The Kolkata Bench of Income Tax Appellate Tribunal ( ITAT ) ruled that an assessment cannot be deemed prejudicial to the revenue if the Assessing Officer ( AO ) has followed the Jurisdictional High Court’s decision prevailing at the time of assessment.
Lakhotia Diagnostic Service Pvt. Ltd,appellant-assessee, filed its original income tax return for AY 2018-19, declaring an income of ₹56,98,030. Following a search and seizure operation at the premises of its group, the AO added ₹7.50 lakh as unsecured loans under Section 68 of the Act and disallowed ₹4,53,131. Penalty proceedings under Section 271AAC were also initiated.
Get a Complete Kit of Essential Books for Daily Practice, Click Here
Later, under Section 263 of the Act, it was found that employee contributions towards Provident Fund ( PF ) and Employee’s State Insurance ( ESI ), amounting to ₹10,69,696, were not deposited within the due dates specified under Section 36(1)(va). Based on the Supreme Court’s decision in Checkmate Services P. Ltd. vs. CIT, the assessment order dated March 30, 2022, was set aside, and the AO was directed to re-examine the matter after giving the assessee an opportunity to be heard.
Dissatisfied by the aggrieved order the assessee appealed before the tribunal.
The assessee argued that the revision order was not valid, citing the Calcutta High Court’s decision in PCIT vs. M/s. SPPL Property Management Pvt. Ltd. and the Supreme Court’s ruling in Checkmate Services P. Ltd.. The counsel stated that the assessment order, passed on March 30, 2022, was based on the prevailing decision in CIT vs. Vijay Shree Ltd. by the jurisdictional High Court. It was further argued that no error existed in the assessment order at the time, as clarified in Checkmate Services P. Ltd. and Ajmera Housing Corpn. vs. CIT.
The two member bench comprising Pradip Kumar Choubey ( Judicial Member ) and Rakesh Mishra ( Accountant Member ) reviewed the records and the decision of the Calcutta High Court. It confirmed that the assessment order was passed on March 30, 2022, when the decision in Vijay Shree Ltd. was in force. The Principal Commissioner of Income Tax (Pr. CIT) had relied on the later Supreme Court decision in Checkmate Services P. Ltd. under Section 263 of the Act.
Get a Complete Kit of Essential Books for Daily Practice, Click Here
The tribunal also examined the recent decision of the Calcutta High Court in M/s. SPPL Property Management Pvt. Ltd., which addressed issues like whether the tribunal erred in quashing the Pr. CIT’s order and whether delayed payments of employees’ PF contributions were allowable. The High Court referred to the Supreme Court’s judgment in Checkmate Services P. Ltd. which held that “At the time of the assessment the AO has followed the decision of Hon’ble Jurisdictional High Court which held the field at the relevant point of time, the assessment cannot be held to be prejudicial to the interest of revenue.”
Based on this, the tribunal concluded that the case was covered by the Calcutta High Court’s decision and allowed the appeals, setting aside the order under Section 263 of the Act.
In short,the appeal filed by the assessee was allowed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
