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Facts
The assessee, a land developer, filed its return for AY 2017-2018 which was processed. The case was selected for scrutiny, and the Assessing Officer (AO) accepted the returned income. The Principal Commissioner (PCIT) initiated revision proceedings under section 263, alleging lack of proper inquiry by the AO regarding cash transactions, demonetization impact, and cash sales.
Held
The Tribunal held that the AO had conducted inquiries, gathered documents, and taken a possible view in accepting the returned income. It was settled law that if two views are possible and the AO has taken one, the PCIT cannot invoke revisional powers under section 263. The Supreme Court's judgment in CIT vs. Embassy Brindavan Developers was cited.
Key Issues
Whether the PCIT was justified in exercising revisional powers u/sec. 263 when the AO had taken a possible view after proper inquiry.
Sections Cited
143(1), 143(2), 142(1), 143(3), 40A(3), 269SS, 263
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, NAGPUR BENCH : NAGPUR
Before: SHRI V. DURGA RAO & SHRI KHETTRA MOHAN ROY
ORDER PER V. DURGA RAO, J.M. : This appeal filed by the Assessee has been directed against the order dated 31.01.2022, of the learned Principal Commissioner of Income Tax, Nagpur-2, Nagpur, passed u/sec.263 of the Act relating to assessment year 2017-2018.
2 ITA.No.44/NAG./2023
There is a delay of 260 days in filing the appeal before the Tribunal. We are satisfied with the averments stated in the affidavit and petition seeking for condonation of delay and accordingly, we, condone the delay of 260 days in filing the appeal before the Tribunal and proceed the decide the appeal on merits.
Facts of the case, in brief, are that the assessee is a firm engaged in the business of land developers. The assessee e-filed return of income on 31.03.2018 declaring total income at Rs.2,90.450/- which was processed u/sec.143(1) of the Act. The case of the assessee was selected for complete scrutiny under CASS. The Assessing Officer issued statutory notices u/sec.143(2) and 142(1) of the Act and in response thereto, the assessee has furnished computation of income, copy of balance-sheet, P & L A/c, cash-flow statement, details of cash balances at the end of each month, cash book, confirmation of unsecured loans and bank statements etc., from time to time. After considering the documents and submissions of the 3 ITA.No.44/NAG./2023 assessee, the Assessing Officer determined the total income of the assessee at Rs.2,90,450/- by accepting the return of income filed by the assessee vide order dated 10.12.2019 u/sec.143(3) of the Act.
The learned PCIT, Nagpur-2 after verification of the records and assessment order, noticed that the Assessing Officer, during the course of assessment proceedings, had not called for the cash book so as to analyse the unusual cash flow and large cash in hand as on immediate following day of demonetization. He further noted that the assessee has cash in hand of Rs.49,61,595/- as on 09.11.2016 and the issue of cash payment exceeding Rs.20,000/- in a day in contravention of sec.40A(3) of the Act have not been examined by the Assessing Officer and the Assessing Officer failed to verify the cash sales of assessee according to the provisions of sec.269SS of the Act as the total sales of the assessee are in cash during the course of assessment proceedings. The learned PCIT noted that there is lack of enquiry on the part of Assessing Officer on the above three issues which resulted into assessment
4 ITA.No.44/NAG./2023 order dated 10.12.2019 as an erroneous one and causes prejudicial to the interest of revenue and by exercising his revisional powers u/sec.263 of the Act set aside the assessment order of the Assessing Officer and directed to inquire into the above issues.
Aggrieved by the order of the learned PCIT, Nagpur-2, the assessee carried the matter in appeal before the Tribunal.
During the course of hearing, Learned Counsel for the Assessee submitted that the assessee has cash receipt of Rs.84,11,738/- for the F.Y. 2016-2017 relevant to the impugned assessment year 2017-2018 but assessee declared in his P & L A/c a sum of Rs.72,22,000/- and for the balance sum of Rs.11,89,738/- during the course of assessment proceedings the Assessing Officer called for the information which were duly placed and examined by the Assessing Officer and accepted the return of income filed by the assessee after considering the documents i.e., computation of income, copy of balance-sheet, P & L A/c, cash-flow statement, details of cash balances at the end of 5 ITA.No.44/NAG./2023 each month, cash book, confirmation of unsecured loans and bank statements etc. Therefore, the Assessing Officer has taken one of the possible views while passing the assessment order u/sec.143(1) of the Act. In support of this proposition, the Learned Counsel for the Assessee relied on the decision of Hon’ble Supreme Court in the case of CIT vs. Embassy Brindavan Developers [2024] 7 SLPCTO 1526 which is placed on record.
The Learned DR on the other hand relied on the order of the PCIT and submitted that the Assessing Officer was failed to property verify the documents placed on record and, therefore, the PCIT has exercised his revisional powers u/sec.263 of the Act which is in accordance with law. He pleaded that the order of the PCIT be confirmed.
We have heard the rival submissions of both the parties and perused the material on record. We find that the case of the assessee was selected for complete scrutiny under CASS and the Assessing Officer issued statutory notices u/sec.143(2) and 142(1) of the Act calling the explanation of the assessee. In response thereto, the 6 ITA.No.44/NAG./2023 assessee has furnished computation of income, copy of balance-sheet, P & L A/c, cash-flow statement, details of cash balances at the end of each month, cash book, confirmation of unsecured loans and bank statements etc., before the Assessing Officer. The Assessing Officer after being satisfied with the documents placed before him and after duly verifying the same, has accepted the returned income of the assessee and completed the assessment u/sec.143(3) of the Act vide his order dated 10.12.2019. We find that it is the settled position of law that when two views are possible and Assessing Officer has taken one of the possible view, the PCIT cannot exercise jurisdiction u/sec.263 of the Act. The Hon’ble Supreme Court in it’s latest Judgment in the case of Embassy Brindavan Developers vs. CIT (supra) has further affirmed this position. We, therefore, set aside the order of the PCIT, Nagpur-2 passed u/sec.263 of the Act and restore that of the Assessing Officer. The grounds of appeal raised by the assessee are accordingly allowed.
In the result, appeal of the Assessee is allowed.
7 ITA.No.44/NAG./2023 Order pronounced in the open Court on 06.02.2025.