Author: Khushi J Prajapati
The Income Tax Appellate Tribunal Ruled that PCIT lacks unlimited power to revise order already examined by AO under section 263 of Income tax act 1961.
The Tribunal observed that the PCIT had recognized certain deficiencies in the assessment process, for example ineffective verification of share application money and unexplained transactions with related parties.
It was noted that these points were serious enough to entitle PCIT to exercise its revisional powers so that correct assessment would be done.
The bench held that PCIT decision to set aside original assessment order fell within Section 263 jurisdiction because there was serious deficiency which affected accuracy of assessment.
The tribunal emphasized that PCIT exercised powers on valid grounds such as addressing unexamined material issues concerning this case.
Accordingly, the bench upheld PCIT order directing fresh assessment while also dismissing the appellants’ argument on reassessment being unnecessary.
Facts
The assessee was a lumbering company that filed its income tax return for assessment year 2014-15 on October 30, 2014 declaring an income of ₹18,19,390. The case was selected for detailed scrutiny which led to notices under section 143(2) and 142(1) being issued by the Assessing Officer (AO) over a series of dates from August 28, 2015 to November 15, 2016. The AO passed the assessment on December 7, 2016 with minor additions of ₹2,50,000 and ₹20,000 despite several adjournments and requests for documents such as cash books, ledgers, stock registers etc. The Principal Commissioner of Income Tax (PCIT) found certain discrepancies during review process and issued a show cause notice under section 263 on January 10th 2018 standing out deficiencies observed in the assessment like inadequacy in verifying the genuineness share application money; transactions conducted with related parties; correctness or otherwise claims regarding expenditure. Thus after this order was set aside by PCIT on March25th 2019 directing a new assessment entirely. The appellant rebutted suggesting PCIT real issues which had already been crossed during original collections thus making reevaluation unwarranted.
Submissions
The petitioner contended that the order passed by PCIT under Section 263 was unjustifiable because the original assessment had been made thoroughly and all issues pointed out by the appellant had already been complied with.
Conclusion
The Income Tax Appellate Tribunal (ITAT) upheld the decision of Principal Commissioner of Income Tax (PCIT) made under section 263 observing that the original assessment was indeed erroneous and prejudicial to the interests of revenue.
The bench found that PCIT had rightly used its revisional powers especially concerning verification of share application money and related party transactions to set right the deficiencies in the assessment.
Case Details
Case Title – M/s. Ved Prakash & Sons Lumbers Pvt Ltd, Timber Market Karnal vs Principal CIT Karnal
Courts Jurisdiction – ITAT Delhi Bench
Appeal No – ITA NO 4079/DEL/2019
Assessment year – 2014-15
Judges – Shri M Balaganesh, Accountant Member & Shri Vimal Kumar, Judicial Member
Date of Pronouncement – 23/08/2024