The Income Tax Appellate Tribunal (ITAT), Rajkot Bench, has recently, in an appeal filed before it, held that matters pending before the CIT(A) for adjudication cannot be disputed in the proceedings under Section 263 of the Income Tax Act.
The aforesaid observation was made by the Rajkot ITAT when an appeal was preferred before it by the assessee, as directed against the order of the Principal Commissioner of Income-Tax, Rajkot, passed in exercise of his revisionary jurisdiction under Section 263 of the Income Tax Act, 1961 for Assessment Year (AY) 2015-16.
The only issue raised by the assessee is that the Pr. CIT erred in holding the assessment order passed under Section 143(3) of the Income Tax Act as erroneous insofar as prejudicial to the interest of Revenue, the brief facts of the case were that the assessee was a partnership firm, engaged in the business of ceramic tiles.
The assessee in the return filed for the year under consideration, declared a loss at Rs. 2,19,44,882/-, which was selected for scrutiny under CASS. Finally, the AO assessed the income at Rs. 91,19,044/- vide order dated 28th December 2017.
Subsequently, the Pr. CIT from the assessment records, found that during the year the assessee firm had received an amount of Rs. 3,22,78,000/- from 11 partners as a capital introduction and that the AO made addition of Rs. 12,00,000/- as unexplained credit on account of capital contribution from 2 partners only, whereas no finding was given regarding remaining amount of Rs. 3,10,78,000/- representing capital received from 9 partners.
Likewise, the PCIT further found that the AO had made an addition of 10% of sundry creditor for Rs. 4,29,42,277/- on an ad-hoc basis to plug possible revenue leakage. However, as per the PCIT, there was no provision under the Income Tax Act, to allow or disallow sundry creditors on ad-hoc and certain percentage basis. And as such, the AO was required to verify the entire sundry creditor and accordingly reach a logical conclusion.
The PCIT also found that the AO vide his order, had worked the amount of suppressed production at Rs. 2,08,36,851/- but that, at the time of computing assessed income, he had made an addition of Rs. 2,02,36,851/- only, resulting in under assessment of income by Rs. 6,00,000.00. 6.1 Thus, the PCIT in view of the above was of the opinion that the order of the AO suffers from error which is prejudicial to the interest of the Revenue and accordingly he issued notice under Section 263 of the Income Tax Act.
The assessee in response to such notice only submitted that the original assessment file had been lost, and hence it requires time to recollect the data. Thereafter several opportunities of being heard were provided but the assessee failed to avail the same, and hence, the PCIT, thus held that the AO framed the assessment order without making proper inquiry or verification, thus making the assessment order as erroneous, insofar as prejudicial to the interest of the Revenue.
In holding so, the PCIT also referred the explanation 2 to Section 263(1) of the Income-Tax Act as well as several judicial pronouncements. And, it is being aggrieved by the order of the PCIT, that the assessee is presently in appeal before the Rajkot ITAT.
Hearing the opposing contentions of both sides as presented by Shri Kalpesh Doshi, the AR on behalf of the assessee, and by Shri Shramdeep Sinha, the CIT-DR on behalf of the Revenue, the ITAT coram of Siddhartha Nautiyal, the Judicial Member, and Waseem Ahmed, the Accountant Member, thus held:
“Once the issue is pending before the learned CIT(A), the same cannot be made subject matter of revision under the provisions of Section 263 of the Act.”
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