2024 (1) TMI 1475 - HC - Income Tax

Revision u/s 263 - as per CIT AO did not enquire about the creditworthiness and identity of the loan providers and genuineness of transactions in respect of unsecured loans - whether the PCIT was justified in invoking his power u/s 263? - ITAT set aside revision orders HELD THAT - Tribunal was satisfied that it was not a case where the AO has not conducted any enquiry. Tribunal on facts found that the assessing officer has raised necessary queries with regard to the issue under consideration and was fully satisfied with the details furnished by the assessee and also accepted the identity creditworthiness and genuineness of the cash creditors and took a plausible view as provided under the Act and completed the assessment u/s 143A r/w Section 143(3) of the Act. Tribunal also faulted the PCIT for making a general observation stating that the assessing officer has not conducted necessary enquiry and failed to give any specific finding as to what was the information that the assessing officer had not called for and has also not given any comment on such information which the PCIT was required to call for during the course of revision proceedings before holding the assessment order in question as being erroneous and prejudicial to the interest of the revenue. Thus we find that no question of law much less substantial question of law arises for consideration.

Summary

ISSUES:

Whether the Principal Commissioner of Income Tax was justified in invoking revisionary power under Section 263 of the Income Tax Act, 1961 to set aside the assessment order.Whether the assessment order passed by the Assessing Officer was erroneous and prejudicial to the interest of the revenue due to alleged failure to enquire about the creditworthiness, identity of loan providers, and genuineness of unsecured loan transactions.

RULINGS / HOLDINGS:

The Tribunal held that the Assessing Officer had conducted sufficient enquiry by calling for all necessary details and evidences regarding unsecured loans, and was satisfied with the identity, creditworthiness, and genuineness of the cash creditors, thus taking a "plausible view as provided under the Act."The Tribunal found that the Principal Commissioner of Income Tax's order under Section 263 was based on a "general observation" without specifying what information the Assessing Officer failed to call for, and without commenting on such information during revisionary proceedings, thereby lacking justification to hold the assessment order as erroneous and prejudicial to revenue.Consequently, the Tribunal quashed the revisionary order and restored the original assessment order, concluding that the assessment order was neither "erroneous nor prejudicial to the interests of the Revenue."The Court found no substantial question of law arose and dismissed the appeal filed by the revenue.

RATIONALE:

The legal framework applied includes Section 263 of the Income Tax Act, 1961, which empowers the Principal Commissioner to revise an assessment order if it is "erroneous and prejudicial to the interests of the revenue."The Tribunal relied on the procedural compliance by the Assessing Officer under Sections 142(1), 153A, and 143(3) of the Act, noting the detailed enquiry and evidentiary submissions made regarding unsecured loans.The Court emphasized that a revisionary order under Section 263 requires specific findings and cannot be based on general observations without identifying the precise defects in the assessment order.No doctrinal shift or dissent was recorded; the decision reaffirmed the principle that revision under Section 263 is not warranted where the Assessing Officer has made a "plausible view" after adequate enquiry.