In faceless regime, normally there cannot be a case of prejudice of lack of enquiry – ITAT

In faceless regime, normally there cannot be a case of prejudice of lack of enquiry because there is application of mind by multiple officers and not by a single officer – ITAT

ABCAUS Case Law Citation:
ABCAUS 3780 (2023) (07) ITAT

Important Case Laws relied upon:
Cinecita Pvt. Ltd. 137 ITR 652
Hoechst Pharmaceuticals Ltd. 113 ITR 877
Octavious Steel and Co. Ltd. 221 ITR 810
Smt. Lata Phulwani
CIT vs Ganpat Ram Vishnoi, 296 ITR 292
Annu Agrotech Private Ltd.

In the instant case, the assessee had challenged the initiation of proceedings by the Principal Commissioner of Income Tax (PCIT) in assuming revisionary jurisdiction u/s 263 of the Income Tax Act, 1961 (the Act).

The assessee had claimed in Profit & Loss account under the nomenclature of registration expenses of a house owned by him. During the year under consideration, assessee had made out a lease deed in favour of a company and under the provision of transfer of Property Act paid stamp duty out of which leassee reimbursed approx. half of the amount and balance amount was borne by the assessee. The assessee accordingly debited in its accounts the said expenses u/s 37(1) of the Act.

In scrutiny assessment u/s 143(3), the assessee placed all the facts before the Assessing Officer (AO) who after examination allowed the expenses by accepting the plea of the assessee.

Later, proceeding u/s 263 was initiated by the PCIT by holding that payment towards registration fees was not allowable as revenue expenses as per provision of section 37(1) of the Act and therefore, the assessment order was erroneous and prejudicial to the interest of the revenue.

The Tribunal observed that the scope of revisionary jurisdiction u/s 263 is very specific, limited and also different from appellate jurisdiction. Law contained in section 263 does not allow PCIT to impose his view over judicious view adopted by the AO unless the view adopted by the ld. AO is established to be not at all sustainable in law.

The Tribunal further observed that the AO in the present case on appreciation of the facts and using his judicial wisdom allowed expenses towards registration of lease deed by debiting in the profit and loss account u/s 37(1) of the Act. The view of the AO was also supported by the Hon’ble High Court.

Further the Tribunal opined that it cannot be said that there was lack of enquiry more particularly when detailed questionnaire was issued by the AO during the assessment proceeding and the AO on perusal of facts held that expenses towards registration of lease deed debited in the profit and loss account u/s 37(1) of the Act was allowable as expenses.

The Tribunal observed that assessment was carried out in the ‘’faceless manner’’ by NFAC. It is a fact that any faceless assessment is carried out through a teamwork of assessment unit,technical unit, review unit, verification unit etc. Since different units are headed by Principal Commissioner of Income Tax, therefore, in a faceless  regime, normally there cannot be a case of prejudice of lack of enquiry for the reason that there is application of mind by multiple officers of Department and not by a single officer. Since the assessee firm had furnished the requisite information and the NFAC has completed the assessment after considering all the facts, therefore, the order passed by the AO cannot be termed as erroneous.

Accordingly, the ITAT quashed the order passed by the PCIT u/s 263 and allowed the appeal of the assessee.

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