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of <h1>Tribunal quashes Section 263 proceedings, upholds AO's order. Appeal allowed as conditions not met.</h1> <h3>Arihant Technology Pvt. Ltd. Versus Pr. CIT New Delhi</h3> Arihant Technology Pvt. Ltd. Versus Pr. CIT New Delhi - [2020] 79 ITR (Trib) 119 (ITAT [Del]) Issues Involved:1. Justification of the order passed under Section 263 of the IT Act.2. Examination of accommodation entry of Rs. 40,00,000/-.3. Assessment of the AO's verification and enquiry process.4. Applicability of legal precedents and twin conditions for invoking Section 263.Issue-wise Detailed Analysis:1. Justification of the order passed under Section 263 of the IT Act:The appeal was filed against the order dated 22.03.2019 passed under Section 263 of the IT Act for the A.Y.2009-10. The Pr.CIT set aside the AO's order, claiming it was erroneous and prejudicial to the interest of the revenue due to inadequate verification of the accommodation entry of Rs. 40 lacs received by the assessee. The Tribunal found that the AO had conducted necessary enquiries and adopted a possible view, thus the Pr.CIT's invocation of Section 263 was unjustified.2. Examination of accommodation entry of Rs. 40,00,000/-:The case was reopened based on information that the assessee received an accommodation entry from companies floated by Sh. Surinder Kumar Jain and Sh. V. K. Jain. The AO accepted the returned loss after considering the details provided by the assessee and the lender company, including ITR, bank statements, and confirmation letters. The Pr.CIT, however, argued that the AO failed to verify the identity, creditworthiness, and genuineness of the transaction adequately.3. Assessment of the AO's verification and enquiry process:The AO issued a notice under Section 133 (6) to M/s. Sri Amarnath Finance Pvt. Ltd., which responded with the required documents. The Tribunal found that the AO had conducted necessary enquiries and adopted a possible view. It was held that action under Section 263 can only be taken when there is a lack of enquiry or no enquiry, which was not the case here.4. Applicability of legal precedents and twin conditions for invoking Section 263:The Tribunal referred to several legal precedents, including CIT Vs. Software Consultants, CIT Vs. Monarch Educational Society, and CIT Vs. DLF Limited, which established that Section 263 can be invoked only when the order is both erroneous and prejudicial to the interest of the revenue. The Tribunal concluded that the AO's order was not erroneous as the AO had taken a possible view after conducting necessary enquiries. Therefore, the twin conditions for invoking Section 263 were not satisfied.Conclusion:The Tribunal quashed the proceedings initiated by the Pr.CIT under Section 263, allowing the appeal filed by the assessee. The order of the AO was upheld, and the grounds raised by the assessee were accepted. The Tribunal emphasized that merely because the Pr.CIT disagreed with the AO's conclusion, it did not justify invoking Section 263. The Tribunal's decision was pronounced in the open court on 03.03.2020.
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