The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) in a recent judgment reprimanded the wrongful exercise of powers by the Principal Commissioner of Income Tax (Appeals)-3, Ahmedabad ( PCIT ) under Section 263 of the Income Tax Act, 1961 while adjudging a valid Income Tax Assessment.
The Income Tax Appeal was filed by Assessee Prakash Khatri, an individual engaged in the business of land trading. The subject matter of the case arose following the Appellant-Assessee’s filing of Income Tax Returns for the Assessment Year 2019-20.
The Assessee furnished details regarding his total income, long term capital gains and income from other sources resulting in a cumulative Rs.23,49,930/- while claiming losses of Rs.11,66,265/- and claimed a refund of Rs.20,58,130/-.
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The Assessing Officer (AO) following scrutiny, made additions of cash credit, cash deposit and unsecured loan amounting to Rs.1,79,53,201/-.
The Appellant’s Form 26AS was subject to verification by the Principal Commissioner of Income Taxes (PCIT) who made findings that the Assessee had sold a property for Rs.3,65,00,000/-, of which the AO had only regarded Rs.2,35,00,000 in his Assessment, resulting in an escapement of Rs.1,30,00,000/-and incorrectly calculated a cash deposit of Rs.83,82,600/-.
In light of the findings made, the Assessee was issued a show-cause notice proposing an addition of Rs.2,13,82,600/- towards the Assessment Order.
The Assessee contested the PCIT’s assertions by submitting that the aforementioned property was not sold by the Assessee and rather was sold by a company named “Vaibhav Corporation Pvt. Ltd.” (Vaibhav Corporation), of which the Assessee is a Director.
The Assessee adduced Form 26AS of Vaibhav Corporation to prove the influx of the sale amount towards Vaibhav Corporation along with Tax Deducted at Source made by the Purchaser of the Property in the name of Vaibhav Corporation.
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Additionally, the Assessee produced a reply received from the Sub Registrar Vadodara-3 affirming that no sale transaction was booked on the PAN Number of the Assessee on concerned dates, thus solidifying the Assessee’s stance that no escapement of income had occurred.
The PCIT refuted the Assessee’s submissions while directing the Assessing Officer to pass fresh orders on the basis of new computation of income.
Senior Counsel, S.N. Soparkar appearing for the Assessee reaffirmed the submissions and evidence produced by the Assessee to hold that the sale was indeed conducted by Vaibhav Corporation and not the Assessee.
The two-member Bench of ITAT comprising T.R. Senthil Kumar, Judicial Member and Narendra Prasad Sinha, Accountant Member echoed the submissions made by the counsel for the Appellant and insisted that no income escapement can be alleged against the Assessee in light of Vaibhav Corporation’s Form 26AS proving that 1% TDS was made by the purchaser against Vaibhav Corporation.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
In addition, ITAT stated that PCIT erred in issuing the file back to the Assessing Officer for re-computation of the Assessee’s income u/s 263 instead of rectification u/s 154 of the Income Tax Act, 1961 despite having solid evidence that the Sale was not conducted by the Assessee, referring to the Property Sale Deed and clarification letter issued by Sub Registrar Vadodara-3.
Concludingly, the Appeal filed by the Assessee was allowed by ITAT.
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