ITAT Surat Verdict-Revision Order Under Section 263 Not Justifiable Unless Order of Assessing Officer is Erroneous
ITAT Surat Verdict: The Surat bench of the Income Tax Appellate Tribunal (ITAT) recently issued a ruling concerning a Revision Order filed under section 263 by the Principal Commissioner of Income Tax. In this significant legal decision, the ITAT in Surat offered its judgment on the matter.
The case revolved around the Revision Order, which had been initiated by the Principal Commissioner of Income Tax. The ITAT, sitting in the Surat jurisdiction, delivered its verdict regarding the implications and validity of this section 263 Revision Order. This ruling has significant implications for the involved parties and serves as a crucial precedent in the realm of income tax regulation and disputes. The decision made by the ITAT bench in Surat could potentially impact similar cases and shape the interpretation and application of section 263 in income tax matters for the foreseeable future.
Facts of the Case
The case was selected for limited scrutiny assessment, on the issue that assessee has introduced capital during the year, which is very high as compared to the profit after tax of the assessee. The assessment was completed u/s 143(3) on 13.01.2021 accepting the returned income as such.
Later on, Ld. PCIT has exercised his jurisdiction u/s 263 (revision order) of the Act. On perusal of assessment records, it was noticed by ld. PCIT that assessee has introduced capital in M/s Sai Nath Petroleum from various sources after claiming capital gains and business income on sale of land and a number of shops.
The computation of such transaction which led to build of capital in Sai Nath Petroleum was also perused and it was noted by ld. PCIT that there is huge discrepancy which needs to be explained by the assessee, considering these facts a notice was issued to the assessee on 10.03.2023 stating that why assessment framed for assessment year (A.Y) 2018-19 should not be revised u/s 263.
In response to notice issued by Ld. PCIT, the assessee submitted her detailed reply and explanation along with all required relevant evidences (including audited balance sheets, profit & loss a/c etc., bank statements, sale deeds etc.) in support of her contention and also explained sources.
However, the ld PCIT held that Assessing Officer has passed the assessment order without making inquiries or verification on the issue which ought to have been made in the assessee case therefore the assessment order u/s 143(3) of the Act in the case of Preetiben Chhatrasingh Chauhan for A.Y 2018-19 passed on 13.01.2021 by the Assessing Officer is erroneous in so far it is prejudicial to the interest of revenue. Therefore, ld. PCIT directed the Assessing Officer to frame the assessment de- novo after making proper enquiries.
Aggrieved by the order of the Ld. PCIT, the assessee is in appeal before the ITAT.
Submission of the Counsel of the Assessee
The revision order passed by the learned Principal Commissioner of Income Tax (PCIT), Valsad under section 263 of the Income Tax Act for assessment year 2018-19 without considering our detailed submission made in reply to the show cause notice issued.
During revision proceedings, the issue raised by Ld. PCIT, was different than the issue involved in limited scrutiny. The Council pointed out that the scrutiny assessment was completed based on a selected issue, namely” “share capital / other capital”.
Therefore, before assessing officer, in the limited scrutiny, the issue raised by the ld. PCIT was not the subject matter of limited scrutiny, hence the ld. PCIT has gone beyond the scope of the ‘limited scrutiny’ where the Assessing Officer does not have power to verify the issue except the issue mentioned in the ‘limited scrutiny’, and hence the order passed by the ld. PCIT is not valid and it may be quashed.
The Principal Commissioner of Income Tax, Valsad erred in passing order u/s 263 of the Act when order passed by assessing officer is neither erroneous nor prejudicial to the interest of revenue.
Submission of the Counsel of the Revenue
The Assessing Officer has not converted ‘limited scrutiny’ into ‘complete scrutiny’ thus Assessing Officer has not applied his mind, therefore order passed by the Assessing Officer is erroneous as well as prejudicial to the interest of revenue, hence order passed by the ld PCIT, may be upheld.
Judgement of ITAT, Surat
The scrutiny assessment was for limited purpose to examine the issue of “share capital and other capital”. The Assessing Officer has examined the ‘share capital and other capital’ in the scrutiny assessment and framed the assessment order u/s 143(3) of the Act, dated 13.01.2021.
However, Ld. PCIT has raised the issue, stating that there was sale of shop numbers 201 to 210 at Zanda Chowk, Silvssa and computation of long-term capital gain, their on which was not the subject matter of ‘limited scrutiny’. Therefore, the issue raised by the L PCIT is outside the scope of limited scrutiny.
We note that as the case of assessee was selected for ‘limited scrutiny’ purpose to verify the sources of substantial increase in capital, and the Assessing Officer had rightly raised query regarding sources of substantial increase in capital, vide notice u/s 142(1) of the Act and the assessee had also submitted her detailed reply and explanation with supporting evidences, against notice u/s 142(1) of the Act before Assessing Officer.
The Assessing Officer, after proper examining and verifying the details and submission along with evidences of the assessee and after satisfying with sources of substantial increase in capital of assessee, had completed the assessment and passed the order u/s 143(3) of the Act.
We also note that that an assessment or re-assessment could only be revised u/s 263 of the Act in case it satisfies the twin conditions, viz: order is erroneous as well as prejudicial to the interest of revenue. In the case of assessee, order passed u/s 143(3) of the Act is neither erroneous nor prejudicial to the revenue, as it was passed after detailed examination and proper verification of all documents of subject matter of limited scrutiny. Therefore, respectfully following the judgment of the Co-ordinate Bench of ITAT Surat in the case of Green Park (supra), we quash the order of ld. PCIT.
Citation: ITA No.238/SRT/2023; Case Title: Preetiben Chhatrasingh Chauhan Vs PCIT; Order Date: 16.10.2023
To Read the provisions under Section 263 of I-T Act CLICK HERE
To Read & Download the CBDT Notification 94/2023 CLICK HERE
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