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Facts
Search and seizure operations were conducted, leading to the issuance of notices under Section 153A of the Income Tax Act. The Assessing Officer (AO) made additions based on seized material, which were confirmed by the CIT(A). However, the Tribunal deleted these additions in a previous appeal, holding that material without corroboration is insufficient. The Principal Commissioner of Income Tax (PCIT) initiated revision proceedings under Section 263, deeming the assessment order erroneous as it allegedly failed to examine the taxability of certain perquisites.
Held
The Tribunal held that the PCIT erred in exercising the power of revision under Section 263. It was found that the AO had indeed examined the seized material and made a plausible view, choosing not to make additions. Furthermore, the Tribunal's prior decision on the insufficiency of uncorroborated material was binding. The PCIT's order was considered erroneous and prejudicial to the assessee, as the assessment order was neither erroneous nor prejudicial to the revenue.
Key Issues
Whether the PCIT was justified in exercising revisionary powers under Section 263 of the Income Tax Act, 1961, when the Assessing Officer had already examined the relevant material and the Tribunal had previously deleted similar additions due to lack of corroborative evidence.
Sections Cited
132, 139(1), 153A, 143, 263, 131, 153D
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI SONJOY SARMA, JM
O R D E R Per: Inturi Rama Rao, AM These appeals filed by the different assessees are directed against the separate orders of the learned Principal Commissioner of Income Tax (Central), Kochi [PCIT] dated 28/03/2025, 25/03/2025, Meat Products of India Ltd. 25/03/2025, 28/03/2025, 28/03/2025, 28/03/2025 for Assessment Years (AY) 2018-19 & 2016-17 to 2020-21 respectively.
Since all these appeals involve identical facts and issues, the appeals were heard together and disposed of vide this common order.
For the sake of convenience and clarity, facts relevant to A.Y. 2016-17 in are stated herein.
Brief facts of the case are that the assessee is an individual and chairman of the group companies. The return of income was filed for the A.Y.2016-17 on 20/04/2021 declaring income of Rs.48,81,720/-. The search and seizure operations u/s. 132 of the Income Tax Act, 1961 (for short, 'the Act') were conducted on 27/02/2020 in the business and residential premises of the appellant. During the course of such search and seizure operations, some incriminating material stated to have been found and seized. Based on this incriminating material, notices u/s. 153A were issued to the appellant for the assessment year under consideration. In response to the notices issued u/s. 153A, assessee filed return of income declaring the same income as shown in the original return of income filed u/s. 139(1) of the Act. Against the said return of income, the assessment was completed by the DCIT, Central Circle-1, Kozhikode (for short, 'AO') vide order dated 30/09/2022 passed u/s. 143 r.w.s. 153A after making certain additions.
Being aggrieved by the above assessment order, an appeal was filed before the Ld. CIT(A), who had confirmed the additions.
On further appeal before this Tribunal, the Tribunal vide its order dated 20/12/2024 in deleted the additions by holding that no addition can be made merely based on the contents found in excel sheet and other digital documents without any other corroborative evidence.
While matter stood thus, the learned PCIT on review of the assessment record, formed an opinion that the assessment order passed by the AO is erroneous and prejudicial to the interests of the Revenue for the reason that AO had failed to examine the taxability of Rs.11,74,046/- as salary received from M/s. ABC Project WLL, Qatar. According to learned PCIT, the same was also admitted by the assessee during the course of recording his statements u/s. 132(4) of the Act. On these premises, the learned PCIT issued a show-cause notice u/s. 263 of the Act dated 11/11/2024 calling upon the appellant to show-cause as to why the assessment order should not be set aside.
In response to the show-cause notice, the assessee filed a detailed explanation by stating that the AO conducted a detailed verification and analysis of the excel sheet and statements recorded before completing the assessment and also obtained approval u/s. 153D of the Act. Further it is submitted that assessment order was Meat Products of India Ltd. contested before the learned CIT(A), who confirmed the addition. Thus, it was submitted that issues which are subject matter of appeal before the CIT(A), cannot be made subject matter of revision. It was further submitted that on further appeal before this Tribunal, the additions made by the AO were deleted.
However, learned PCIT on due consideration of the explanation of the assessee and considering the order of this Tribunal, proceeded to hold that the findings of the Tribunal are not acceptable to the Department, since the AO failed to examine the taxability of perquisites received from M/s. ABC Project WLL, Qatar based on the excel sheets found during the course of search and seizure operations and the assessment order is erroneous. Accordingly, set aside the assessment order with a direction to examine the taxability of perquisites received from M/s. ABC Project WLL, Qatar after giving reasonable opportunity of being heard to the assessee.
Being aggrieved by the order passed by the PCIT, the assessee is in appeal before the Tribunal in the present appeal.
