2021 (8) TMI 805 - AT - Income Tax

Tribunal quashes PCIT's order under Section 263, finding AO's inquiries sufficient.

Smt Surinder Kaur Brar D/o. Sh. Pal Singh, Sh. Santokh Singh Brar Prop. M/s. EssEss Filling Station, Sh. Gurbachan Singh Brar S/o. Sh. Nidhan Singh Brar Versus ITO, Ward – 2 Moga

The Tribunal quashed the order passed by the Principal Commissioner of Income Tax (PCIT) under Section 263, holding that the Assessing Officer (AO) had ... Revision u/s 263 - receipt of on-money - incriminating material found in search or not? - HELD THAT:- In the present case, the enquiries and verification were made by the Assessing Officer Assesse mentioned hereinabove, despite that the PCIT had mentioned that the enquiry should have been made from Shri Amarjeet Singh Randhawa as well as from the purchaser of the property regarding the monitoring consideration involved in the sale purchase of the property. In our view, the conclusion of the PCIT was erroneous as no addition can be made on the basis of dumb document namely the photocopy of the Agreement to Sell which did not bear the signature of the Assessee. As mentioned that the two cases were assessed at Chandigarh and the amount was added back which was also confirmed by CIT Appeal. In our view this finding of the PCIT is again required to be rejected as in the Appeal filed by Shri Amarjeet Singh Randhawa and Smt. Amandeep Kaur,2020 (12) TMI 255 - ITAT CHANDIGARH] were allowed by the Tribunal and thereby the addition made of the said amounts have been deleted by the Tribunal . Once the order passed by the CIT Appeal in the hands of the co-seller namely Shri Amarjeet Singh Randhawa and Smt. Amandeep Kaur was passed by the Tribunal and the additions were deleted, then no addition can be made in the hands of the Assesse who were neither the signatory of the Agreement nor any GPA was granted in favour of Shri Amarjeet Singh Randhawa. In our view, the order passed under Section 263 would unsettle the order passed by the Tribunal in the case of Shri Amarjeet Singh Randhawa. PCIT should himself have conducted the enquiry or causing to make such enquiries have passed the order under Section 263. In the present case, despite the material available on record, no further enquiry were made by the PCIT and had simply relied upon the finding recorded by the CIT Appeal in the hands of co-owners. In the present case, sufficient enquiries were made and in the absence of the original document , which was not signed by the Assesse, in the absence of the GPA in favour of Shri Amarjeet Singh Randhawa and any other evidence proving the receipt of onmoney at the time of registration of sale deed, it will not be possible for the Assessing Officer to make additions in the hands of the Assessee before us. PCIT has failed to prove how the order passed by the Assessing Officer was erroneous in the absence of any incriminating to prove the receipt of on-money. - The order passed by the PCIT under Section 263 was without any jurisdiction and accordingly we quashed the same - Decided in favour of assessee. Issues Involved:1. Justification of the order passed under Section 263(1) of the Income Tax Act, 1961.2. Validity of the assessment order dated 30-03-2015 under Section 153C read with Section 153A of the Income Tax Act, 1961.3. Adequacy of the inquiries made by the Assessing Officer.4. Verification of the genuineness of sundry creditors.5. Application of Explanation 2 to Section 263 of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Justification of the order passed under Section 263(1) of the Income Tax Act, 1961:The Principal Commissioner of Income Tax (PCIT) issued a Show Cause Notice on 14.02.2017, citing that the Assessing Officer (AO) failed to make adequate inquiries regarding an Agreement to Sell and the minutes of the Board Meeting of Great Value Infra Promoters Private Limited. The PCIT concluded that the AO's order was erroneous and prejudicial to the interest of the Revenue. The PCIT's order was based on the assertion that the AO had not made independent inquiries from the concerned parties and had accepted the submissions made by the assessee without further verification.2. Validity of the assessment order dated 30-03-2015 under Section 153C read with Section 153A of the Income Tax Act, 1961:The AO reopened the case under Section 153C based on documents found during a search and seizure operation at the premises of M/s Godwin Group of Cases. The AO issued notices under Sections 143(2) and 142(1) and conducted inquiries, including issuing show cause notices to the assessee. The AO concluded that no addition could be made based on the photocopy of the Agreement to Sell, which did not bear the signatures of the assessee. The AO also considered the minutes of the Board Meeting but found no evidence of any on-money payment over and above the sale consideration mentioned in the Agreements.3. Adequacy of the inquiries made by the Assessing Officer:The AO conducted inquiries by issuing show cause notices and obtaining responses from the assessee. The AO concluded that the alleged document (Agreement to Sell) was a photocopy and did not bear the signatures of the assessee. The AO also considered the minutes of the Board Meeting of Great Value Infra but found no evidence of any on-money payment. The Tribunal noted that the AO had made adequate inquiries and that the PCIT's assertion that more inquiries were required was not justified.4. Verification of the genuineness of sundry creditors:The PCIT held that the AO failed to verify the genuineness of sundry creditors, which was not raised in the Show Cause Notice. The Tribunal found that the AO had made adequate inquiries and that the PCIT's assertion was not justified. The Tribunal noted that the AO had accepted the return of income filed by the assessee after making adequate inquiries.5. Application of Explanation 2 to Section 263 of the Income Tax Act, 1961:The Tribunal noted that Explanation 2 to Section 263, inserted by the Finance Act, 2015, w.e.f. 01.06.2015, provides that an order would be deemed to be erroneous and prejudicial to the interest of Revenue if the order was passed without making inquiries or verification which should have been done. However, the Tribunal found that the AO had made adequate inquiries and verification. The Tribunal also referred to judicial precedents, including the judgment of the Delhi High Court in the case of Brahma Centre Development Private Limited, which held that Explanation 2 to Section 263 is only prospective in nature.Conclusion:The Tribunal quashed the order passed by the PCIT under Section 263, holding that the AO had made adequate inquiries and that the PCIT's assertion of inadequate inquiry was not justified. The Tribunal found that the AO's order was not erroneous or prejudicial to the interest of the Revenue and that the PCIT had failed to prove any incriminating evidence to support the receipt of on-money. The Tribunal allowed the appeals filed by the assessee.