2021 (11) TMI 630 - AT - Income Tax

Tribunal rules in favor of assessee, quashing section 263 revision order and upholding AO's assessment.

Radhika Corporation Versus The Principal Commissioner of Income Tax- (Central), Surat

Radhika Corporation Versus The Principal Commissioner of Income Tax- (Central), Surat - TMI Issues Involved:- Non-verification of cash credit of Rs. 2.28 crore- Non-verification of cash in hand of Rs. 75 lakhs- Understatement of income of the project- Non-mentioning reference of seized document/evidence in the satisfaction note under section 153C of the Act- Validity of declaration under IDS-2016Issue-wise Detailed Analysis:1. Non-verification of Cash Credit of Rs. 2.28 Crore:The Principal Commissioner of Income Tax (PCIT) identified that the Assessing Officer (AO) did not verify the unsecured loans during the assessment. The assessee contended that detailed submissions and explanations were provided to the AO, who verified and accepted them. The assessee argued that the AO had made adequate inquiries and that no evidence of bogus loans was found during the search and survey actions. The Tribunal noted that the AO had issued notices and received detailed replies from the assessee, which were verified. Thus, the AO's acceptance of the unsecured loans was found to be in order.2. Non-verification of Cash in Hand of Rs. 75 Lakhs:The PCIT noted that the AO failed to verify the cash in hand and cash deposits. The assessee clarified that the actual cash deposit was Rs. 6,00,000 and not Rs. 20,20,000 as mentioned in the show cause notice. The AO had verified the complete cash book and bank book during the assessment proceedings. The Tribunal found that the AO had indeed verified the cash transactions, and the PCIT's observation was incorrect.3. Understatement of Income of the Project:The PCIT observed that the AO did not verify the understatement of income from the project. The assessee explained that all transactions were accounted for in the balance sheet and profit and loss account. The assessee had declared a closing work-in-progress (WIP) stock of Rs. 4,07,504, which was reflected in the return of income. The Tribunal found that the AO had considered the disclosure made under the Income Disclosure Scheme (IDS), which was higher than the income reflected in the impounded material. Thus, the AO's assessment was not erroneous.4. Non-mentioning Reference of Seized Document/Evidence in the Satisfaction Note under Section 153C:The PCIT noted that the AO did not mention the reference of seized documents in the satisfaction note. The assessee argued that the AO had verified all the seized materials and framed the assessment order under the supervision of the Joint Commissioner of Income Tax (JCIT). The Tribunal held that even if the reference was not mentioned, the AO had conducted a thorough verification, and the assessment order was valid.5. Validity of Declaration under IDS-2016:The PCIT questioned the validity of the declaration made under IDS-2016. The assessee contended that the IDS declaration was made before the issuance of notice under section 153C and was accepted by the PCIT. The Tribunal noted that the IDS declaration was never questioned or revoked by the authorities, and the tax paid under IDS was not refunded. The AO had no authority to disregard the IDS declaration, which was valid and accepted.Conclusion:The Tribunal concluded that the AO had conducted adequate inquiries and verifications during the assessment proceedings. The PCIT's observations were not justified, as the AO's assessment order was neither erroneous nor prejudicial to the interests of the revenue. The Tribunal quashed the revision order under section 263 of the Act, allowing the appeal of the assessee.