Inadequate enquiry u/S 263 of Income Tax Act is not sustainable: Delhi HC dismisses appeal [Read Order]

The Delhi High Court dismissed an appeal, asserting that an insufficient inquiry under Section 263 of the Income Tax Act 1961 was not sustainable.

The Principal Commissioner of Income Tax ( PCIT ) took a significant step by nullifying the existing Assessment Order. This decision was made under the provisions of Section 263 of the Act, prompting the Assessing Officer to issue a fresh Assessment Order. The subsequent development unfolded on March 27, 2022, when the Assessing Officer, in accordance with Section 143(3) of the Income Tax Act 1961, issued a new order.

The counsel representing the appellant Dacchita Shahi, argued that the Tribunal's contested order is in violation of both law and facts, warranting its overturn. The contention was that the Assessing Officer had neglected to acquire essential documents such as income tax returns, balance sheets, and bank statements, among others, pertaining to M/s DLF Commercial Projects Corporation. This company had engaged in a development agreement with the respondent/assessee and had provided an advance of Rs.14,06,00,000/-.

Under Section 263 of the Income Tax Act 1961, the Principal Commissioner of Income Tax ( PCIT ) had served a show-cause notice dated 15.02.2021, a fact duly acknowledged by the respondent/assessee. The order under Section 263 of the Income Tax Act 1961 highlighted that, in response to the show-cause notice, the respondent/assessee not only submitted written explanations but also had a chartered accountant and an advocate attend hearings on their behalf.

The Division bench comprising Justice  Girish Katha Palia and Justice Rajiv Shakdhar concluded that under Section 263 of the Income Tax  Act 1961 ,the Principal Commissioner of Income Tax ( PCIT ) notably omitted to document the reasons leading to the determination that the Assessment Order was both erroneous and detrimental to the interests of revenue. Furthermore, there was a complete absence of any indication that such a conclusion was reached based on a thorough or even minimal inquiry.

Therefore, it was unequivocally asserted that the order under Section 263 of the Income Tax Act 1961 lacks legal sustainability. Accordingly, the appeal was dismissed.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates