2022 (11) TMI 449 - AT - Income Tax

Tribunal upholds assessment order, dismisses challenge to revisionary proceedings.

The Tribunal allowed the appeal, holding that the revisionary proceedings under Section 263 were not justified. The Tribunal upheld the assessment order ... Revision u/s 263 by CIT - Scope and power of CIT - justification to set aside the assessment order passed under section 143[3] r.w.s. 153D of the Act dated 24/12/2019 and direct the assessing officer to modify the original assessment passed - HELD THAT:- We do not find any fetters on the powers of Ld.PCIT/CIT for revising any order passed by the Ld.AO, except as provided in Explanation 1(c) of the section. However, the argument of the assessee is that, powers granted to the PCIT and CIT u/s 263 becomes otiose if the authority below the rank of PCIT/ CIT i.e Joint Commissioner of Income tax, has approved the order u/s 153D of the Act. The Ld.Ar is making out an argument that, if the lower authority, u/s 153D, has approved the order, the Higher Authority i.e., PCIT and CIT lose their power to revise such orders. We do not find force in this argument of the assessee as Pr.CIT is way high above the Jt.CIT. We refer to section 116 of the Act, where the Income Tax authorities in their hierarchical order are listed, clears the doubt about it. The assessment order in the present facts are not passed under the instructions of the superior authority or under the direction of the superior authority, but merely an approval was granted by the Joint Commissioner of Income Tax under Section 153D of the Act to pass the orders. Provisions of Section 153D speak about 'prior approval for assessment in the case of search'. The section also provide for obtaining the prior approval of the Joint Commissioner for merely passing an order. Thus if the argument of the AR is to be accepted then in such cases where the assessment has been framed under Section 153A or Section 153C, the same will go out of the ambit of the provisions of Section 263 of the Act and such a view cannot be even considered to be a plausible view in the eye of law. Provisions of Section 263 of the Act give un-fettered right to the Commissioner of Income Tax to revise any order passed by the AO - Whatever was to be excluded by the law has already been provided under that Section and the only exception are the issues 'decided and considered' in the appellate orders. Therefore, the reasoning of the arguments advanced by the AR in respect of Ground no.3 falls without any legs to stand. Even the authority above PCIT and CIT cannot deprive the powers of the revision and thus there is no reason that lower authority exercising powers granted to it can prevent the PCIT or the CIT to exercise revisionary powers. Therefore, it is apparent that none of the lower authorities or even a superior authority cannot put spokes in exercising the power of the Pr.CIT. The power of the Commissioner u/s 263 is in the nature of supervisory jurisdiction. This power is granted to correct an error, which is prejudicial to the interest of the Revenue in the order of the AO, even if it is approved by the Joint Commissioner, who is also falling below the rank of the Pr. Commissioner. If the argument of the ld. AR is accepted then the supervisory authority of the Pr. Commissioner granted under the Act is hampered. Provisions of Section 263 of the Act give unfettered right to the Commissioner of Income Tax to revise any order passed by the AO. Whatever was to be excluded by the law has already been provided under that Section and the only exception are the issues 'decided and considered' in the appellate orders. Therefore, the reasoning of the arguments advanced by the Ld. AR on this line also fails and we dismiss the same. Addition u/s 68 - We are of the view that the PCIT is not justified in set aside assessment order passed u/s. 143(3). The Ld.AO had conducted enquiry based on the return filed in lieu of the notices issued post search action. A specific query has been raised as to why the amount offered by assessee at the time of recording statement u/s. 132(4) stands reduced by a sum of Rs. 4 Lakhs in response to which reply has been furnished by assessee which has been accepted by the AO and no addition has been made. The said amount has been offered to tax by assessee as business income and no addition has been made by the Ld.AO under any other provisions of the Act, applicability of section 115BBE is not possible. PCIT has stated that AO should have treated the said income as unexplained cash credit and addition should have been made u/s. 68 - This contention is not accepted as for invoking the provisions of section 68 there has to be entries in the books of account for which no explanation is offered by assessee. In the present