PCIT's revision order under Section 263 quashed for property purchase on-money allegations lacking evidence

The ITAT Ahmedabad quashed the PCIT's revision order u/s 263, finding it unjustified. The case involved alleged on-money payments for property purchase based on seized documents. The PCIT claimed the AO's assessment was erroneous for insufficient inquiry. However, the Tribunal held that the AO had conducted proper inquiry, examining documentary evidence including sale deed, bank statements, and payment confirmations. The assessee's name did not appear in incriminating documents, and consistent denial of on-money payments was supported by evidence. Unlike contradictory cases, here the AO's assessment was based on plausible view after proper examination of relevant materials, making Section 263 invocation unwarranted. Appeals allowed.

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Issues Involved:
1. Validity of the reopening of assessment under Section 147/148 of the Income Tax Act.
2. Adequacy of inquiry conducted by the Assessing Officer (AO).
3. Justification for invoking Section 263 by the Principal Commissioner of Income Tax (PCIT).

Issue-wise Detailed Analysis:

1. Validity of the reopening of assessment under Section 147/148 of the Income Tax Act:
The reopening of the assessment for AY 2015-16 and AY 2017-18 was based on allegations of "on-money" payments made by the assessee for the purchase of a property in the Kalhaar Blues and Greens (KBG) Project. This information came from a report by the Investigation Wing, which indicated that the builder, Navratna Organizers and Developers Pvt. Ltd. (NODPL), admitted to receiving cash payments for villas. The assessee contended that the entire consideration was fully disclosed in the Sale Deed and denied making any payments beyond what was declared. Despite repeated requests, the AO failed to provide the actual copy of the reasons recorded for reopening the assessment.

2. Adequacy of inquiry conducted by the Assessing Officer (AO):
The AO conducted a detailed inquiry during the reassessment proceedings. The assessee provided documentary evidence, including the sale deed, bank account statements, and payment confirmations. The AO examined these documents and found no direct evidence implicating the assessee in making "on-money" payments. The assessee's name did not appear in the incriminating documents, and the AO did not question the explanation that the unit was purchased by the assessee's parents, with her name added only for inheritance purposes. The assessee also highlighted discrepancies in the excel sheet cited by the Department and labeled it a "dumb document."

3. Justification for invoking Section 263 by the Principal Commissioner of Income Tax (PCIT):
The PCIT invoked Section 263, stating that the AO did not sufficiently inquire into the alleged "on-money" payments. However, it was evident from the assessment records that the AO had conducted an inquiry into the assessee's property purchase. The PCIT's reliance on the excel sheet found during a search in the premises of a third party was deemed insufficient. The Tribunal noted that the excel sheet lacked corroborative material or signatures, making it unreliable. The Tribunal also referred to judicial precedents, including the decision in Divyesh Bhupendra Desai Vs. PCIT, where it was held that when the AO has taken a plausible view based on inquiry and material on record, the invocation of Section 263 is unwarranted.

Conclusion:
The Tribunal found that the PCIT's order under Section 263 was unjustified. The AO's original assessment was based on a proper examination of the relevant material, and there was no error or prejudice to the interests of the Revenue. Accordingly, the Tribunal quashed the orders passed by the PCIT for both Assessment Years 2015-16 and 2017-18 and allowed the appeals of the assessee.

Judgment:
Both appeals of the assessee, ITA Nos. 775/Ahd/2024 and 776/Ahd/2024, were allowed, and the orders passed by the PCIT were quashed. The judgment was pronounced in the Open Court on 10th September 2024 at Ahmedabad.

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