ITAT overturns revision order under Section 263 for on-money payment in property purchase case

ITAT Ahmedabad allowed the assessee's appeal against PCIT's revision order u/s 263 regarding on-money payment for immovable property purchase. The tribunal held that the AO conducted adequate enquiry and the assessment order was neither erroneous nor prejudicial to revenue interest. PCIT failed to provide specific findings showing AO's error. The tribunal noted that incriminating material (excel-sheet) found during search lacked signature and corroborative evidence. Following Gujarat HC precedent in PCIT v. Kaushik Nanubhai Majithia, mere presence of assessee's name in developer's unsigned document without proof of actual payment was insufficient basis for proceedings.

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Issues:
Appeal against order passed by Ld. Principal Commissioner of Income Tax under Section 263 of the Income Tax Act for Assessment Year 2016-17.

Analysis:
The appeal was filed by the Assessee against the order passed by the Ld. Principal Commissioner of Income Tax, Ahmedabad-1, setting aside the assessment order dated 29/03/2022 passed by the faceless assessing officer under Section 147 r.w.s. 144B. The issue revolved around the alleged on-money payment of Rs. 55,00,000/- by the Assessee to Navratna Organisers and Developers Pvt. Ltd. for the purchase of immovable property in the scheme called "Kalhaar Blues and Greens." The PCIT observed that the Assessing Officer erred in not verifying the information and directed the faceless assessing officer to pass a fresh Assessment Order. The Assessee contended that the proceedings under Section 147 were initiated to examine the on-money payment, and sufficient enquiries were made by the Assessing Officer. The Assessee challenged the initiation of re-assessment proceedings and requested proof of the alleged payment, highlighting the lack of incriminating material supporting the claim. The Assessee's submissions emphasized the absence of evidence and relevance of an excel sheet found during the search period. The Assessee argued that there was no lack of enquiry by the Assessing Officer on the issue of on-money payment, and the order under Section 263 did not specify any errors in the assessment order.

The PCIT contended that Navratna Developers admitted to taking on-money for the purchase of immovable property, suggesting inadequacy of enquiries in the assessment order. However, the Tribunal found that the Assessing Officer had conducted sufficient enquiries into the on-money payment issue during the 147 proceedings. The Tribunal noted that the PCIT did not provide specific findings on the alleged errors in the assessment order. The Tribunal highlighted the absence of adverse incriminating material supporting the on-money payment claim and referenced a judicial precedent to support the decision. The Tribunal concluded that there was no lack of enquiry by the Assessing Officer and allowed the Assessee's appeal, setting aside the order passed under Section 263 of the Act. The judgment referenced a similar case ruling by the Gujarat High Court to support the decision.

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