CIT revision order quashed as AO properly enquired unsecured loans under section 68 following Shreeji Prints precedent

The ITAT Surat quashed the CIT's revision order under section 263 regarding addition under section 68 for unexplained credit. The tribunal held that the AO had conducted detailed enquiries on unsecured loans and trade payables and taken a reasonable, plausible view. Following SC precedent in Shreeji Prints case, the tribunal ruled that when AO makes proper enquiries and accepts genuineness of transactions, such decisions cannot be considered erroneous or prejudicial to revenue interests. The CIT's different opinion alone was insufficient grounds for revision. Appeal decided in favor of assessee.

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Issues Involved:
1. Initiation of proceedings u/s 263.
2. Assumption of jurisdiction u/s 263.
3. Violation of principles of natural justice.
4. Alleged change in opinion.
5. Verification of Unsecured Loan and genuineness of creditors.
6. Validity of assessment proceedings.
7. Erroneous and prejudicial to interest of revenue.

Summary:

1. Initiation of proceedings u/s 263:
The assessee contended that the learned Pr. Commissioner of Income Tax (Pr.CIT) erred in initiating proceedings u/s 263 of the Income Tax Act, 1961, without valid grounds. The Tribunal noted that the Pr.CIT had issued a show cause notice based on audit objections without independent application of mind.

2. Assumption of jurisdiction u/s 263:
The assessee argued that the Pr.CIT wrongly assumed jurisdiction u/s 263. The Tribunal found that the assessment order was neither erroneous nor prejudicial to the interest of revenue, as the Assessing Officer (AO) had conducted a thorough investigation during the scrutiny assessment.

3. Violation of principles of natural justice:
The assessee claimed that the Pr.CIT violated the principles of natural justice by not specifying the grounds for initiating action u/s 263 in the show cause notice. The Tribunal observed that the show cause notice was based on audit objections and lacked independent evaluation by the Pr.CIT.

4. Alleged change in opinion:
The assessee asserted that the order u/s 263 was merely a change in opinion. The Tribunal agreed, noting that the AO had already investigated the issues of unsecured loans and trade payables during the assessment proceedings.

5. Verification of Unsecured Loan and genuineness of creditors:
The Pr.CIT alleged that the AO did not verify the unsecured loan of Rs. 3.11 crores and the genuineness of creditors. The Tribunal found that the assessee had furnished confirmations, bank statements, and income tax returns of the lenders, and the AO had accepted these details after due verification.

6. Validity of assessment proceedings:
The assessee argued that the entire proceedings were invalid as the assessment order u/s 143(3) was framed after due inquiry. The Tribunal found that the AO had conducted a comprehensive investigation and accepted the details provided by the assessee.

7. Erroneous and prejudicial to interest of revenue:
The Pr.CIT set aside the assessment order, claiming it was erroneous and prejudicial to the interest of revenue. The Tribunal held that the AO's order was based on a plausible view after proper verification, and the Pr.CIT's action was not justified.

Conclusion:
The Tribunal quashed the order of the Pr.CIT dated 25/03/2022, allowing the appeal of the assessee. The Tribunal emphasized that the AO had conducted a thorough investigation, and the Pr.CIT's revision based on audit objections without independent application of mind was not valid. The appeal was allowed, and the order announced in open court on 05th April, 2024.

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