2023 (11) TMI 392 - AT - Income Tax

AO's assessment erroneous for failing proper enquiries under Section 43CA regarding plot sales, revision upheld

ITAT Raipur upheld PCIT's revision order u/s 263, rejecting assessee's challenge based on borrowed satisfaction from audit objection. Tribunal found AO's ... Revision u/s 263 - validity of assessment as framed u/s 153A questioned Scope of non-abated assessment without any incriminating material - additional ground raised by the assessee pertaining to approval granted under Section 153D - Assessee argued revisionary proceedings have been invoked by the Ld. PCIT based on audit objection which is nothing but borrowed satisfaction - as per CIT(A) there is violation on the part of the assessee in compliance of provisions of Sections 43CA - HELD THAT:- Contrary to the arguments and to distinguish with the case laws relied upon by the Ld AR, in present case the revenue has submitted a report of the AO to substantiate that there was deliberations between the AO and JCIT, also certain additional evidence in the form of communications between the departmental authorities were furnished before us, which were further strengthened by producing the assessment case records maintained by the department. Since the issue regarding approval u/s 153D and its validity depends upon verifications of such facts, also the contention raised before us was never raised before the departmental authorities, under such facts and circumstances, in the interest of natural justice, on careful perusal of the material available on record, case laws pressed into and report of the department, we find it appropriate to restore this issue to the file of AO for fresh adjudication of the same on the basis of facts and law, the assessee shall remain at liberty to raise such issues before the revenue authorities and to furnish necessary information/ evidences and submissions in support of his contentions. Consequently, the additional ground of the assessee regarding noncompliance of provisions of section 153D in granting the approval to draft order by Ld JCIT, is partly allowed. Appeal pertaining to non-abated assessment year wherein no incriminating material was found during the course of search - Nothing is apparent or emanating pertaining to incriminating material in the relevant AY 2014-15, therefore, in absence of information pertaining to incriminating material on record, we are unable to comprehend that whether there was any incriminating material pertaining to A.Y. 2014-15, unearthed during the search proceedings or not. Under such circumstances, such a contention of the assessee cannot be concurred with at this stage and therefore, the grounds raised pertaining to no incriminating material surfaced for a non abated assessment year is liable to be dismissed. Our observations are supported with the judicial pronouncement in the case of NTPC [1996 (12) TMI 7 - SUPREME COURT] as held that the tribunal is not prevented to consider the questions of law arising in assessment proceedings though not raised earlier, but the relevant facts should be available on records. Such guiding interpretation by the Hon’ble Apex Court suggests that the tribunal has the power to consider question of law which are based on relevant facts and material available on records, but without involving itself in the issue as an investigator to unearth the relevant facts. In terms of aforesaid observations, the contention raised by the Ld. AR w.r.t. non-abated assessment without any incriminating material is rejected in absence of any observation in the orders of revenue authorities that there was no incriminating material for the un-abated assessment year 2014-15. The contention of the assessee that the issue raised in initiating the proceedings u/s 263 was based on objection by the revenue audit department proves that the revisionary proceedings have been invoked by the Ld. PCIT based on audit objection which is nothing but borrowed satisfaction hence the said revision proceedings shall be treated as bad in law. In this context, since there were lots of deliberations by Ld. PCIT in invoking the provisions of section 263, therefore, it cannot be perceived that the initiation of proceedings with borrowed satisfaction, further, our observation is supported with the decision in the case of Gopal Sponge and Power Pvt. Ltd.[2023 (11) TMI 296 - ITAT RAIPUR] Admittedly, the questions and aspects pertaining to the transactions of Sale of plots by the assessee were validly raised by the Ld. PCIT, though the information qua the transactions were called for by the Ld. AO and duly submitted by the assessee but the necessary enquiries w.r.t. section 43CA were not conducted by the Ld. AO leads to hold the assessment order erroneous and accordingly prejudicial to the interest of revenue. The assessee’s contention that proper opportunity of hearing was not granted cannot not accepted while 3 responses by the assessee were considered by the Ld PCIT, and the issue is remitted back to the files of AO for fresh adjudication without any binding conclusion to be followed by the AO, the assessee is also at liberty to submit all his explanations and contentions before the AO. In the course of hearing to substantiate the questions raised by Ld. PCIT, certain additional evidence under a request application to grant leave to furnish such evidence dated 07/06/2023 have been submitted by the Ld. AR, which are allowed to be admitted and on perusal of such details which contains affidavit from M/s Adhiraj Developers, Flow chart