In the recent ruling, the Delhi High Court ,upheld the decision of the Principal Commissioner of Income Tax ( CIT ) to revise the assessment due to the Assessing Officer’s ( AO ) failure to verify dishonored cheques.
M.R. Apparels Private Limited, the appellant-assessee, had appealed under Section 260A of the Income Tax Act, 1961, challenging the order dated 06.02.2024 issued by the Income Tax Appellate Tribunal in ITA No. 198/DEL/2020, concerning the Assessment Year 2015-16.
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The appeal stemmed from a prior order dated 18.11.2019 passed by the Principal Commissioner of Income Tax (CIT) under Section 263 of the Act, which had found the assessment order dated 04.05.2017, passed by the Assessing Officer (AO) under Section 143(3), to be erroneous and prejudicial to the Revenue’s interest.
The dispute revolved around the sale of immovable property during the financial year 2014-15, amounting to ₹6,50,00,000. The appellant had executed the sale deed on 17.03.2015 but only received ₹5,05,00,000, as two cheques totaling ₹1,45,00,000 issued by the purchaser were dishonored.
The appellant contended that the transaction was incomplete and, therefore, had not reported the capital gains for the assessment year in question.
The CIT found that the AO had failed to properly investigate the details surrounding the dishonor of the cheques and determined that the assessment order had been passed without sufficient inquiry. As a result, the AO reassessed the appellant’s income for the year 2015-16, raising a tax demand of ₹44,19,500.
The appellant then appealed to the Tribunal against the CIT’s order, but the Tribunal upheld the CIT’s decision, agreeing that the AO had not conducted the necessary verifications.
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Upon further appeal to the court, the appellant’s case was dismissed. The court ruled that the CIT had correctly invoked Section 263 of the Act, as the AO’s failure to properly investigate the dishonored cheques rendered the assessment order erroneous and prejudicial to the Revenue.
A coram of Vibhu Bakhru(Justice)and Swarana Kanta Sharma(Justice) dismissed the appeal as the court found no substantial question of law in the case.
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