2023 (3) TMI 1096 - AT - Income Tax

Tribunal sets aside PCIT's order under section 263, upholds AO's assessment as adequate inquiries were conducted.

The Tribunal allowed the appeal, setting aside the Ld. PCIT's order under section 263. The AO's assessment order was upheld as adequate inquiries were ... Revision u/s 263 by CIT - unverified/ unexplained from undisclosed sources of income - HELD THAT:- We find that the matter has been thoroughly examined by the AO wherein specific queries have been raised regarding source of gold ornaments and source of other expenditure and after due examination of the submissions and documentation filed by the assessee, AO has partially accepted the assessee’s explanation and has made the addition in the hands of the assessee and has passed a speaking order. The explanation has been called for and not accepted on face value shows due application of mind on part of the AO and the PCIT in his order has not brought out what further enquiries or verification which ought to be done and has not been done by the AO and how the order so passed by the AO can be held as erroneous and prejudicial to the interest of the Revenue. The order so passed by the AO cannot be held as erroneous in so far as prejudicial to the interest of the Revenue and the impugned order passed u/s 263 by the ld PCIT is set-aside and that of the AO’s assessment order passed u/s 147 r/w 143(3) is sustained.Appeal of the assessee is allowed. Issues Involved:1. Legitimacy of the revision of the assessment order by the Ld. PCIT under section 263 of the Income Tax Act.2. Adequacy of the Assessing Officer's (AO) inquiries and verification regarding the expenditure claimed by the assessee.Detailed Analysis:1. Legitimacy of the Revision of the Assessment Order by the Ld. PCIT under Section 263 of the Income Tax Act:The primary contention of the assessee is that the Ld. PCIT erred in revising the assessment order dated 27.12.2019 on the grounds that the AO failed to conduct proper inquiries during the assessment proceedings. The assessee argued that the AO had conducted adequate inquiries and had duly verified the submissions made regarding the expenditure on the marriage of his daughter. The Ld. PCIT, however, held that the AO did not properly verify the expenditure of Rs. 25,00,000/- claimed in a petition before the Hon'ble Punjab & Haryana High Court and that a sum of Rs. 11,38,080/- remained unexplained. The Ld. PCIT, therefore, set aside the assessment order for being erroneous and prejudicial to the interest of the Revenue.2. Adequacy of the Assessing Officer's Inquiries and Verification:The AO initially received information that the assessee had spent Rs. 25,00,000/- on his daughter's marriage and conducted preliminary inquiries. The assessee responded by stating that he had spent Rs. 16,00,000/- on the marriage, with Rs. 9,00,000/- being an alimony amount included in the petition. The AO examined the submissions, accepted the explanation regarding the alimony amount, and verified the sources of the Rs. 16,00,000/- expenditure. The AO accepted Rs. 6,30,000/- as explained and added Rs. 9,70,000/- to the assessee's income as unexplained expenditure. The Ld. PCIT, however, found the AO's inquiries insufficient and held that the entire amount of Rs. 25,00,000/- was not properly verified.Tribunal's Findings:The Tribunal noted that the AO had thoroughly examined the matter, issued notices, and verified the submissions made by the assessee. The AO had accepted the explanation regarding the alimony amount and had scrutinized the sources of the Rs. 16,00,000/- expenditure. The Tribunal found that the AO had applied his mind and had not accepted the assessee's submissions at face value. The Ld. PCIT had not specified what further inquiries were necessary or how the AO's order was erroneous and prejudicial to the Revenue. The Tribunal concluded that the AO's order was not erroneous and prejudicial to the interest of the Revenue and set aside the Ld. PCIT's order under section 263, sustaining the AO's assessment order.Conclusion:The appeal of the assessee was allowed, and the order of the Ld. PCIT under section 263 was set aside. The AO's assessment order was sustained, as the Tribunal found that the AO had conducted adequate inquiries and verification regarding the expenditure claimed by the assessee.