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Facts
The assessee's assessment for AY 2017-18 was reopened under Section 147 due to unexplained investment in a property. During revision proceedings under Section 263, the PCIT discovered that the Assessing Officer had failed to consider a second property purchased by the assessee with an unexplained cash component of Rs. 19 lakhs, despite the information and sale deeds being available. Consequently, the PCIT set aside the assessment order and directed the AO to reframe it, leading to the assessee's appeal.
Held
The Tribunal upheld the PCIT's order, confirming that the Assessing Officer's failure to conduct a proper inquiry into the second property, which involved an unexplained cash investment, rendered the assessment order erroneous and prejudicial to the interest of the revenue. The Tribunal affirmed that the PCIT had validly exercised revisionary powers under Section 263 of the Income Tax Act.
Key Issues
Whether the PCIT's revisionary order under Section 263 was justified, given the Assessing Officer's failure to investigate a second property purchase with unexplained cash payment, making the original assessment erroneous and prejudicial to the revenue.
Sections Cited
263, 147, 148, 144B, 69
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Income Tax Appellate Tribunal, HYDERABAD “B” BENCH: HYDERABAD
Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD “B” BENCH: HYDERABAD BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MANJUNATHA G, ACCOUNTANT MEMBER ITA.No.249/Hyd./2024 Assessment Year 2017-2018 Mohammed Mannan The Income Tax Officer, Abdul, Hyderabad. vs. Ward-7(1), Hyderabad. PIN - 500 045. Telangana. Telangana. (Appellant) (Respondent) For Assessee : CA Murali Mohan Rao For Revenue : Ms. M. Narmada, CIT-DR Date of Hearing : 17.03.2025 Date of Pronouncement : 30.04.2025 ORDER PER MANJUNATHA G. :
This appeal has been filed by the Assessee against the order dated 29.02.2024, of the learned Principal Commissioner of Income Tax, Hyderabad-1, Hyderabad, passed u/sec.263 of the Income Tax Act, 1961 [in short “the Act”], relating to the assessment year 2017-2018.
Brief facts of the case are that, the assessee filed his return of income for the impugned assessment year
2 ITA.No.249/Hyd./2024 2017-2018 on 21.07.2017 declaring total income of Rs.1,08,500/-. The assessment has been subsequently reopened u/sec.147 of the Act, on the basis of the reasons recorded for reopening, as per which, information available with the Department shows that the assessee had entered into an agreement of sale for purchase of commercial space at "Sarath City Capital Mall", Kondapur for a consideration of Rs.75,67,000/- and paid entire amount, out of the above Rs.59,22,000/- paid in cash. Accordingly, notice u/sec.148 of the Act dated 30.03.2021 was issued and served on the assessee. In response to the notice, the assessee filed return of income on 19.05.2021 declaring total income at Rs.1,08,500/-. The assessment has been completed u/sec.147 r.w.s.144B of the Act vide order dated 21.03.2022 and determined the total income of the assessee at Rs.60,30,500/- by making addition of Rs.59,22,000/- u/sec.69 of the Act as unexplained investment for purchase of property.
