2023 (10) TMI 201 - AT - Income Tax

Tribunal quashes PCIT's order under Income Tax Act, finding original assessment not erroneous.

The Tribunal allowed the appeal, quashing the Ld. PCIT's order under Section 263 of the Income Tax Act, 1961, determining that the Assessing Officer had ... Validity of Revision u/s 263 - Inadequate/insufficient or no enquiry - main grievance of DR for the Revenue was that AO has not conducted further enquiry - HELD THAT:- We note that further enquiry may be conducted by the Assessing Officer, if he thinks fit that results of the first enquiry are not sufficient. Therefore, after conducting proper enquiry, if the assessing officer passed order in brief, that does not mean that assessing officer has not conducted enquiry. We note that main grievance of ld DR for the Revenue was that assessing officer has not conducted further enquiry. As we have noted earlier that it is the domain of the assessing officer to decide, based on the facts and circumstances that a further enquiry is needed or not. Pr. C.I.T. by invoking his jurisdiction u/s. 263 of the Act is giving another opportunity to the Ld. A.O., which is not permissible. Hon’ble Bombay High Court in the case of Ranka Jewellers [2010 (3) TMI 544 - BOMBAY HIGH COURT] relying on the decisions of Malabar Industrial Co. Ltd. [2000 (2) TMI 10 - SUPREME COURT] and Max India Ltd. [2007 (11) TMI 12 - SUPREME COURT] has held that once the issue was considered by the A.O., the remedy of the revenue could not lie in invoking of the jurisdiction u/s. 263 of the Act. Therefore, the order of the Ld. C.I.T. was definitely outside the purview of section 263. The exercise aimed at ascertaining the correct income of the assessee has been fulfilled by the Ld. A.O. by exercising his quasi-judicial functions vis-a-vis passing the assessment order u/s. 143(3) - certainly it is not a case wherein adequate enquiries at the assessment stage were not carried out or assessment was made in haste. What is an opinion formed as a result of these enquiries and verification of the materials is something which is in exclusive domain of the Assessing Officer, and even if Ld. Pr. Commissioner does not agree with the results of such enquiries, the resultant order cannot be subjected to revision proceedings. It is a settled position in law that provisions of section 263 of the Act do not permit substituting one opinion by another opinion. Therefore, the order of the Ld. Pr. C.I.T. cannot be sustained on the principle of ‘erroneous’ nature of the order of the A.O., as it is not erroneous. Appeal filed by the assessee is allowed. Issues Involved:1. Validity of the order under Section 263 of the Income Tax Act, 1961.2. Miscellaneous grounds of appeal.Summary:I. Validity of Order u/s 263:1. The assessee challenged the jurisdiction of the Learned Principal Commissioner of Income Tax (Ld. PCIT) under Section 263 of the Income Tax Act, 1961, asserting that the impugned assessment order was not erroneous or prejudicial to the interest of the revenue.2. The assessee argued that the Assessing Officer (AO) had reopened and completed the assessment under Section 147 of the Act after making complete inquiries and verification of the facts, and thus, the Ld. PCIT had no jurisdiction to invoke revisionary power under Section 263.3. The Ld. PCIT noted discrepancies in the explanations provided by the assessee regarding the source of cash deposits during the assessment proceedings and the verification by the ITO (I & CI), Surat. The PCIT observed that the AO failed to make necessary inquiries or verifications, rendering the assessment order erroneous and prejudicial to the interest of the revenue.4. The Ld. PCIT issued a show-cause notice under Section 263, highlighting the AO's failure to verify the source of cash deposits and the reasons for the withdrawal of huge cash amounts by third parties. Consequently, the Ld. PCIT directed the AO to make a fresh assessment.II. Miscellaneous:1. The appellant reserved the right to add, alter, or vary any grounds of appeal.Detailed Judgment:1. The Tribunal noted that the AO had indeed conducted inquiries and verifications during the reassessment proceedings, as evidenced by the assessee's submissions and the AO's assessment order.2. The Tribunal emphasized that the AO had examined the issue raised by the Ld. PCIT and had obtained relevant documents and explanations from the assessee, including bank statements, confirmations from parties, and agreements related to the sale of land.3. The Tribunal referred to the Hon'ble Gujarat High Court's judgment in the case of CIT v. Nirma Chemical Works Pvt. Ltd., which stated that an assessment order need not incorporate detailed reasons for every claim, and the AO's brief order does not imply a lack of inquiry.4. The Tribunal also cited the ITAT Mumbai's judgment in JRD Tata Trust v. DCIT, emphasizing that the AO need not investigate every claim in detail if the initial inquiry appears satisfactory.5. The Tribunal concluded that the AO had conducted sufficient inquiry and that the Ld. PCIT's direction for further inquiry was unwarranted. The Tribunal quashed the Ld. PCIT's order, stating that the AO's order was neither erroneous nor prejudicial to the interest of the revenue.Conclusion:The Tribunal allowed the appeal filed by the assessee, quashing the Ld. PCIT's order under Section 263 of the Income Tax Act, 1961. The order was pronounced on 25/09/2023.