2024 (9) TMI 1311 - AT - Income Tax

AO's detailed inquiry during reassessment prevents CIT from invoking Section 263 revision powers

Vinod Narayan Joshi Versus The Principal Commissioner of Income Tax, Vadodara-1, Vadodara

ITAT Ahmedabad allowed the assessee's appeals against CIT's revision order u/s 263. The tribunal held that the AO had already conducted detailed inquiry ... Revision u/s 263 - as per CIT AO's orders were erroneous and prejudicial to the interests of the revenue due to the alleged failure to properly inquire into the credit entries in the bank accounts - HELD THAT:- As demonstrated in the proceedings, the AO had already addressed these concerns during the reassessment and therefore he had duly considered all the relevant facts such as explanation of credit entries in the bank account, while framing the assessment order. Thus, there is no material evidence or substantial grounds to suggest that the assessment order was either erroneous or prejudicial to the interest of the Revenue. As a settled law that for an order to be revised u/s 263, it must be demonstrated that the assessment order suffers from a legal infirmity or factual error leading to a loss of revenue. In the present case, the AO has made a detailed inquiry into all the issues as specifically pointed out by PCIT, and the conclusions drawn by the AO are supported by evidence. Therefore, the assessment order cannot be said to be erroneous in so far as it is prejudicial to the interests of the Revenue. Consequently, the revisionary powers u/s 263 are not required to be exercised in the instant case. Appeals filed by assessee are allowed. Issues:- Condonation of delay in filing appeals due to COVID-19 disruptions- Reasons for reopening assessments for AY 2011-12 and 2012-13- PCIT's invocation of jurisdiction under section 263 for both assessment years- Grounds of appeal by the assessee against PCIT's orders- Arguments by the AR and DR regarding the assessment orders- Examination of material and inquiries conducted by the AO during reassessment- Justification of PCIT's revisionary powers under section 263- Deletion of addition made by AO for AY 2012-13 by CIT(A)- Final decision on the appeals and setting aside of PCIT's ordersAnalysis:Condonation of Delay:The assessee filed appeals with a delay of 131 days, attributing it to disruptions caused by the COVID-19 pandemic. Citing the Supreme Court's order granting an extension of the limitation period due to the pandemic, the delay was condoned as the Departmental Representative did not object, and the appeals were admitted for adjudication.Reasons for Reopening Assessments:For AY 2011-12 and 2012-13, the Assessing Officer (AO) reopened assessments due to discrepancies in the source of funds for property purchases not reflected in the income declared by the assessee. The AO issued notices under section 148 and completed reassessments under section 143(3) r.w.s. 147, making necessary inquiries into the source of payments.PCIT's Invocation of Jurisdiction under Section 263:The Principal Commissioner of Income Tax (PCIT) invoked jurisdiction under section 263, deeming the AO's orders erroneous and prejudicial to revenue interests. The PCIT highlighted the AO's failure to investigate various issues, leading to the setting aside of reassessment orders for both assessment years.Grounds of Appeal and Arguments:The AR contended that the AO had adequately considered all relevant materials and inquiries before reassessment. The AR argued against the PCIT's invocation of section 263, citing a Delhi Tribunal decision and the deletion of an addition for AY 2012-13 by the CIT(A). The DR, however, supported the PCIT's order.Examination of Material and Inquiries by AO:The AO conducted detailed inquiries and considered evidence provided by the assessee during reassessment proceedings. The PCIT's concerns regarding credit entries in bank accounts were addressed by the AO, rendering the PCIT's revision under section 263 unwarranted.Final Decision and Setting Aside of PCIT's Orders:After hearing both parties and examining the records, it was concluded that the PCIT's orders under section 263 for both assessment years were unsustainable in law. The AO's jurisdiction was deemed appropriate, and the orders were not found to be erroneous or prejudicial to revenue interests. Consequently, the PCIT's orders were set aside, and the assessment orders passed by the AO were restored, leading to the allowance of the appeals filed by the assessee.