2025 (4) TMI 646 - AT - Income Tax

Assessment order adopting plausible view on land investment timing not erroneous under section 263

ITAT Hyderabad allowed the assessee's appeal against PCIT's revision order under section 263 regarding unexplained investment in land purchase. The ... Revision u/s 263 - assessment order u/s 153A with regard to the issue of unexplained investment in the purchase of lands questioned - as argued once assessment order has been passed u/sec.153C of the Act with the prior approval of JCIT u/s 153D, then, the same cannot be revised u/sec.263 - HELD THAT:- The revision order passed by the PCIT is not sustainable in the facts and circumstances of the case, since the assessment order sought to be revised by him cannot be regarded as erroneous and prejudicial to the interests of revenue on the basis of the seized material and sworn statements relied by him. The sole seized document relied on by the PCIT in the revision order cannot be considered to be in the nature of 'incriminating material' since the same merely contains the details of cheque payments made for purchase of lands at Rangareddyguda, which are routed through the books of account. The said seized document admittedly does not contain any details of cash payments made towards on-money over and above the said cheque payments. In the absence of any incriminating information in the said seized document, the same cannot be relied upon for drawing any inference regarding the quantum of on-money payments and the period during which such on-money payments were made. Consequently, the said seized document does not constitute incriminating material to facilitate any conclusion regarding payment of on-money by the appellant during the previous years relevant to AYs 2017-18 and 2018-19. Therefore, the reliance placed by the PCIT on the said seized document for the purpose of arriving at the finding that on-money payments were made during the previous years relevant to A.Ys 2017-18 and 2018-19 and for holding that the assessment order u/s 153A for A.Y 2018-19 in the case of the appellant is erroneous and prejudicial to the interests of revenue on account of failure to make addition therein towards the on-money payments made during the A.Y 2018- 19 for the purpose of revision of the said assessment order is misplaced and the same is untenable on facts. The support sought to be drawn by the PCIT from the sworn statements of Sri.J.Anirudh Reddy and Sri.M.Uday Kumar Reddy to conclude that the on-money payments in cash for purchase of Rangareddyguda lands were made to the extent of Rs. 42.80 crores and they were made during the period from June 2016 to July 2017, which falls under the A.Ys 2017-18 and 2018-19, is also not tenable, because it may be seen on perusal of the answer given by Sri.J.Anirudh Reddy to Q.No.10 that the same contained an internal contradiction. On one hand, he stated that he received on-money payments in cash as and when the land is ready for registration. On the other hand, he stated in the very next sentence that the on-money payments in cash were received during the period from June 2016 to July 2017. Since the registration of the lands at Rangareddyguda took place during the previous years relevant to A.Ys 2020-21 and 2021-22, the on-money could not have been received by him during the period from June 2016 to July 2017 going by his own averment that the cash was received as and when the lands were ready for registration. This clearly shows that the statement of Sri.J.Anirudh Reddy contained an internal contradiction, which has rendered the statement as unreliable for drawing any conclusion regarding the period during which on-money payments were made. Moreover, the claim that on-money payments in cash were received by him during the period from June 2016 to July 2017, when the facts available on record unmistakably show that the registration of the lands at Rangareddyguda took place during the previous years relevant to A.Ys 2020-21 and 2021-22, runs completely contrary to the prevailing commercial practice of making on-money payments closer to the date of registration of lands. Such a claim which is against the prevailing commercial practice needs to backed by documentary evidence in order to be considered as reliable and acceptable, which is absent in the present case. AO has adopted one of the plausible views on the basis of the seized material, sworn statements and affidavit after necessary application of mind and appreciation of evidences that the on-money payments for purchase of lands at Rangareddyguda aggregated to Rs. 32.66 crores only and that they were made during the previous year relevant to A.Y 2020-21/2021-22 while making assessments u/s 153C in the hands of the group companies which purchased the said lands. Therefore, we are of the considered view that the revision order passed by the PCIT u/s 263 of the Act for A.Y 2018-19 by adopting a