Income Tax Act, 1961, Section 263

Revision under section 263--Erroneous and prejudicial order--Reasonable enquiry made AO with regard to issue raised by PCIT

Conclusion: Where issue raised by PCIT was not overlooked by AO but a reasonable inquiry was made by AO in that regard and further in response to queries raised, in the course of assessment proceedings, the assessee filed all material particulars; exercise of revisional jurisdiction by PCIT was wholly unjustifiable on the issue without making reference to circumstances, which warranted necessity of some more enquiries.

PCIT observed that assessee received an amount by way of loan from one 'S'. PCIT opined that no detailed enquiries were made by AO as to source of said amount available to 'S', i.e. no detailed enquiries were made by AO with respect to source of source. Accordingly, he held the assessment order as erroneous and prejudicial to the interest of Revenue. On appeal, Tribunal set aside the order passed by PCIT under section 263. Held: Tribunal noted that issue raised by PCIT was not overlooked by AO but a reasonable enquiry was made by AO in that regard. Further, in response to queries raised, in the course of assessment proceedings, the assessee filed all material particulars. Therefore, exercise of revisional jurisdiction was wholly unjustifiable on the issue without making reference to circumstances, which warranted necessity of some more enquiries. As AO made enquiries albeit not probably in the manner in which the PCIT would have liked but it could not be the sacrosanct ground for assumption of jurisdiction under section 263. Further, PCIT himself did not enter into any minimal inquiry on the issue himself, if so considered expedient and there was not even prima facie demonstration of fallacy in the action of AO, which rendered the order erroneous and prejudicial to the Revenue. Merely because the expectations of PCIT were purportedly not met, it should not, necessarily trigger revisional action under section 263. Hence, Tribunal rightly set aside the order passed by PCIT under section 263.

Decision: In assessee's favour

IN THE ALLAHABAD HIGH COURT

SAUMITRA DAYAL SINGH & MANJIVE SHUKLA JJ.

Pr. CIT v. Harendra Nath Gupta

ITA No. 2 of 2024

25 January, 2024

Appellant by: Gaurav Mahajan

Respondent by: None

ORDER

1. Heard Shri Gaurav Mahajan, learned counsel for the revenue and Shri Ankur Agarwal, learned counsel for the assessee.

2. Present appeal has been filed by the revenue under section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act) arising from the order of the Income Tax Appellate Tribunal, Agra Bench, Agra dated 25-7-2023 passed in ITA No. 148/AGR/2017 for A.Y. 2012-13 (Harendra Nath Gupta v. Pr. CIT). By that order, the Tribunal has allowed the assessee's appeal and set aside the order of the Principal Commissioner, Circle-2, Agra dated 31-3-2017 passed under section 263 of the Act.

3. Perusal of the order of the Principal Commissioner reveals that he has been swayed by the fact that detailed enquiries were not made by the assessing officer with respect to source of source. The amount Rs. 80,00,000 was obtained by the assessee by way of loan from M/s. Sanwaria Trade Link (P) Ltd., Kolkata. To that extent, there is no doubt that the said amount was received through banking channel.

4. The Principal Commissioner has opined, no detailed enquiries were made by the assessing officer as to the source of Rs. 80,00,000 available to M/s. Sanwaria Trade Link (P) Ltd. It is true, the observations made by the Principal Commissioner are generally relevant considerations. What may have however completely missed the attention of the Principal Commissioner is, in any case, other than the hypothetical circumstance of such transactions being disbelieved, if due enquiry being made, no cogent material existed before the Principal Commissioner to prima facie doubt the genuineness of such transactions. Here it is relevant to note that tax liability in that case would be about Rs. 18,00,000.

5. Thus, though it is true, by virtue of Explanation-2 added to section 263 of the Act, a presumption exists as to the assessment order being erroneous and prejudicial to the interest of revenue, it does not empower the Commissioner to exercise revisional powers in each and every case.

6. In the present case, the Tribunal has observed as under:

"8. Upon careful consideration, we note that the case laws relied upon by the learned counsel for the assessee is fully applicable. We note that the issue was not overlooked but a reasonable inquiry was made by the assessing officer in this regard too. In response to queries raised, in the course of the assessment proceedings, the Assessee had filed all material particulars. The Commissioner has thus acted casually. Therefore, exercise of supervisory jurisdiction is wholly unjustifiable on the issue without making reference to circumstances which warrants necessity of some more enquiries. The assessing officer, in the instant case, has made enquiries albeit not probably in the manner in which the Commissioner would have liked but this cannot be the sacrosanct ground for assumption of jurisdiction under section 263 of the Act.

9. Under these circumstances, one cannot possibly say that the assessing officer had sleepwalked on the issues involved. Noticeably, the learned Commissioner himself has not entered into any minimal inquiry on the issues himself, if so considered expedient and there is not even prima facie demonstration of fallacy in the action of the assessing officer which rendered the order erroneous and which also simultaneously caused prejudice to the revenue. Merely because the expectations of the revisional Commissioner are purportedly not met, it should not, in our opinion, necessarily trigger revisional action under section 263 of the Act in every case. The learned Commissioner has of so invoked provisions of section 263 including explanation 2 (a) which is effective from 1-6-2015 and it cannot be applied in the current assessment year. Hence, the learned Commissioner's reference to explanation 2(a) does not support the case of the Revenue. This is not a case of non-inquiry, the assessing officer has made inquiry and on the touchstone of the aforesaid case laws, we find that the learned Commissioner's order cannot be sustained. Hence, we set aside the order of the learned Commissioner and decide the issue in favour of the assessee."

7. Thus, we find the present is not a fit case to offer interference. No substantial question of law is seen to exist in the context of tax dispute not exceeding Rs. 18,00,000 that may otherwise exist. Under the prevailing litigation policy of the Union Government, such a dispute may not be brought to the High Court. As to the legality of the reasoning offered by the Tribunal, we leave it open to be tested in an appropriate case. In the context of the present dispute, the findings recorded by the Tribunal are well reasoned and based on material on record. No question of law may arise in these facts.

8. In view of the above, present appeal lacks merit and is accordingly dismissed.