2022 (3) TMI 478 - AT - Income Tax

Tribunal quashes PCIT's revisionary jurisdiction over tax assessments; AO's decisions upheld for Assessment Years 2013-17

M/s Satyam Educational Health And Charitable Trust Versus PCIT-Central, Patna

The Tribunal held that the Principal Commissioner of Income Tax (PCIT) did not validly exercise revisionary jurisdiction under Section 263. The Assessing ... Revision u/s 263 by CIT - AO has not examined/enquired some issues during the assessment proceedings and accordingly came to the conclusion that the assessments so framed in all the above 4 years from AY 2013-14 to 2016-17 were erroneous in so far as prejudicial to the interest of the revenue and revised all the above 4 assessment years by directing the AO to pass fresh assessment orders after examining all the issues - HELD THAT:- It is settled law that in order to invoke the jurisdiction u/s 263 of the Act by the PCIT, the twin conditions i.e. the order has to be erroneous and prejudicial to the interest of the revenue, have to be satisfied. In case one of the condition is satisfied out of the two, even then the PCIT cannot invoke the jurisdiction u/s 263 of the Act to revise the assessment. It is also a settled law that the jurisdiction is not available to PCIT u/s 263 of the Act to revise the assessment on the issues merely because no reference or discussion has been made in the assessment order especially when the AO has called for details/explanations from the assessee on all the issues as proposed by PCIT in the order passed u/s 263 and assessee has responded the same by filing written submissions with details/evidences which are part of the assessment records. The revisionary jurisdiction is not available to the PCIT merely on the ground that AO sought reply from the assessee during assessment proceedings which furnished by the assessee with evidences and are available in the assessment records however it did not find an elaborate discussion or reference in the assessment order. Similarly the powers of revision u/s 263 of the Act cannot be exercised arbitrarily in order to make roving enquiries and initiate fresh enquiries - Thus the jurisdiction u/s 263 can be exercised to revise the assessments where no enquiry at all has been conducted by the AO which is a case of lack of enquiry but not in a case where the AO has conducted an enquiry which in the opinion of PCIT is inadequate /insufficient without showing as to how the order framed by the AO after appreciating the evidences filed by the assessee is contrary to facts or not in accordance with law. Thus we hold that the revisionary jurisdiction has not been validly exercised by the ld PCIT. Accordingly we quash the revisionary proceedings initiated u/s 263 of the Act and the consequent orders passed u/s 263 of the Act. The appeal of the assessee is allowed. Issues Involved:1. Validity of the jurisdiction exercised by the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, 1961.2. Examination of the issues raised by the PCIT for Assessment Years (AY) 2013-14 to 2016-17.3. Whether the assessments made by the Assessing Officer (AO) were erroneous and prejudicial to the interest of the revenue.Issue-wise Detailed Analysis:1. Validity of the jurisdiction exercised by the PCIT under Section 263 of the Income Tax Act, 1961:The PCIT invoked jurisdiction under Section 263 of the Act, revising the assessments for AY 2013-14 to 2016-17. The PCIT concluded that the AO failed to examine various issues adequately, making the assessments erroneous and prejudicial to the interest of the revenue. The PCIT issued show cause notices for each assessment year, highlighting specific issues that were allegedly not properly examined by the AO.2. Examination of the issues raised by the PCIT for Assessment Years (AY) 2013-14 to 2016-17:- AY 2013-14:The PCIT noted that the assessee trust received Rs. 1,11,00,000 as an unsecured loan and purchased land from unidentified persons. The AO was accused of not examining these transactions properly. The assessee argued that the AO had issued a detailed questionnaire under Section 142(1), which included queries about the unsecured loan and land purchase. The assessee provided explanations and evidence, which the AO accepted.- AY 2014-15:The PCIT raised two issues: non-examination of a credit of Rs. 1,06,27,500 in a Punjab National Bank account and undisclosed enrollment fees of Rs. 26,71,000. The AO had issued a questionnaire under Section 142(1), and the assessee provided explanations and evidence, which the AO accepted. The assessee argued that the AO's acceptance of the explanations indicated that the issues were adequately examined.- AY 2015-16:The PCIT invoked jurisdiction for non-disclosure of fees amounting to Rs. 2,12,36,700. The AO had issued a questionnaire under Section 142(1) and received explanations and evidence from the assessee, which were accepted. The assessee argued that the AO had adequately examined the issue.- AY 2016-17:The PCIT raised three issues: suppression of investments in building amounting to Rs. 21,61,626, non-disclosure of fees amounting to Rs. 1,74,12,300, and suppression of receipts amounting to Rs. 8,74,32,476. The AO had issued a questionnaire under Section 142(1) and received explanations and evidence from the assessee, which were accepted. The assessee argued that the AO had adequately examined these issues.3. Whether the assessments made by the AO were erroneous and prejudicial to the interest of the revenue:The assessee argued that the AO had conducted detailed inquiries on all the issues raised by the PCIT and had accepted the explanations and evidence provided. The assessee contended that the AO had taken a plausible view, and the assessments could not be considered erroneous or prejudicial to the interest of the revenue merely because the PCIT had a different opinion. The assessee cited several judicial precedents to support their argument that the PCIT could not invoke Section 263 merely because the AO's order did not elaborate on the issues or because the PCIT believed further inquiry was needed.Judgment:The Tribunal held that the AO had examined all the issues raised by the PCIT during the assessment proceedings and had taken a plausible view based on the explanations and evidence provided by the assessee. The Tribunal found that the PCIT had not provided a concrete finding on how the assessments were erroneous and prejudicial to the interest of the revenue. The Tribunal quashed the revisionary proceedings initiated under Section 263 and the consequent orders passed by the PCIT, allowing the appeals of the assessee.Conclusion:The Tribunal concluded that the revisionary jurisdiction under Section 263 was not validly exercised by the PCIT. The assessments made by the AO were neither erroneous nor prejudicial to the interest of the revenue as the AO had conducted adequate inquiries and accepted the explanations and evidence provided by the assessee. The appeals of the assessee were allowed.