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Income Tax Appellate Tribunal, “ A ” BENCH, AHMEDABAD
Before: SHRI TR SENTHIL KUMAR & SHRI MAKARAND V. MAHADEOKAR
आदेश/O R D E R
PER MAKARAND V. MAHADEOKAR, AM: These appeals filed by the assessee for Assessment Years (hereinafter referred to as “AY”) 2011-12 and 2012-13 are directed against the orders passed by the Principal Commissioner of Income-tax (hereinafter referred to as Ninod Narayan Joshi vs. PCIT Asst. Years 2011-12 2012-13 2 “PCIT”), Vadodara-1, u/s 263 of the Income-tax Act, 1961(hereinafter referred to as “The Act”), wherein the orders passed by the Assessing Officer (hereinafter referred to as “AO”) u/s 143(3) read with section 147 of the Act were set aside with directions to make fresh assessments.
The assessee has also filed an application for condonation of delay in filing these appeals.
Condonation of Delay
The appeals were filed with a delay of 131 days. The assessee submitted that the delay was caused due to the disruptions arising from the COVID-19 pandemic, which affected the timely filing of appeals. The assessee referred to the order of the Hon'ble Supreme Court in In Re: Cognizance for Extension of Limitation (Miscellaneous Application No. 21 Of 2022 in Miscellaneous Application No. 665 Of 2021), which extended the limitation period due to the pandemic.
3.1 Considering these circumstances and the fact that the learned Departmental Representative (DR) did not object to the condonation of delay, the delay in filing these appeals is satisfactorily explained. Accordingly, the delay is condoned, and the appeals are admitted for adjudication on merits.
Facts and Reasons for Reopening the Assessments
A.Y. 2011-12: The assessee, a salaried employee, filed his return of income on 26.08.2011, declaring an income of Rs.8,02,790/-. The return was Ninod Narayan Joshi vs. PCIT Asst. Years 2011-12 2012-13 3 processed u/s 143(1) on 09.11.2011, and a demand of Rs.790/- was raised. Subsequently, information was received from the Assessing Officer, Circle- 1(1)(1), Baroda, indicating that the assessee had purchased a flat for Rs.14,41,000/- during the Financial Year (FY) 2010-11. The source of this payment was not evident from the income declared by the assessee, leading the AO to believe that the income chargeable to tax had escaped assessment due to the non-disclosure of the source of funds used for the purchase. Consequently, the AO issued a notice u/s 148 and completed the reassessment u/s 143(3) r.w.s. 147 of the Act on 30.11.2018, accepting the returned income after making necessary inquiries into the source of the payment.
A.Y. 2012-13: The assessee filed his return of income on 02.06.2012, declaring an income of Rs.8,80,330/-. The return was processed u/s 143(1) on 03.12.2012, resulting in a NIL demand. However, the AO received information that the assessee had made a total payment of Rs.33,85,000/- Rs.10,85,000/- by cheque and Rs.23,00,000/- in cash) for the purchase of an immovable property during FY 2011-12. The source of these payments was not disclosed in the return, leading the AO to believe that the income chargeable to tax had escaped assessment. The AO reopened the assessment u/s 147, issued a notice u/s 148, and completed the reassessment u/s 143(3) r.w.s. 147 of the Act on 28.11.2018, making an addition of Rs.23,00,000/- for unexplained cash payments.
Later for A.Y. 2011-12, the PCIT invoked jurisdiction u/s 263, holding that the AO’s order was erroneous and prejudicial to the interests of the revenue. The PCIT observed that the AO failed to make adequate inquiries regarding several issues, including unexplained cash deposits of Rs. 2,22,990/-, unexplained credit entries of Rs. 50,000/-, and unsecured loans claimed by the Ninod Narayan Joshi vs. PCIT Asst. Years 2011-12 2012-13 4 assessee. Despite these discrepancies, the AO accepted the returned income without making any additions, which the PCIT considered a lapse. For A.Y. 2012-13, the PCIT set aside the reassessment order on the grounds that the AO failed to verify the sources of various cash deposits, unsecured loans, and discrepancies in the reported salary income. The PCIT concluded that the AO’s failure to investigate these issues made the order erroneous and prejudicial to the revenue.
