2021 (12) TMI 1169 - AT - Income Tax

Revision u/s 263 by CIT - large increase in sundry creditors with respect to turnover as compared to the preceding year - HELD THAT - PCIT has accepted the gross receipt of ₹ 2.73 crores and cost of ₹ 2.62 crores while doubting the sundry creditors without even doubting the sundry debtors of like amount. So therefore, according to the Ld. AR the action of the A.O to have accepted the explanation given by the assessee after going through the ledgers of the sundry creditors and sundry debtors as well as the balance sheet as well as profit loss filed by the assessee is a plausible view, so the Ld. PCIT ought not to have interfered with it. We find force in the submissions of Shri S.M. Surana. We find from the discussion supra and after going through the records especially the details of sundry creditors and sundry debtors, we are of considered opinion that the A.O has taken a plausible view in the facts and circumstances of the case. And at any rate the action of the A.O in the given facts cannot be held to be unsustainable in law. So, therefore, the action of the A.O in not drawing any adverse inference in respect of sundry creditors in the given facts should not have been interfered by Ld. PCIT exercising his revisional jurisdiction u/s. 263 - the action of the Ld. PCIT to interdict when the A.O has discharged his duty as an investigator as well as that of the adjudicator as discussed above. Since the A.O's action on the facts as discussed is a plausible view, we find merit in the appeal of the assessee and we are inclined to hold that the impugned action of the Ld. PCIT is without jurisdiction and therefore null in the eyes of law so quashed. Appeal of assessee allowed.

Summary

Issues:
- Challenge to the jurisdiction of Principal CIT-14 to invoke revisional jurisdiction u/s. 263 of the Income Tax Act without validly holding AO's action as erroneous and prejudicial to Revenue.

Detailed Analysis:

1. The appeal was against the Principal CIT-14's order dated 17.03.2020 invoking revisional jurisdiction u/s. 263 of the Income Tax Act. The legal issue raised was the jurisdictional challenge regarding the AO's action on sundry creditors. The AO had accepted the explanation of the assessee regarding a large amount of sundry creditors without drawing adverse inferences.

2. The AO had issued notices under sections 143(2) and 142(1) of the Act, inquiring about the sundry creditors. The assessee explained the substantial amount of sundry creditors due to outstanding payments as a labor contractor. The AO accepted this explanation and the returned income of the assessee.

3. The Principal CIT-14 proposed to revise the assessment based on the increase in sundry creditors without verifying their genuineness. The CIT-14 set aside the AO's order and directed a fresh assessment, leading to the appeal.

4. The Tribunal analyzed whether the AO had properly examined the issue of sundry creditors. The AO had considered the details provided by the assessee, including financial statements and ledger accounts. The AO accepted the explanation given by the assessee, which was deemed a plausible view.

5. The Tribunal referred to a Delhi High Court case where the ITAT and High Court upheld the AO's decision when the gross receipts and expenses were accepted. Similarly, in this case, the Tribunal found the AO's action reasonable, as the gross receipts and costs were accepted without adverse inferences.

6. The Tribunal concluded that the AO had taken a plausible view based on the facts and circumstances, and the Principal CIT-14's interference was unwarranted. The CIT-14's action was deemed without jurisdiction and null in the eyes of the law, leading to the allowance of the assessee's appeal.

7. The Tribunal pronounced the order in favor of the assessee on 15 December 2021, quashing the Principal CIT-14's decision to revise the assessment based on the sundry creditors issue.