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Facts
The assessee appealed against the Pr. CIT's invocation of revisionary jurisdiction under section 263 for AY 2018-19. The Pr. CIT found issues with salary paid in cash and business promotion expenses claimed in cash, deeming the assessment order erroneous and prejudicial to revenue. The assessee contended that all queries were addressed during the original assessment.
Held
The Tribunal noted that the case was selected for scrutiny to verify business expenses against commission receipts. The AO had made queries and accepted the assessee's explanations, choosing not to make additions. The Tribunal held that the Pr. CIT could not substitute his view for the AO's plausible view, especially when the AO's view was not unsustainable in law.
Key Issues
Whether the revisionary order passed by the Pr. CIT under section 263 was justified when the Assessing Officer had considered the issues and taken a plausible view?
Sections Cited
263, 143(3), 192, 40A(3)
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Income Tax Appellate Tribunal, “DB” BENCH, AGRA
Before: HON’BLE SHRI SATBEER SINGH GODARA, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
(िनधा�रणवष� / Assessment Year:2018-19) Ms. Anjali Singhal Income-tax Officer, बनाम/ 22, Vaibhav Kunj, Dayalbagh, Ward 2(1)(1), Agra. Vs. Agra. �थायीलेखासं./जीआइआरसं./PAN/GIR No. CULPS-2323-B (अपीलाथ�/Appellant) : (� थ� / Respondent) अपीलाथ�कीओरसे/ Appellant by : Sh. Pankaj Gargh, Adv. – Ld. AR � थ�कीओरसे/Respondent by : Dr. Arun Kumar Yadav – Ld. CIT-DR सुनवाईकीतारीख/Date of Hearing : 18-02-2025 घोषणाकीतारीख /Date of Pronouncement : 22.04.2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. By way of this appeal, the assessee assails invocation of revisionary jurisdiction u/s 263 by Ld. Pr. Commissioner of Income Tax-1, Agra (Pr.CIT) for Assessment Year (AY) 2018-19 vide impugned order dated 21-03-2023 in the matter of an assessment framed by Ld. AO u/s 143(3) of the Act on 01-02-2021. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. The registry has noted delay of 285 days in the appeal which stand condoned.
Upon perusal of assessment order, it could be seen that the assessee’s return of income was selected to verify the issue of low income in comparison to large commission receipt. The Ld. AO identified major expenses and raised various queries in this regard during the course of assessment proceedings. After considering the replies of the assessee, Ld. AO made adhoc disallowance of 25% of certain expenditure and made addition of Rs.5.89 Lacs.
3. Subsequently, Ld. Pr. CIT, upon perusal of case records, observed that the assessee paid salary of Rs.26.91 Lacs to 9 employees in cash without deduction of tax at source u/s 192. The Ld. Pr. CIT also opined that the provisions of Sec.40A(3) would be attracted. The assessee also claimed Business Promotion expenses of Rs.8.90 Lacs in cash and the assessee made huge cash withdrawals which should have been examined by Ld. AO. Accordingly, the assessee was show-caused. The assessee refuted all these allegations and stated that due enquiries were made on all the issues during assessment proceedings itself. However, rejecting the same, Ld. Pr. CIT held the assessment order to be erroneous and prejudicial to the interest of the revenue and directed Ld. AO to pass fresh order on all these issues. Aggrieved, the assessee is in further appeal before us.
At the outset, it could be observed that the case was selected for scrutiny specifically to verify the Business expenses / low income in comparison to large commission receipt. During the course of assessment proceedings, various queries were raised by Ld. AO for major expenses including the expenses which have been flagged in the impugned revisionary order. The assessee, during the course of revisionary proceedings also highlighted the fact that it worked as an insurance agent and received commission. The details of all salaried employees were given along with ledger extracts. None of the payment exceeded the threshold limit of Rs.10000/-. On the issue of business expenses also, all details were furnished by the assessee to Ld. AO in its reply dated 09-12-2020 along with ledger extracts. The Ld. AO looked into the same and arrived at a satisfaction. In the light of all these facts, it could be concluded that the flagged issues were well documented by the assessee and duly been enquired into by Ld. AO during the course of assessment proceedings itself. After due consideration of assessee’s submissions, Ld. AO accepted the claim of the assessee with due application of mind. Accordingly, Ld. AO chose not to make any addition in the hands of the assessee on the flagged issues while framing the assessment. In our opinion, the allegations in the proposed revision are not well founded. It is a case of acceptance of one of the plausible views which was more on facts and the said view could not be said to be opposed to any law or statutory provisions. The Ld. AO, in our opinion, had taken one of the plausible views in the matter and therefore, Ld. Pr. CIT could not be said to be justified in substituting the view of Ld. AO with that of his own view. Simply because some further verification was required or simply because the verification was not done in a particular manner, the same could not justify revision of the order unless it was shown that the view of Ld. AO was erroneous or opposed to any law.
The Hon’ble Supreme Court in Malabar Industrial Co. Ltd. vs. CIT (supra) has held that the phrase 'prejudicial to the interests of the revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of the revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue, unless the view taken by the Income-tax Officer is unsustainable in law. The said principal has been reiterated by Hon’ble Court in its subsequent judgment titled as CIT V/s Max India Ltd. (295 ITR 282). Similar principal has been followed in Grasim Industries Ltd. V/s CIT (321 ITR 92). The ratio ofall these decisions is that where two views are possible and AO has preferred one view against another view, order could not be said to be erroneous or prejudicial to the interest of the revenue.
Therefore, on the given facts, the impugned revision of assessment order could not be sustained in law. We order so. The assessment as framed by Ld. AO stand restored back.
The appeal stand allowed in terms of our above order. Order pronounced u/r 34(4) of Income Tax (Appellate Tribunal) Rules, 1963. Sd/- Sd/- (SATBEER SINGH GODARA) (MANOJ KUMAR AGGARWAL) 6ाियक सद7 /JUDICIAL MEMBER लेखासद7 / ACCOUNTANT MEMBER Dated: 22.04.2025 आदेशकी9ितिलिपअ;ेिषत/Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. � थ�/Respondent 3. आयकरआयु3/CIT 4. िवभागीय�ितिनिध/DR 5. गाड9फाईल/GF ASSISTANT REGISTRAR
ITAT AGRA