2023 (1) TMI 701 - AT - Income Tax

Tribunal rules in favor of appellant, finding Assessing Officer's assessment accurate. PCIT's intervention deemed unwarranted.

Maruti Construction Co. Versus Principal Commissioner of Income Tax, Rajkot-1.

The Tribunal allowed the appeal, ruling in favor of the appellant, as it found that the Assessing Officer had appropriately considered and addressed the ... Revision u/s 263 - AO failed to satisfy Section 69C being unexplained expenditure which may attract higher tax liability as per Section 115BBE - HELD THAT:- It is pertinent to note that the AO has given a detailed finding in respect of unexplained expenses related to Sub-contract and the same has been taken into account after verifying the evidences produced during the assessment proceedings. AO has properly adjudicated the issue and made the addition. Invocation of Section 69C of the Act does not arise in the present case as the source of the expenditure was already explained by the assessee and, therefore, it does not amount to undisclosed expenditure under Section 69C but the same was related to Sub-contract expenses for which the relevant details and the explanation was not accepted by the Assessing Officer. Therefore, invocation of Section 263 of the Act which is revisionary statute cannot be exercised by PCIT as the Assessing Officer has passed just and proper assessment order by taking interest of the Revenue and thus it does not amount to erroneous or prejudicial to the interest of Revenue. Thus, appeal of the assessee is allowed. Issues:1. Jurisdiction under section 263 of the Income Tax Act.2. Application of provisions of Section 69C and 115BBE of the Act.3. Proper examination of impugned issues by the Assessing Officer.4. Revision of assessment order under section 263 of the Act.Jurisdiction under section 263 of the Income Tax Act:The appeal was filed against the order passed by the PCIT, Rajkot-1 for the Assessment Year 2017-18. The PCIT observed that the Assessing Officer failed to justify unexplained expenditure under Section 69C which could attract higher tax liability as per Section 115BBE. A show cause notice was issued for revision under Section 263 of the Act, stating that the order of the Assessing Officer was erroneous and prejudicial to the Revenue's interest. The PCIT directed a fresh assessment invoking Section 263.Application of provisions of Section 69C and 115BBE of the Act:The Assessing Officer made an addition for unexplained expenses related to sub-contract, but the PCIT found the assessment lacking in justifying Section 69C unexplained expenditure. The PCIT held that the Assessing Officer's order was prejudicial to Revenue's interest and directed a fresh assessment under Section 263. The appellant argued that the Assessing Officer properly examined the issue, and the invocation of Section 69C was not applicable as the source of expenditure was explained, relating to sub-contract expenses.Proper examination of impugned issues by the Assessing Officer:The appellant contended that during assessment proceedings, all necessary details and submissions related to unexplained expenditure were provided, and the Assessing Officer had conducted proper inquiries. The appellant cited various court decisions to support their case, emphasizing that the Assessing Officer had correctly not invoked Section 69C and, therefore, the PCIT's revision under Section 263 was unwarranted. The appellant maintained that the Assessing Officer's assessment was just and proper.Revision of assessment order under section 263 of the Act:The appellant argued that the PCIT's exercise of revisionary powers was unwarranted as the Assessing Officer had adequately considered and adjudicated on the issue of unexplained expenses related to sub-contract. The Tribunal noted that the Assessing Officer had made a detailed finding on the issue, properly verifying the evidence and making the necessary addition. It was concluded that the Assessing Officer's assessment was correct, and the PCIT's intervention under Section 263 was not justified. Consequently, the appeal of the assessee was allowed, and the order pronounced in favor of the appellant.