In a significant ruling, the Income Tax Appellate Tribunal (ITAT) Jaipur has ruled in favor of the appellant, setting aside the Principal Commissioner of Income Tax ( PCIT )’s order under Section 263 of the Income Tax Act, 1961. The tribunal found that the PCIT had ignored multiple submissions made by the assessee, violating the principles of natural justice.
Dinesh Kumar Chaurasia, appellant-assessee, had filed his income tax return for Assessment Year 2013-14, declaring an income of Rs.3,70,630. His return was processed under Section 143(1), and no assessment was conducted. However, during a survey conducted on October 29, 2019, tax officials found two sale agreements related to land transactions.
Based on these documents, the department alleged that the appellant had made unexplained cash investments totaling Rs.1.65 crore, which had escaped assessment.
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A reassessment notice under Section 148 was issued, and the income was reassessed at Rs.1,67,70,630(One Crore Sixty Seven Lakh Seventy Thousand Six Hundred Thirty) on a protective basis, with the substantive addition made in the hands of Mahendra Mehra, who was the registered buyer in the agreements. Later, the PCIT issued a notice under Section 263, alleging that the Assessing Officer had not properly examined the case, and subsequently passed an ex-parte order against the appellant.
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A Two Member Bench of Dr. S Seethalakshmi (Judicial Member) and Gagan Goyal (Accountant Member) quashed the Section 263 order because the authorities committed multiple legal and procedural errors.
The tribunal found that assessee had submitted multiple responses on January 6, October 9, January 23, and March 4. However, PCIT ignored these submissions and incorrectly claimed that the assessee did not respond. The ITAT ruled that the order was passed without considering the assessee’s defense, which violated the principles of natural justice.
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The tribunal also noted that the substantive addition had already been made in the hands of Mahendra Mehra, confirming that the income belonged to him. Since income cannot be taxed twice, the protective addition made against Chaurasia,the appellant, was no longer valid. Therefore, the continued proceedings against him had no legal basis.
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The ITAT further observed that the PCIT failed to provide proper justification for invoking Section 263. The tribunal found that new issues were raised that were not part of the original show cause notice (SCN).
Since the PCIT could not prove that the reassessment order was wrong, the ITAT ruled that the Section 263 order was invalid and restored the original assessment.
In Conclusion, the appeal was allowed.
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