The case has been subsequently taken-up for revision proceedings by the PCIT, Hyderabad-1 and 3 ITA.No.249/Hyd./2024 accordingly a show cause notice u/sec.263 of the Act dated 31.12.2023 was issued and called-upon the assessee to explain as to why assessment order passed by the Assessing Officer u/sec.147 r.w.s.144B shall not be revised. In the said show cause notice, the PCIT observed that as per the insight portal information, the assessee had also purchased one more commercial space in the same premises for the total consideration of Rs.29 lakhs, out of which, Rs.19 lakhs has been paid in cash. During the course of scrutiny, the assessee has also furnished copies of both the sale deeds. However, while completing the assessment, the Assessing Officer had considered only one sale deed for purchase of commercial space for a consideration of Rs.75,67,000/-, but, ignored the second sale deed even though the same was available with him. Since the Assessing Officer has not considered the second sale deed for the purpose of taxation and also bring to tax unexplained investment of Rs.19 lakhs, the PCIT observed that the assessment order passed by the Assessing Officer u/sec.147 r.w.s.144B of the Act is erroneous in so far as it is prejudicial to the interest of the 4 ITA.No.249/Hyd./2024 revenue. In response to the show cause notice, assessee submitted that, the assessment order passed by the Assessing Officer is not prejudice to the interest of revenue because, the Assessing Officer has considered the issue of purchase of property and after considering relevant facts has made addition towards unexplained investment in purchase of property as per the sale deed and, therefore, the observation of the PCIT that the Assessing Officer has not considered the issue is incorrect. The PCIT after considering the relevant submissions of the assessee, set-aside the assessment order dated 21.03.2022 passed by the Assessing Officer u/sec.147 r.w.s.144B of the Act and directed the Assessing Officer to re-frame the assessment by making addition of Rs.19 lakhs towards cash payment for purchase of property as unexplained investment u/sec.69 of the Act.
Aggrieved by the order of the PCIT, the assessee is now in appeal before the Tribunal.
CA P. Murali Mohan Rao, Learned Counsel for the Assessee, submitted that, the learned PCIT has erred in 5 ITA.No.249/Hyd./2024 setting-aside the assessment order passed by the Assessing Officer without appreciating the fact, that when the Assessing Officer has already accepted assessee’s explanation regarding investment made in purchase of property, the Assessing Officer could not proceed to make any addition on any other issue, then, there is no scope for the PCIT to invoke revisionary jurisdiction u/sec.263 of the Act and set-aside the assessment order. Learned Counsel for the Assessee further referring to various judicial precedents including decision of Hon’ble Delhi High Court in the case of ITO vs., DG Housing Projects Ltd., [2012] 20 taxmann.com 587 (Del.); orders of ITAT, Hyderabad Bench, Hyderabad in the case of M/s. Southern Realtors Towers Private Limited vs., DCIT in ITA.No.607/Hyd./2018 dated 06.12.2018 and Divya Jyothi Steels Ltd., vs., ACIT ITA.Nos.1176 & 29/Hyd./2016 dated 28.03.2018; DCIT vs., Sri Dinakara Suvarna 151 taxmann.com 489 (SC); submitted that, the Assessing Officer has examined the issue and accepted the explanation of assessee and, therefore, the PCIT cannot set-aside the assessment order
6 ITA.No.249/Hyd./2024 on the ground that no enquiry was conducted by the Assessing Officer. In this regard, he relied upon the decision of ITAT, Hyderabad Bench, Hyderabad in the case of JVR Retails Private Ltd., vs., DCIT, ITA.No.175/Hyd./2021 order dated 31.01.2023; Judgments of Hon’ble Calcutta High Court in the cases of CIT vs., Usha Martin Ventures Ltd., 150 taxmann.com 491 (Cal.) (HC) and PCIT vs., Usha Polychem India (P.) Ltd., 149 taxmann.com 240 (Cal.) (HC).
MS. M. Narmada, learned CIT-DR, on the other hand, supporting the order of the learned PCIT submitted that, the assessment order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue which is evident from the facts brought on record by the PCIT where it is very clear that, although, as per insight information there are two sale deeds and are available with the Assessing Officer, but, the Assessing Officer has considered only one sale deed for the purpose of assessment in the re-assessment proceedings which renders the assessment order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the 7 ITA.No.249/Hyd./2024 revenue. The PCIT after considering the relevant facts has rightly set-aside the assessment order passed by the Assessing Officer by exercising powers conferred u/sec.263 of the Act. In this regard, she relied upon Judgment of Hon’ble Himachal Pradesh High Court in the case of Virbhadra Singh (HUF) vs., PCIT [2018] 400 ITR 530 (H.P.).
