cost of repetition, we may note that the ld PCIT neither in his show cause notice nor in ultimate / final order has held that the order passed by the AO is unsustainable in law. So far as nonverification of CASS (only issue in AY 207-18 only), we find that the ld PCIT raised this issue that the item under the CASS were not verified by the assessing officer. We find that the assessment of this year (AY2017-2018) the assessment has not been made has been made consequent of survey and not under CASS hence, the said identification of such issue is not misplaced. - Decided in favour of assessee. Issues Involved:1. Erroneous and prejudicial assessment orders under section 263.2. Non-verification of cash loans received and repaid.3. Understatement of project income.4. Non-initiation of penalty under section 271D.5. Non-verification of unsecured loans.6. Non-verification of claims of expenses and liabilities.7. Non-mentioning of seized documents in the satisfaction note under section 153C.8. Non-disallowance under section 40A(3).9. Non-verification of CASS.Detailed Analysis:1. Erroneous and prejudicial assessment orders under section 263:The Principal Commissioner of Income Tax (Pr.CIT) invoked section 263, asserting that the assessment orders for AY 2015-16, 2016-17, and 2017-18 were erroneous and prejudicial to the interests of the revenue. The Pr.CIT identified multiple issues, including non-verification of cash loans, understatement of income, and non-initiation of penalties, among others. The Tribunal emphasized that for section 263 to be invoked, the twin conditions of the order being erroneous and prejudicial to the revenue must be met. The Tribunal noted that the Assessing Officer (AO) had conducted inquiries, issued detailed questionnaires, and obtained necessary approvals, thus fulfilling the requirements of a valid assessment process.2. Non-verification of cash loans received and repaid:The Pr.CIT claimed that the AO did not verify cash loans received and repaid. However, the Tribunal found that the AO had issued detailed questionnaires and received satisfactory replies from the assessee, explaining that the amounts were 'on money' for bookings and not loans. The AO, after considering the explanations, did not draw any adverse inference, indicating that the AO had exercised reasonable judgment.3. Understatement of project income:The Pr.CIT alleged that the AO accepted the assessee's disclosure under the Income Disclosure Scheme (IDS) without verification. The Tribunal noted that the assessee had accounted for unaccounted transactions in its books and declared income under IDS, which was accepted without objection. The Tribunal highlighted that the AO had considered the declaration, and the Pr.CIT did not provide any evidence of misrepresentation by the assessee.4. Non-initiation of penalty under section 271D:The Pr.CIT criticized the AO for not initiating penalties under section 271D for cash loans. The Tribunal observed that the amounts in question were booking advances, not loans, and thus section 271D was not applicable. The Tribunal cited precedents where non-initiation of penalty proceedings could not be a ground for revision under section 263.5. Non-verification of unsecured loans:The Pr.CIT contended that the AO failed to verify unsecured loans. The Tribunal found that the AO had issued notices and received details from the assessee, who provided explanations and supporting documents. The Tribunal emphasized that the AO's decision to accept the explanations was a reasonable and plausible view, and the Pr.CIT did not demonstrate how the AO's approach was erroneous or prejudicial.6. Non-verification of claims of expenses and liabilities:The Pr.CIT argued that the AO did not verify expenses and liabilities. The Tribunal noted that the assessee's books were audited, and the AO had issued detailed questionnaires and received responses. The AO's acceptance of the explanations was deemed a reasonable exercise of judgment, and the Pr.CIT did not provide specific evidence of any irregularities.7. Non-mentioning of seized documents in the satisfaction note under section 153C:The Pr.CIT claimed that the AO did not reference seized documents in the satisfaction note. The Tribunal found that the AO had verified the seized material and framed the assessment under the supervision of the Joint Commissioner of Income Tax (JCIT). The Tribunal held that the Pr.CIT did not demonstrate how the omission rendered the assessment erroneous or prejudicial.8. Non-disallowance under section 40A(3):The Pr.CIT alleged that the AO failed to disallow expenses under section 40A(3). The Tribunal noted that when income is estimated, provisions regarding section 40A(3) are not applicable. The Tribunal cited precedents supporting this view and held that the AO's approach was reasonable and legally sustainable.9. Non-verification of CASS:The Pr.CIT raised the issue of non-verification of CASS for AY 2017-18. The Tribunal found that the assessment was not made under CASS but was a consequence of a survey. The Tribunal held that the Pr.CIT's identification of this issue was misplaced.Conclusion:The Tribunal concluded that the AO had conducted necessary inquiries, exercised reasonable judgment, and obtained required approvals. The Pr.CIT did not provide sufficient evidence to demonstrate that the AO's orders were erroneous or prejudicial to the interests of the revenue. Consequently, the Tribunal quashed the revision orders under section 263 for all three assessment years, allowing the assessee's appeals.