facts of the case, the declaration by assessee is based on a seized material which is self-explanatory in terms of the parties to whom payments have been made in cash as well as cheque towards construction. In the present facts of the case, the order passed by the Ld.AO may be prejudicial however, it cannot be held to be erroneous and the Ld.AO had adopted one of the possible view. Respectfully following the ratio laid down by Hon’ble Supreme Court case of Malabar Industrial Co. Ltd. [2000 (2) TMI 10 - SUPREME COURT] we hold the revisionary proceedings initiated in the present facts to be bad in law and quash the consequential order passed dated 22/03/2022. Issues Involved:1. Validity of the revisionary proceedings initiated under Section 263 of the Income Tax Act.2. Justification for setting aside the assessment order passed under Section 143(3) read with Section 153D of the Income Tax Act.3. Assessment of the additional income declared during search proceedings and its treatment under Section 68 and Section 115BBE of the Income Tax Act.Detailed Analysis:1. Validity of the Revisionary Proceedings Initiated Under Section 263:The primary issue raised by the assessee was the validity of the revisionary proceedings initiated by the Principal Commissioner of Income Tax (Pr.CIT) under Section 263 of the Income Tax Act. The assessee contended that the assessment order passed under Section 143(3) read with Section 153D was after due verification and approval by the Joint Commissioner of Income Tax, and hence, the revisionary proceedings were not justified. The Tribunal examined the relevant legal provisions and case laws, including the decision of the Hon'ble Delhi Tribunal in the case of Smt. Abha Bansal & Others vs. Pr.CIT, and concluded that the Pr.CIT has the authority to revise any order passed by the Assessing Officer, irrespective of the approval under Section 153D. The Tribunal held that the power of the Pr.CIT under Section 263 is supervisory and can be exercised even if the assessment order is approved by a lower authority. Therefore, the Tribunal dismissed the ground raised by the assessee challenging the validity of the revisionary proceedings.2. Justification for Setting Aside the Assessment Order:The Pr.CIT set aside the assessment order on the grounds that the Assessing Officer failed to examine the source of the cash expenses declared as commission in the return of income. The Pr.CIT argued that in the absence of an explanation for the source, the amount should have been treated as unexplained cash credit under Section 68 and taxed under Section 115BBE. The assessee contended that the Assessing Officer had made specific enquiries and verified the claim during the assessment proceedings. The Tribunal noted that the Assessing Officer had indeed conducted an enquiry and accepted the explanation provided by the assessee regarding the reduction of the additional income declared during the search proceedings. The Tribunal found that the assessment order was not erroneous and the Assessing Officer had adopted one of the possible views. Therefore, the Tribunal held that the revisionary proceedings initiated by the Pr.CIT were not justified and quashed the consequential order passed.3. Assessment of Additional Income Declared During Search Proceedings:The Tribunal examined the treatment of the additional income declared during the search proceedings. The assessee had admitted an amount of Rs. 28,84,727/- as undisclosed income on account of cash payment for the construction of a house. However, upon verification, the assessee reduced the amount by Rs. 4,00,000/- and offered the net amount of Rs. 24,84,727/- under the head 'Income from other sources.' The Assessing Officer accepted this explanation and did not make any addition under Section 68. The Pr.CIT argued that the amount should have been treated as unexplained cash credit and taxed under Section 115BBE. The Tribunal held that the declaration by the assessee was based on seized material, which was self-explanatory, and the Assessing Officer had conducted the necessary verification. The Tribunal concluded that the order passed by the Assessing Officer was not erroneous and the revisionary proceedings were based on a mere change of opinion. Therefore, the Tribunal allowed the grounds raised by the assessee on the merits.Conclusion:The Tribunal allowed the appeal filed by the assessee, holding that the revisionary proceedings initiated under Section 263 were not justified. The Tribunal quashed the consequential order passed by the Pr.CIT and upheld the assessment order passed by the Assessing Officer. The Tribunal emphasized that the Assessing Officer had conducted the necessary verification and adopted one of the possible views, which cannot be considered erroneous.