The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) orders that the assessing officer’s assessment order must be erroneous and prejudicial to invoke Section 263 of the Income Tax Act, 1961, and sets aside the Principal Commissioner of Income Tax’s revisional order.
Assessee, Dee Are Texfab Pvt.Ltd filed its income tax return for the assessment year (A.Y) 2014-15 declaring the total income of Rs. 11,45,820. In the case of Sanjay Govindram Agrawal, the department conducted a search on 12-04-2019, which led to the reopening of the case of the assessee. AO issued the notices to the assessee to provide information under section 142(1) of the act. The assessee also responded to all the notices.
The National Faceless Assessment Centre ( NFAC ) also requested AO to provide all the details of the seized documents in search of the Sanjay Govindram Agrawal case indicating the involvement of the assessee.
NFAC scrutinized the document and completed the assessment. The PCIT observed that the AO had an underassessment of income due to a lack of addition for the alleged accommodation entries amounting to Rs. 1,36,02,120 from the entry operator Sanjay Govindram Agrawal and issued a notice under section 263 of the Act for revision of the reassessment order passed under Section 147 r.w.s 144B of the Income tax Act.
The assessee replied to the notice that the AO’s order was not erroneous nor prejudicial to the interest of the revenue and provided relevant details. However, the CIT was not satisfied with the submission and directed the AO to pass a fresh order. CIT relied only on the information available on INSIGHT PORTAL and concluded that there is ample evidence that the assessee has transacted with Sanjay Govindram Agrawal for accommodation entries.
Aggrieved by the PCIT order, the assessee appealed before the ITAT, Ahmedabad on the ground that PCIT erred in law as well as in fact. The assessee explained that the information available on the Insight portal pertains to Divyaraj Madanlal Gupta, proprietor of M/s Dee Are Products not the assessee with the relevant documents. Assessee counsel relied on various judicial precedents.
The respondent’s counsel represented by Kamlesh Makwana argued that AO hadn’t addressed the information regarding the accommodation entries for which the case was reopened. CIT counsel relied on the information from the Insight portal data and claimed it as sufficient evidence.
The bench of Siddhartha Nautiyal (Judicial Member) and Makarand V. Mahadeokar (Accountant Member) observed that the fundamental issue is whether the PCIT was justified in invoking the jurisdiction under Section 263 of the Income tax law.
The Tribunal noted that the AO issued multiple notices to the assessee and conducted sufficient inquiries. The tribunal observed that the assessee provided an explanation and evidence to show that the transaction was not conducted by the assessee but by the proprietorship firm Divyaraj Madanlal Gupta.
It was observed that mere information on the insight portal cannot be considered evidence and the AO’ order must be erroneous and prejudicial to the interest of the revenue to invoke section 263 of the act which is not satisfied in this case.
The tribunal set aside the PCIT order and upheld the reassessment order passed by the AO under Section 147 read with Section 144B of the Act.
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