2023 (10) TMI 261 - AT - Income Tax

Tribunal quashes revisionary order under section 263, finding original assessment order not erroneous.

Raremat Mall Management Co. Pvt. Ltd. Versus The PCIT – 1, Surat.

Raremat Mall Management Co. Pvt. Ltd. Versus The PCIT – 1, Surat. - TMI Issues Involved:1. Validity of the revisionary order under section 263 of the Income Tax Act.2. Whether the assessment order under section 143(3) was erroneous and prejudicial to the interest of revenue.3. Examination of the utilization of cash payments and potential violations of section 40A(3)/269T.Summary:1. Validity of the Revisionary Order under Section 263:The assessee challenged the correctness of the revisionary order passed by the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act, 1961, which set aside the assessment order under section 143(3) for the assessment year 2017-18. The assessee argued that the original order was neither erroneous nor prejudicial to the interest of revenue.2. Whether the Assessment Order under Section 143(3) was Erroneous and Prejudicial to the Interest of Revenue:The PCIT observed that the assessee-company made cash payments totaling Rs. 3,84,00,000/- to Raremat Mall Management Office in 87 transactions, with mall operation expenses booked at Rs. 1,28,15,659/-. The PCIT noted that the difference of Rs. 2,55,84,341/- was unexplained and that the Assessing Officer (AO) had not inquired into this matter during the assessment proceedings. The PCIT concluded that the AO's failure to verify the issue rendered the assessment order erroneous and prejudicial to the interest of revenue.3. Examination of the Utilization of Cash Payments and Potential Violations of Section 40A(3)/269T:The assessee contended that the cash payments were not expenses but were shown as current assets in the balance sheet. The funds were transferred to the Raremat Mall Management Office for managing expenses, and the ledger accounts were submitted to the AO during the assessment. The assessee argued that the AO had made adequate inquiries and verified the details, thus the order was not erroneous.Tribunal's Findings:The Tribunal examined the documents and evidence submitted by the assessee, including letters, audit reports, and ledger accounts. It noted that the AO had issued notices under section 142(1) and had asked relevant questions regarding the cash transactions. The Tribunal found that the AO had indeed made inquiries and verified the details during the assessment proceedings.The Tribunal referred to the Supreme Court's decision in Malabar Industries Ltd. vs. CIT, which held that for an order to be revised under section 263, it must be both erroneous and prejudicial to the interest of revenue. The Tribunal concluded that the AO's order was neither erroneous nor prejudicial to the interest of revenue as the AO had made a plausible view based on the evidence.Conclusion:The Tribunal quashed the revisionary order passed by the PCIT under section 263, stating that the jurisdictional conditions for invoking revisional jurisdiction were absent. The appeal filed by the assessee was allowed, and the assessment order dated 25.12.2019 was upheld.Order Pronounced:The order was pronounced on 26/09/2023 in the open court.