2020 (9) TMI 273 - AT - Income Tax

Improper Revision by PCIT under Section 263 Reversed by ITAT

The ITAT ruled that the PCIT wrongly exercised revision jurisdiction under Section 263 of the Income Tax Act. The AO had made adequate inquiries, and the ... Revision u/s 263 by PCIT - as observed AO failed to made independent inquiries with regard to the genuineness of the agricultural income, sundry creditors and mismatching in sales turn over - HELD THAT:- PCIT had asked the assessee about the genuineness/validity of various claims to which the assessee had given a detailed reply. Once a point wise reply was given by the assessee, then a duty was cast upon the Ld. PCIT to examine the reply of the assessee and form a prima-facie opinion as to whether the order of the AO was erroneous so far as it was prejudicial to the interest of Revenue. Perusal of the impugned order of the Ld. PCIT reveals that the Ld. PCIT without considering the submission of the assessee and even without giving any prima-facie findings that explanation given by the assessee was not correct or that the same was not reliable, proceeded to hold that the order of the Assessing Officer was erroneous and prejudicial to the interest of Revenue because of the inadequate inquires. Action of the Ld. PCIT without considering the explanation given by the assessee and without pointing out as to what other enquires were required to be made by the Assessing Officer in the facts and circumstances of the case, has set aside the order of the Assessing Officer and remanded the matter back to the file of the Assessing Officer for passing of the assessment order afresh. The above action of the Ld. PCIT cannot be held to be justified. Merely because the Assessing Officer has not discussed about the enquires made by him in detail in the assessment order is no ground to hold that the order of the Assessing Officer is erroneous and prejudicial to the interest of Revenue. PCIT in this case wrongly exercised revision jurisdiction u/s. 263 - Decided in favour of assessee. Issues Involved:1. Genuineness of Agricultural Income2. Sales Turnover Mismatch3. Sundry Creditors Verification4. Verification of Unsecured LoansDetailed Analysis:1. Genuineness of Agricultural Income:The Principal Commissioner of Income Tax (PCIT) observed that the Assessing Officer (AO) failed to make independent inquiries regarding the genuineness of the agricultural income. The assessee contended that during the assessment proceedings, the AO had inquired about the agricultural land and income, and the assessee had provided evidence of holding 37.5 acres of land, including a photocopy of the WILL and J forms. The sale proceeds were received through cheques, and the net agricultural income was consistent with previous years. However, the PCIT did not accept this explanation and deemed the AO's order erroneous and prejudicial to the interest of Revenue due to inadequate inquiries.2. Sales Turnover Mismatch:The PCIT noted a mismatch in sales turnover, which the AO did not independently verify. The assessee argued that there was no mismatch, as the total sales as per books and returns were Rs. 71,46,06,546. Evidence supporting this was provided during the assessment proceedings. Despite this, the PCIT set aside the AO's order, directing a fresh assessment.3. Sundry Creditors Verification:The PCIT found that the AO did not make necessary inquiries regarding sundry creditors. The assessee provided copies of accounts from its books and those of the sundry creditors, and the AO had called for information under Section 133(6), finding no discrepancies. The PCIT, however, did not consider this sufficient and deemed the AO's order erroneous and prejudicial to the interest of Revenue.4. Verification of Unsecured Loans:The issue of unsecured loans was not part of the limited scrutiny. The assessee argued that this was not a relevant issue for the current assessment. The PCIT included this in his revision jurisdiction, which the assessee contested.Tribunal's Findings:The ITAT Chandigarh found that the PCIT did not properly consider the assessee's explanations and evidence. The PCIT failed to pinpoint specific deficiencies in the AO's inquiries or explain why the assessee's explanations were unsatisfactory. The Tribunal emphasized that the PCIT must make or cause to make necessary inquiries to justify the revision of the AO's order. The Tribunal highlighted that the deeming provisions of Section 263 do not grant arbitrary powers to the PCIT to revise any order without proper justification.The Tribunal cited the case of 'Narayan Tatu Rane vs. Income Tax Officer,' emphasizing that the PCIT must demonstrate that the AO's inquiries were not reasonable or adequate. The Tribunal concluded that the PCIT's action was unjustified and quashed the impugned order, allowing the assessee's appeal.Conclusion:The ITAT ruled that the PCIT wrongly exercised revision jurisdiction under Section 263 of the Income Tax Act. The AO had made adequate inquiries, and the PCIT did not provide sufficient reasons to deem the AO's order erroneous and prejudicial to the interest of Revenue. The Tribunal quashed the PCIT's order and allowed the assessee's appeal.