different view from that of the AO is not sustainable in law, as adoption of one plausible views by the AO does not render the assessment order to be erroneous and prejudicial to the interests of revenue within the meaning of section 263 of the Act. Appeal of the Assessee is allowed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment were:Whether the Principal Commissioner of Income Tax (PCIT) had the jurisdiction to revise the assessment order passed under Section 153A of the Income Tax Act, 1961, with prior approval under Section 153D, using powers under Section 263.Whether the assessment order was erroneous and prejudicial to the interests of the revenue, justifying revision under Section 263.The validity of relying on seized materials from searches conducted on other persons to revise the assessment order under Section 263.Whether the assessment order could be revised based on non-incriminating materials.Whether the Assessing Officer's view was a plausible one, thereby precluding revision under Section 263.2. ISSUE-WISE DETAILED ANALYSISJurisdiction under Section 263:Relevant legal framework and precedents: Section 263 allows the PCIT to revise any order deemed erroneous and prejudicial to the interest of the revenue. However, the appellant argued that orders passed under Section 153A with prior approval under Section 153D are not subject to revision under Section 263.Court's interpretation and reasoning: The Tribunal found that the statute does not explicitly restrict the revision of orders passed with prior approval under Section 153D. However, the Tribunal emphasized that the PCIT must demonstrate the twin conditions of error and prejudice to revenue.Conclusions: The Tribunal concluded that the PCIT's assumption of jurisdiction was not justified given the lack of evidence showing the assessment was erroneous and prejudicial.Erroneous and Prejudicial to Revenue:Relevant legal framework and precedents: The assessment order can be revised if it is both erroneous and prejudicial to the interests of the revenue.Court's interpretation and reasoning: The Tribunal analyzed the PCIT's reliance on seized documents and statements, determining that they did not constitute incriminating material. The Tribunal noted inconsistencies in the statements relied upon by the PCIT.Conclusions: The Tribunal found that the assessment order was neither erroneous nor prejudicial, as it was based on a plausible view supported by the evidence available at the time.Use of Seized Material from Other Persons:Relevant legal framework and precedents: The appellant argued that materials seized from searches on other persons could not be used to revise their assessment under Section 263.Court's interpretation and reasoning: The Tribunal agreed with the appellant, emphasizing that the materials relied upon were not incriminating and were not directly related to the appellant's assessment year in question.Conclusions: The Tribunal concluded that the PCIT's reliance on such materials was misplaced and invalid for the purpose of revision.Non-Incriminating Materials:Relevant legal framework and precedents: The Tribunal considered whether non-incriminating materials could justify revision under Section 263.Court's interpretation and reasoning: The Tribunal found that the materials did not contain evidence of cash payments or on-money transactions, thus lacking the incriminating nature required for revision.Conclusions: The Tribunal held that the revision based on non-incriminating materials was unsustainable.Plausible View by the Assessing Officer:Relevant legal framework and precedents: The appellant argued that the Assessing Officer had taken a plausible view, which should not be revised under Section 263.Court's interpretation and reasoning: The Tribunal agreed, noting that the Assessing Officer's conclusions were based on available evidence and were one of the permissible views.Conclusions: The Tribunal concluded that the PCIT's differing view did not render the original assessment erroneous or prejudicial.3. SIGNIFICANT HOLDINGSCore principles established: The Tribunal reinforced the principle that for an assessment order to be revised under Section 263, it must be both erroneous and prejudicial to the revenue. The presence of a plausible view by the Assessing Officer precludes revision.Final determinations on each issue: The Tribunal quashed the PCIT's order, holding that the assessment order was neither erroneous nor prejudicial. The reliance on non-incriminating materials and materials from searches on other persons was deemed invalid.Verbatim quotes of crucial legal reasoning: 'The revision order passed by the PCIT is not sustainable in the facts and circumstances of the case, since the assessment order sought to be revised by him cannot be regarded as erroneous and prejudicial to the interests of revenue on the basis of the seized material and sworn statements relied by him.'