Aggrieved by the order of PCIT, the assessee filed an appeal before us with following grounds of appeal:
Grounds of Appeal for A.Y. 2011-12
1. The Ld. Pr. CIT, Vadodara-1, Vadodara has erred in law and in facts in passing of the order u/s. 263 setting aside the order of the Ld. A. O. passed u/s. 143(3) r.w.s. 147 dated 30.11.2018 and directing him to pass a fresh assessment order on the ground that various issues have not been examined by him. The order being bad in law and in facts deserves to be cancelled.
2. The Ld. Pr. CIT, Vadodara-1, Vadodara has erred in law and in facts in passing the impugned order u/s. 263 completely ignoring the fact that the order of the Ld. A.O. revised was passed u/s. 143(3) r.w.s. 147 wherein no addition was made by the Ld. A.O. in respect of the item of income which was believed to have escaped assessment. In absence of any addition made in respect of such item, no further addition to income could have been made. Thus the Ld. Pr. CIT has exceeded his powers in setting aside the assessment order dated 30.11.2018 and examine the issues which are other than the item of income believed to have escaped assessment as such item of income is not assessed to tax. The order of the Ld. Pr. CIT is prayed to be cancelled being bad in law and in facts.
3. The Ld. Pr. CIT is erred in law and in facts in ignoring the fact that the Ld. A.O. had examined the various items of income now held by him as assessable to income though examined in the course of assessment.
4. Your appellant craves liberty to add, alter, amend, substitute or withdraw any of the grounds) of appeal hereinabove contended.
Ninod Narayan Joshi vs. PCIT Asst. Years 2011-12 2012-13 5 Grounds of Appeal for A.Y. 2012-13
1. The Ld. Pr. CIT, Vadodara-1, Vadodara has erred in law and in facts in passing of the order u/s. 263 setting aside the order of the Ld. A. O. passed u/s. 143(3) r.w.s. 147 dated 28.11.2018 and directing him to pass a fresh assessment order on the ground that various issues have not been examined by him. The order being bad in law and in facts deserves to be cancelled.
2. The Ld. Pr. CIT is erred in law and in facts in ignoring the fact that the Ld. A.O. had examined the various items of income, now held by him as assessable to income, though examined in the course of assessment. The order being bad in law and in facts deserves to be cancelled.
3. Your appellant craves liberty to add, alter, amend, substitute or withdraw any of the grounds) of appeal hereinabove contended.
On the grounds of appeal
8. The Authorised Representative (AR) for the assessee contended that the AO had duly considered all relevant materials and conducted inquiries before completing the reassessment. The AR argued that the PCIT's invocation of section 263 was unjustified as the AO’s order was neither erroneous nor prejudicial to the interests of the revenue. The PCIT merely substituted his opinion for that of the AO without any legal basis. The AR further explained the details submitted to the AO at the time re-assessment. The AR placed reliance on the decision of Delhi Tribunal in case of Smt. Daya Rani vs. Pr. CIT (ITA No. 402/Del/2021), wherein it was held that if no addition is made on the issue for which the assessment was reopened, the reassessment proceedings should be dropped, and any revision u/s 263 is unsustainable.
8.1 In case of A.Y. 2012-13 the AR stated that, the addition of Rs.23,00,000/- made by the AO was deleted by the CIT(A). The AR placed the copy of the order of CIT(A) on records.
The Departmental Representative (DR) on the other hand relied on the order of PCIT.
We have heard the parties and perused the material available on record. We note that the assessee was issued notices u/s 143(2) and 142(1) of the Act during the course of assessment proceedings in case of both A.Y. 2011-12 and A.Y. 2012-13. As per the notices u/s 142(1) of the Act dated 06-07-2018 in case of A.Y. 2011-12 and A.Y. 2012-13, the assessee was specifically asked to provide complete details of bank accounts (operative and non-operative) held by the assessee himself or jointly. The assessee was also required to furnish the bank statements for verification along with explanation for credit entries exceeding RS.20,000/- He was also asked to specifically mention that there is no other bank account except those mentioned by the assessee. In the same notice the assessee was also asked to provide details of investment made in movable and immovable assets. In reply to these notices the assessee submitted the details along with the bank statements covering both the assessment years and the explanation to the credit in excess of Rs.20,000/- covering bank accounts with ICIC Bank (A/c No. 000301046151) and Union Bank of India (A/c No. 310602010012295). To explain the source of funds a loan sanction letter from Axis Bank sanctioning a loan of Rs. 24,12,351/- was also submitted to the AO.
