2023 (7) TMI 468 - AT - Income Tax

Tax Tribunal overturns PCIT's revision order, finds AO's actions valid under section 263

The Tribunal held that the Principal Commissioner of Income Tax erred in invoking revision jurisdiction under section 263 of the Income-tax Act. The ... Revision u/s 263 by CIT - cash deposit made during the demonetization period - PCIT directed the ld. AO to issue notice u/s 133(6) to the various donors and re-examine the veracity of the gifts received by the assessee and this direction was given by the ld. PCIT before the completion of revision proceedings u/s 263 and AO accordingly issued notices u/s 133(6) to the donors and all the donors duly replied directly before the ld. AO in response to notice u/s 133(6) confirming the fact of giving gifts to the assessee by explaining their sources - HELD THAT:- We hold that the ld.AO in the original assessment proceedings itself had made adequate enquiries with regard to the cash gifts received by the assessee and that the ld. AO had again examined the veracity of the gifts at the behest of ld. PCIT during revision proceedings u/s 263 of the Act, by issuing notices u/s 133(6) of the Act, which stood directly complied with by the donors and no adverse inferences were drawn by the ld. AO on the documents furnished by the donors. Hence the AO had taken the only plausible and correct view on the issue of receipt of cash gifts by the assessee. Once a plausible view has been taken by the ld. AO, the same cannot be subjected to revision u/s 263 of the Act. The law is very well settled on this issue by the decisions of Malabar Industrial Co Ltd [2000 (2) TMI 10 - SUPREME COURT] and Max India Ltd [2007 (11) TMI 12 - SUPREME COURT] - Hence we hold that the ld. PCIT had grossly erred in invoking revision jurisdiction u/s 263 - Decided in favour of assessee. Issues involved:The only issue in this case is whether the Principal Commissioner of Income Tax was justified in invoking revision jurisdiction under section 263 of the Income-tax Act regarding the assessment order passed by the Income-tax Officer.Details of the Judgment:1. The assessee, engaged in property development, filed a return for AY 2017-18 declaring income. The assessment was selected for limited scrutiny regarding cash deposits during demonetization. The AO sought details of a significant cash deposit, which the assessee denied making. The AO agreed but added to the cash balance. The PCIT revised the assessment under section 263, focusing on cash gifts received by the assessee, deeming them unexplained. The PCIT disregarded explanations and invoked section 263 without prior notice on Explanation 2.2. The assessee explained the cash gifts from family members, providing bank statements and affidavits. The PCIT doubted the donors' capacity and concluded the gifts were unexplained credits. The PCIT did not consider the donors' responses to AO's inquiries post-revision. The Tribunal found the AO conducted thorough inquiries, verified the gifts, and directed further verification. The PCIT's revision was deemed unwarranted as the AO's actions were reasonable and compliant with legal precedents.3. The Tribunal held the PCIT erred in invoking section 263, as the AO's actions were valid, and the revision lacked merit. The appeal was allowed, and the PCIT's revision order was quashed.This summary provides a detailed overview of the judgment, highlighting the issues involved and the Tribunal's decision on each issue.