explaining the Flow of consideration received from M/s Adhiraj Developers w.r.t. sale deed executed and relevant part of Bank Statement of M/s Adhiraj Developers. On perusal of such additional evidence, it is amicably realized that all these information, which were never submitted before the revenue authorities, are crucial in deciding the issues in hand, at the same time these needs further examination, analysis and verification of its veracity to arrive at the conclusion that whether they support the contentions raised by assessee or not, thus should be restored back to the file of AO. This itself shows that the Ld AO, who have never enquired for all such information, was failed in performing his duties in examining the facts in light of applicable provisions of law. We are of the considered view that the order of Ld. PCIT is justified, the assumption of jurisdiction in initiation of proceedings u/s 263 are according to law, with proper application of mind. Since, the assessment order is set aside and opportunity of being heard is granted to the assessee, there is no prejudice to the assessee, accordingly, we find substance in the order of Ld. PCIT and therefore the same stands sustained. Since, we have approved the order of Ld. PCIT u/s 263 in restoring the case of the assessee back to the file of Ld. AO for fresh assessment for the AY 2014-15, our decision rendered therein shall be mutatis mutandis applicable in other appeals of the assessee for the AY 2015-16, 2016-17 and 2017-18, having identical facts, issues and circumstances except the quantum involved. Issues Involved:1. Opportunity of Hearing2. Erroneous and Prejudicial Order3. Jurisdiction under Section 2634. Audit Objection5. Substitution of Opinion6. Inadequate Enquiry7. Section 43CA Violation8. Search Assessment Scope9. Approval under Section 153DSummary:1. Opportunity of Hearing:The assessee contended that the Principal Commissioner of Income Tax (Pr. CIT) passed the order without giving an opportunity of hearing, violating the principles of natural justice. The Tribunal noted that the Pr. CIT issued a notice and the assessee submitted written submissions. However, the Pr. CIT did not provide a personal hearing. Citing judicial precedents, the Tribunal emphasized that failure to provide an opportunity of hearing renders the revisional order legally fragile.2. Erroneous and Prejudicial Order:The assessee argued that the assessment order was neither erroneous nor prejudicial to the interest of the Revenue. The Pr. CIT invoked Section 263 without proper appreciation of facts and evidence. The Tribunal observed that the Pr. CIT's conclusion of 'no enquiry' and 'non-application of mind' by the Assessing Officer (AO) was not factually correct. The AO had made necessary inquiries and verifications during the assessment proceedings.3. Jurisdiction under Section 263:The assessee contended that the Pr. CIT assumed jurisdiction under Section 263 based on issues already examined by the AO. The Tribunal noted that the Pr. CIT cannot assume jurisdiction merely to substitute his opinion for that of the AO. The Pr. CIT must show that the AO's inquiries were inadequate or non-existent, which was not established in this case.4. Audit Objection:The assessee argued that the revision proceedings were initiated at the instance of an audit objection, constituting borrowed satisfaction. The Tribunal held that the Pr. CIT's action based on an audit objection does not invalidate the proceedings if the Pr. CIT independently examines the case records and finds the assessment order erroneous and prejudicial to the Revenue.5. Substitution of Opinion:The Tribunal reiterated that the Pr. CIT cannot use Section 263 to substitute his opinion for that of the AO. The AO had made inquiries and the Pr. CIT did not bring any new material on record to justify his conclusions.6. Inadequate Enquiry:The Pr. CIT's power to revise can be invoked in cases of no enquiry or lack of enquiry, not merely inadequate enquiry. The Tribunal found that the AO had made necessary inquiries and verifications, and the Pr. CIT's conclusion of inadequate enquiry was not justified.7. Section 43CA Violation:The Pr. CIT set aside the issue of Section 43CA to the AO without appreciating the explanation provided by the assessee. The Tribunal noted that the AO had examined the applicability of Section 43CA during the assessment proceedings, and the Pr. CIT did not bring any new material to substantiate his claim.8. Search Assessment Scope:The assessee argued that the assessment order under Section 263 was illegal as it was based on issues not covered by the search assessment. The Tribunal observed that for non-abated assessment years, no addition can be made in absence of any incriminating material found during the search, as per the Supreme Court's decision in PCIT vs. Abhisar Buildwell Pvt. Ltd.9. Approval under Section 153D:The assessee raised an additional ground challenging the validity of the approval granted under Section 153D, claiming it was mechanical and without application of mind. The Tribunal found that the approval process involved deliberations between the AO and the Joint Commissioner of Income Tax (JCIT), and the issue was restored to the AO for fresh adjudication.Conclusion:The Tribunal partly allowed the appeals, sustaining the Pr. CIT's order under Section 263 but remanding the issue of approval under Section 153D to the AO for fresh adjudication. The Tribunal emphasized the need for proper inquiry and application of mind in revisionary proceedings under Section 263.