2023 (9) TMI 30 - AT - Income Tax

Assessee's appeal allowed, order under section 263 quashed. AO's inquiry reasonable. Revisionary order invalid.

Sunil Prasad Versus Pr. CIT-1, Patna

The appeal filed by the assessee was allowed, and the order passed under section 263 of the Act was quashed. The court held that the Assessing Officer had ... Revision u/s 263 - AO has completed the assessment without making any enquiries with regard to cash deposits during the demonetization period and penalty proceedings were not initiated u/s 271D of the Act which renders the order passed u/s 143(3) of the Act dated 04.07.2019 as erroneous and prejudicial to the interests - A/R contended that the case of the assessee was selected for limited scrutiny under CASS only for examination of cash deposited during the demonetization period - HELD THAT:- AO has conducted a reasonable enquiry by calling for the explanation from the assessee and assessee furnished the evidences on the basis of which a conclusion was made by the AO. The case of the assessee is supported by the decision of Mukul Kumar (2009 (1) TMI 886 - PATNA HIGH COURT) wherein a similar issue has been decided in favour of the assessee. In the case of Gabriel India Limited [1993 (4) TMI 55 - BOMBAY HIGH COURT] has held that the assessment order cannot be framed as erroneous unless it is not in accordance with law or against the facts on records. Hon'ble Court has also held that if the AO acting in accordance with law makes assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately and this section does not visualize a case of substitution of the judgment of the Commissioner for that of the AO who has passed the order, unless the decision is held to be erroneous. Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and if left to the Commissioner, he would have estimated the income at a figure higher than the one determined by the AO. In that context the Hon'ble Court has also held that that jurisdiction would not vest the Commissioner with the power to re-examine the accounts and determine the income himself at a higher figure as it is because the AO has exercised the quasi-judicial power vested in him in accordance with law and arrive at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. Similarly, in the case of Malabar Industries [2000 (2) TMI 10 - SUPREME COURT] has held that the provisions of Section 263 of the Act cannot be invoked to correct each and every type of mistake or error committed by the AO and it is only when an order is erroneous that the Section will be attracted - incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous and in the same category fall orders passed without applying the principles of natural justice or without application of mind. Every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interests of the revenue. By giving an example that when the AO adopts one of the courses permissible in law and it has resulted in loss of revenue or where two views are possible and the AO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the AO is unsustainable in law. Therefore, the view taken by the AO is not an incorrect view and that the assessment was passed after examining the record, evidences furnished by the assessee. Therefore, accordingly we are inclined to quash the order passed u/s 263 of the Act by allowing the appeal of the assessee. Issues:The only issue raised by the assessee is against the invalid jurisdiction exercised u/s 263 of the Act by Ld. Pr. CIT thereby passing a revisionary order which is invalid and bad in the eyes of law.Comprehensive Details:The assessee filed its return of income declaring total income. The case was selected for limited scrutiny due to cash deposited during demonetization. The Assessing Officer (AO) partly accepted the plea of the assessee and framed the assessment. The AO added a specific amount to the income of the assessee, which was not challenged before Ld. CIT(A). Ld. Pr. CIT observed that the assessment was completed without proper enquiries and penalty proceedings. The Pr. CIT issued a notice to the assessee and revised the assessment, directing the AO to frame it afresh after making necessary enquiries.The argument presented by Ld. A/R was that the AO had already examined the issue in detail during the assessment proceedings. The jurisdiction under section 263 of the Act was questioned, stating that the AO had called for explanations and the assessee had provided supporting evidence. Ld. A/R contended that the revisionary order was not valid, citing relevant case laws to support the argument.On the other hand, Ld. D/R supported the order passed by Ld. Pr. CIT, emphasizing the lack of proper enquiry by the AO and the correctness of the revisionary order. The D/R stated that the revision did not cause any loss or prejudice to the assessee.After hearing both sides, it was observed that the AO had conducted a reasonable enquiry during the assessment proceedings. The view taken by the AO was considered plausible and not contrary to the facts on record. Citing relevant case laws, it was concluded that the AO's decision was not erroneous. Therefore, the order passed under section 263 of the Act was quashed, and the appeal of the assessee was allowed.In conclusion, the appeal filed by the assessee was allowed, and the order passed under section 263 of the Act was quashed.