We have heard both the parties, perused the material on record and the orders of the authorities below. We find that, the PCIT has power to set-aside the assessment order in terms of sec.263 of the Income Tax Act, 1961, in case the PCIT is satisfied that the assessment order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue. Whether the assessment order is erroneous in so far as it is prejudicial to the interest of the revenue is subjective satisfaction of the PCIT. In case the PCIT observes that, the order passed by the Assessing Officer is erroneous which caused prejudicial to the interest of the revenue and such finding is supported by necessary evidences and reasons, then, the PCIT can invoke jurisdiction u/sec.263 of the Act
8 ITA.No.249/Hyd./2024 and set-aside the assessment order. In the present case, the PCIT has set-aside the assessment order passed by the Assessing Officer u/sec.147 r.w.s.144B of the Act as erroneous, because as per the insight portal information, the assessee had purchased two properties at “Sarath City Mall”. However, while completing the assessment u/sec.147 of the Act, the Assessing Officer had considered only one sale deed and made addition u/sec.69 of the Act. Although, another sale deed was available with the Assessing Officer while completing the assessment and there is an unexplained investment of Rs.19 lakhs for purchase of property, the Assessing Officer failed to examine the issue in light of relevant evidences available during the course of assessment proceedings, which caused prejudice to the interest of the revenue. We find that, the assessment has been reopened u/sec.147 of the Act on the basis of information available as per the insight portal information where the assessee had purchased two properties at “Sarath City Mall” one for consideration of Rs.75,67,000/- and paid Rs.59,22,000/- in cash. Further, the assessee had also 9 ITA.No.249/Hyd./2024 purchased another property at “Sarath City Mall” for a consideration of Rs.29 lakhs and paid Rs.19 lakhs in cash. The above information was available with the Assessing Officer while completing the assessment u/sec.147 of the Act. In fact, during the course of scrutiny, the assessee has already furnished particulars of both the sale deeds. Although, both sale deeds are available before the Assessing Officer, but, the Assessing Officer has considered only one sale deed and ignored the other sale deed even though there is no disclosure of said investment for purchase of property by the assessee. From the above, it is undisputedly clear that, the Assessing Officer has passed order u/sec.147 r.w.s.144B of the Act without conducting proper enquiry, which, he ought to have carried-out and, therefore, the learned PCIT has rightly exercised his revisionary powers in light of Explanation-2 to section 263 of the Act. Therefore, in our considered view, the assessment order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue and thus, there is no error in the reasons given by the PCIT to set-aside the assessment order
10 ITA.No.249/Hyd./2024 by exercising powers conferred u/sec.263 of the Act. This view is supported by the decision of Hon’ble Himachal Pradesh High Court in the case of Virbhadra Singh (HUF) vs., PCIT (supra), wherein it has been clearly held that “where no inquiry was conducted by Assessing officer in passing assessment order after accepting explanation furnished by the assessee, then, Commissioner was well within his power under section 263 to direct fresh assessment”. This view is also supported by the Judgment of Hon’ble Supreme Court in the case of Malabar Industrial Company Ltd., vs., CIT [2000] 243 ITR 83 (SC) and CIT vs., Paville Projects Pvt. Ltd., [2023] 453 ITR 447 (SC); wherein it has been clearly held that when the assessment order passed by the Assessing Officer is erroneous and it is prejudicial to the interest of the revenue, then, the PCIT has power to revise the assessment order in terms of sec.263 of the Income Tax Act, 1961. In the present case, going by the facts available on record, we find that, although, the information is available with the Assessing Officer with regard to purchase of second property by the assessee in 11 ITA.No.249/Hyd./2024 “Sarath City Capital Mall” and payment of consideration in cash, but, the Assessing Officer has passed the assessment order without considering the relevant material available on record which render the assessment order erroneous in so far as it is prejudicial to the interest of the revenue. Thus, we are of the considered view that, the PCIT has rightly exercised his powers u/sec.263 of the Act and set-aside the assessment order accordingly. We, therefore, find no infirmity in the order of the learned CIT(A) and accordingly, the order of the PCIT passed u/sec.263 of the Income Tax Act, 1961 is confirmed. The grounds of appeal of the assessee are dismissed.
In the result, appeal of the assessee is dismissed.