The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) directed the Assessing Officer ( AO ) to conduct a fresh assessment due to the inadequacy of the inquiry into the source of fresh capital.
The counsel for the assessee K.P Garg highlighted that subsequent to the issuance of the assessment order on 14.03.2014, the Central Board of Direct Taxes ( CBDT ) through a notification dated 03.11.2014, exercising powers under sections (1) and (2) of section 120 of the Income Tax Act 1961, revised the jurisdiction of field formations. In relation to the present case, it is argued that the assessee qualified as a non-resident during the relevant previous year for the assessment year in question. According to the mentioned CBDT notification, the Principal Commissioner of Income Tax ( PCIT ), Ghaziabad, had no jurisdiction over the assessee at the time of issuing the notice under section 263 of the Act on 23.03.2015.
The counsel for the Revenue Sapna Bhatia who was present during the proceedings, concurred with the argument that income tax authorities had to operate within the bounds of jurisdiction defined by the statute. An examination of the records reveals that the contested issue of jurisdiction deficiency was indeed raised before the Principal Commissioner of Income Tax ( PCIT ), Ghaziabad, during the course of the proceedings.
The two member bench of the tribunal comprising Challa Nagendra Prasad ( Judicial member ) and G.S Pannu ( Vice President ) concluded that the assessment order dated 14.03.2014 was erroneous and prejudicial to the interests of revenue. The order was set aside with directions to the AO to pass a fresh assessment order after a thorough examination of the case, considering all available evidence on record, or that may be produced or furnished by the Assessee.
The bench observed that the AO had not properly examined the source, especially considering that in the earlier assessment year 2010-11, fresh capital introduced by the assessee was found unexplained by the AO.
The bench noted the lack of inquiry or application of mind by the AO on the issue of introduced fresh capital.
Accordingly, appeals were allowed for statistical purposes.
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