It is contended that the AO had duly examined the excel sheet and other digital documents as extracted from the mobile seized by the Investigation team. It is further contended that the additions made in the assessment u/s. 153A of the Act were based on the contents of the excel sheet therefore, it cannot be said that the AO Meat Products of India Ltd. had failed to examine the excel sheets. It is further submitted that the assessment order was contested before the Ld. CIT(A), however, failed to succeed. On further appeal before this Tribunal, the Tribunal had deleted the addition, made based on the seized material in the form of excel sheets and other digital documents in absence of any corroborative evidence. Thus, it is submitted that in view of the findings of this Tribunal, the order of revision cannot be sustained. It is further contended that the jurisdiction u/s. 263 cannot be exercised, in cases, where the AO has examined the issues, which are sought to be revised by the learned PCIT placing reliance on the following judicial precedents:-
(a) M/s. The Malabar Industries Co. Ltd. vs. CIT [2000] 243 ITR 83 (SC) (b) Haryana Paper Distributors (P.) Ltd. vs. PCIT [2018] 95 taxmann.com 152 (Guj. – HC) (c) CIT vs. Nirma Chemicals Works (P.) Ltd. vs. CIT [2009] 182 Taxman 183 (Guj. – HC) On merits, it is contended that during the course of examination u/s. 131, the assessee clarified that the amounts represents TA/DA reimbursements by M/s. ABC Project WLL, Qatar and mere reimbursement of expenditure does not result in perquisites. The assessee is an employee and shareholder of the M/s. ABC Project WLL, Qatar. He further submitted that the power of revision u/s. 263 cannot be exercised on the ground that the view adopted by the AO is not acceptable to the Commissioner. The Meat Products of India Ltd. learned PCIT failed to demonstrate as to how the enquiry made by the AO is inadequate and also failed to point out as to what additional enquiry should have been conducted by the AO. It is further submitted that the recourse to provisions of section 263 cannot be made for the purpose of fishing and roving enquiries. Placing reliance on the decision of Punjab & Haryana High Court in the case of V-con Integrated Solutions (P.) Ltd. [2025] 173 taxmann.com 773.
Without prejudice to the above, it is submitted that the power of revision u/s. 263 cannot be exercised in respect of assessment order which was passed after obtaining approval u/s. 153D. Reliance in this regard was placed on the decision of Madhya Pradesh High Court in the case of PCIT vs. Prabhar Developers (P.) Ltd. (2024) 162 Taxman. com 48 ( MP HC) and also the decision of coordinate bench of this Tribunal at Patna in the case of Gyan Infrabuild (P.) Ltd. vs. PCIT (Central) [2024] 162 taxmann. 664 (Patna – Trib.).
On the other hand, learned CIT-DR submits that non- consideration of the contents of the loose-sheets found during the course of search indicating the payment of perquisites to the employees, rendered the assessment order erroneous and prejudicial to the interests of Revenue and the learned PCIT rightly exercised the power of revision and, therefore, no interference is called for.
Meat Products of India Ltd. 14. We have heard the rival submissions and perused the material on record. The issue that arises for our consideration is in the facts of the case, whether the learned PCIT was justified in exercising power of revision vested with him under the provisions of section 263 of the Act.
The Parliament had conferred the power of revision on the Commissioner of Income Tax u/s 263 of the Act in case the assessment order passed is erroneous and prejudicial to the interests of revenue. In order to invoke the power of revision, the above two conditions are required to be satisfied cumulatively. References in this regard can be made to the decision of the Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT, 243 ITR 83 (SC) and in the case of CIT vs. Max India Ltd., 295 ITR 282 (SC). The error in the assessment order should be one that it is not debatable or plausible view. In a case where the Assessing Officer examined the claim, took one of the plausible views, the assessment order cannot be termed as an “erroneous”.
In the background of above legal position, now we shall proceed to examine the facts of the present case to find out as to whether AO had examined the loose-sheets which indicates the payment of perquisites to the assessee or not. In the explanation offered by the appellant, in response to the show-cause notice, the appellant asserted before the learned PCIT that these loose-sheets were examined by the AO while framing the assessment order, Meat Products of India Ltd. having examined the loose-sheets the AO made certain additions. This contention of the appellant remain uncontroverted. In these circumstances, it cannot be said that the AO had failed to conduct investigation or verification of the loose-sheets. Therefore, having made enquiries, the AO had chosen not to make any addition in respect of the alleged perquisites to the appellant. Once AO carried out verification, it can be inferred that he accepts the plea of the assessee and chose not to make addition. Furthermore, the additions made by the AO were deleted by this Tribunal in dated 20/12/2024 by holding that the seized material in the form of excel sheet and other digital documents without any corroborating material cannot form the basis for making addition.
In the light of these findings of Tribunal, learned PCIT having taken into consideration the outcome of the appeal before this Tribunal, ought not have exercised the power of revision, merely because the findings of the Tribunal are not acceptable to the Department. As on today, the order of the Tribunal holds the field and binding on the AO. Therefore, the assessment order cannot be termed as ‘erroneous’. In these circumstances, we are of the considered opinion that the order passed by the AO is neither erroneous nor prejudicial to the interests of the Revenue and therefore, the learned PCIT ought not have exercised the power of revision u/s.
Accordingly, the order passed by the PCIT is hereby quashed as it cannot be sustained in the eyes of law.
Our findings in preceding paragraphs in shall apply mutatis mutandis to the other appeals in 342, 343, 344 & 345/Coch/2025 also.
In the result, all the appeals filed by the assessees are allowed. Order pronounced on 04th August, 2024 under Rule 34 of The Income Tax (Appellate Tribunal) Rules, 1963.