Allahabad High Court Ruling in case of The Principal Commissioner of Income Tax, Aaykar Bhawan, Noida and Another v. M/s Sampark Management Consultancy LLP
The Allahabad High Court recently ruled that no substantial question of law arises in a case where no perversity is evident in the order passed by the Income Tax Appellate Tribunal under Section 260A of the Income Tax Act, 1961. This section provides the framework for filing appeals before the High Court against decisions made by the Appellate Tribunal.
Case Background
The case involved the scrutiny of the assessee’s returns for the Assessment Year 2017-18. The scrutiny was initiated under the Computer-Assisted Scrutiny Selection system. The Assessing Officer (A.O.) issued several notices under Section 142(1) of the Act, accompanied by detailed questionnaires.
The assessee complied with all notices and provided the required responses. After reviewing the records, the A.O. found no discrepancies and accepted the income returns under Section 143(3) of the Act. However, the Principal Commissioner of Income Tax (P.C.I.T.) deemed the A.O.’s order erroneous and prejudicial to the interest of revenue. Invoking Section 263 of the Act, the P.C.I.T. issued a notice to the assessee and directed a fresh inquiry on specific issues.
The assessee, dissatisfied with the P.C.I.T.’s directive, appealed to the Income Tax Appellate Tribunal. The Tribunal ruled in favor of the assessee, concluding that the A.O. had conducted all necessary inquiries before passing the order. The P.C.I.T. subsequently challenged this decision in the High Court.
Key Arguments
Appellant-Department’s Contentions:
- The A.O.’s order was allegedly passed without proper inquiries or verification, bringing the case within the scope of Explanation 2 to Section 263(1) of the Act.
- The Tribunal failed to consider certain provisions of the Act.
- Some documents presented were either not part of the original record or inadequately examined by the A.O., indicating negligence.
Respondent-Assessee’s Defense:
- The assessment order under Section 143(3) was compliant with all statutory requirements.
- The P.C.I.T.’s reliance on Explanation 2 to Section 263(1) was unwarranted, as proper inquiries had been made by the A.O.
- The Tribunal’s decision was justified and supported by the material on record.
High Court Ruling
The Allahabad High Court upheld the Tribunal’s decision, stating that the order was based on a thorough review of the record. The court emphasized that the P.C.I.T.’s directive under Section 263 lacked merit as it was not substantiated by any credible evidence.
The bench, comprising Chief Justice Arun Bhansali and Justice Vikas Budhwar, observed:
“Once the Tribunal, on thorough scrutiny of the record, has concluded that the reasons recorded by the P.C.I.T. based on Explanation 2 to Section 263 pertaining to the failure of the A.O. in making inquiries or verification were baseless and contrary to the record, the order passed by the P.C.I.T. was without jurisdiction. The appellant’s counsel has failed to demonstrate any perversity in the Tribunal’s findings.”
Conclusion
The High Court dismissed the appeal, reinforcing the principle that a substantial question of law cannot arise in the absence of demonstrable perversity in the Tribunal’s order.
This verdict highlights the importance of adhering to proper procedural checks during assessments and ensuring that appellate authorities act within their jurisdiction when issuing directives under Section 263 of the Income Tax Act.
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