PCIT exercising revisionary power u/s 263 cannot direct the AO to do again and again enquiry the way the PCIT wants – ITAT
In a recent judgment, the ITAT Jodhpur has observed that PCIT exercising revisionary power u/s 263 cannot direct the AO to do again and again enquiry the way the PCIT wants. It is the privilege that the AO has whether to call for the details or to verify the same from the details available on record.
ABCAUS Case Law Citation:
4348 (2024) (12) abcaus.in ITAT Jodhpur
Case laws relied upon by the Parties:
PCIT vs. ShreejiPrints (P.) Ltd. (SC)
CIT vs. G.M. Mittal Stainless Steel (P.) Ltd. [2003] (SC)
CIT vs. Reliance Communication Ltd. [2016] (SC)
Shiv Kumar Nayyar vs. ACIT
CIT vs. Rajasthan Financial Corporation (1996)
Narain Singla vs. PCIT [2015]
CIT vs. Sunbeam Auto Ltd. [2010]
In the instant case, the assessee had challenged the order passed by the Pr. Commissioner of Income Tax (PCIT) in invoking the provisions of section 263 of the Income Tax Act, 1961 (the Act) to hold that assessment order passed u/s 143(3) was prejudicial to the interests of the revenue.
The assessee is a partnership firm and engaged as civil contractor mainly having business of construction and maintenance of roads and runways. There was a search and seizure action in case of a Business Group. As a result, a survey proceeding u/s. 133A of the Act was carried out at site office of the assessee firm. During the course of survey action at work site of the assessee, certain incriminating documents, loose papers etc., were impounded by the survey team.
After analyzing the said impounded documents/material, certain cash payment were found made in contravention of the provision of section 40A(3) of the Act. Finally, the assessment order u/s 143(3) was passed determining at assessed income by making disallowance on accounts of unexplained cash credit u/s 68 of the Act and disallowance on accounts of violation u/s 40A(3) of the Act.
While examining the assessment record the PCIT noted that AO had called for the details of the violation u/s 40A(3) from the assessee only for few records seized and no query was made to the assessee to explain other seized records related to said violation nor any supporting and corroborative evidence are available on the record. The PCIT concluded that there was a failure on part of the Assessing Officer in carrying out the requisite inquiries/examination(s) and thereby the action of the AO was erroneous and prejudice to the interest of the revenue.
The PCIT issued a show cause notice to the assessee and after rejecting the submissions of the assessee, set aside the assessment order.
The Tribunal observed that PCIT herself admitted in her order u/s 263 that the AO placed on record the office note wherein he wrote that “all the documents and financial statement found during the course of survey proceeding are recorded / reflected in the regular books of accounts of the assessee and the same is verified during the assessment proceedings.” However, the note made in writing made by the AO was ignored by PCIT by merely stating that an examination of order of the Assessing Officer made it clear that he did not take a conscious decision relating transactions as per two annexures of seized records and not examined at all by the AO as no query has been raised in this regard & the assessee had not replied on the entries mentioned in these documents.
The Tribunal observed that while issuing the show cause notice to the assessee neither the PCIT demonstrated by placing the relevant part of the seized records which suggest the addition and thereby loss of revenue nor she has while passing the order placed on record the relevant part of the failure on the part of the AO.
The Tribunal opined that the above conduct itself suggested that the action of the PCIT was based on surmises and conjectures. Not only that when the AO had specifically written in the office note that he had verified all the aspect of the matter then PCIT merely based on the assumption and presumption cannot held the assessment order has caused prejudice to the revenue.
The Tribunal further stated that when the specific observation with that of the general observation the specific will prevail because that general statement of the PCIT had not been proved as correct by placing anything on record so as to demonstrate the impact of her observations.
The Tribunal opined that the AO is having the co-judicial authority PCIT cannot direct the AO to do again and again enquiry the way the PCIT wants, it is the privilege that the AO has whether to call for the details or to verify the same from the details available on record. Thus, merely non mentioning the annexure and not asking the details merely itself does not hold the order prejudicial or erroneous.
Accordingly, the Tribunal quashed the revisionary order and allowed the appeal of the assessee.
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