10.1 The AO, in respect of A.Y. 2012-13, issued a cause notice dated 01-11- 2018 requesting the assessee to show cause as to why Rs.23,00,000/- cash paid as on money to purchase of flat, as found during the course of survey at the office of Corner Point Infrastructure Pvt. Ltd. and admitted by the director of the company Shri Mitesh Patel and Mehul Pandya, should not be treated as Ninod Narayan Joshi vs. PCIT Asst. Years 2011-12 2012-13 7 unexplained investment u/s 69 of the Act. The assessee replied to the said notice and denied the same with a request to provide evidence and opportunity to cross examine the party. The assessee placed reliance on many judicial precedents while replying to said show cause notice.
10.2 We also note that the reasons recorded for reopening the assessments were specifically related to the investments made in immovable property, which were adequately explained by the assessee to the satisfaction of the AO. The PCIT's concerns in the notice under section 263, which focused on credit entries in the bank accounts, were already addressed by the AO during the reassessment proceedings. Given that the AO had conducted detailed inquiries and made a conscious decision based on the evidence provided, the PCIT’s invocation of section 263 was unwarranted. The AO’s orders were neither erroneous nor prejudicial to the revenue, and the PCIT’s attempt to revise them u/s 263 was not justified.
10.3 The PCIT invoked his revisionary jurisdiction under section 263, arguing that the AO's orders were erroneous and prejudicial to the interests of the revenue due to the alleged failure to properly inquire into the credit entries in the bank accounts. However, as demonstrated in the proceedings, the AO had already addressed these concerns during the reassessment and therefore he had duly considered all the relevant facts such as explanation of credit entries in the bank account, while framing the assessment order. Thus, there is no material evidence or substantial grounds to suggest that the assessment order was either erroneous or prejudicial to the interest of the Revenue. It is a settled law that for an order to be revised under Section 263, it must be demonstrated that the assessment order suffers from a legal infirmity or factual error leading Ninod Narayan Joshi vs. PCIT Asst. Years 2011-12 2012-13 8 to a loss of revenue. In the present case, the Assessing Officer has made a detailed inquiry into all the issues as specifically pointed out by PCIT, and the conclusions drawn by the AO are supported by evidence. Therefore, the assessment order cannot be said to be erroneous in so far as it is prejudicial to the interests of the Revenue. Consequently, the revisionary powers under Section 263 of the Income Tax Act, 1961, are not required to be exercised in the instant case.
10.4 It is also pertinent to note that the addition of ₹23,00,000/- made by the AO during the reassessment proceedings for A.Y. 2012-13 was subsequently challenged by the assessee before the Commissioner of Income-tax (Appeals) [CIT(A)]. The CIT(A), after a thorough examination of the facts and the evidence presented, deleted the addition. The CIT(A) observed that the addition made by the AO lacked sufficient corroborative evidence and that the explanation provided by the assessee regarding the source of the funds was satisfactory. This deletion by the CIT(A) further underscores the fact that the AO had conducted a proper and adequate inquiry during the reassessment proceedings. The CIT(A)'s decision to delete the addition indicates that the AO's order was neither erroneous nor prejudicial to the interests of the revenue.
10.5 In view of the above discussions on facts, we hold that the orders passed by the PCIT u/s 263 for both A.Y. 2011-12 and A.Y. 2012-13 are unsustainable in law. The AO had exercised his jurisdiction appropriately, and there was no error that could be termed prejudicial to the interest of the revenue.
10.6 Accordingly, we set aside the orders of the PCIT for both the years under appeal and restore the assessment orders passed by the AO.
In the combined result, the appeals filed by assessee are allowed.
Order pronounced in the Open Court on 30th August, 2024 at Ahmedabad.