No Error or Prejudice to Revenue Interests: ITAT quashes Revision Order u/s 263 of Income Tax Act [Read Order]

In a recent ruling, the Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) quashed the revision order passed under Section 263 of the Income Tax Act of 1961 as the bench found no error or prejudice to the interest of the revenue.

The appeal in this present case had been filed before the ITAT against the order passed by the Principal Commissioner of Income Tax (PCIT), for the assessment year (AY) 2017-18 arising in the matter of the assessment order passed under Section 263 of the Income Tax Act, 1961.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

  A notice under Section 142(1) of the Income Tax Act, dated 22.12.2017, was issued, requiring the assessee to file the correct return of income for the Assessment Year 2017-18. The assessee failed to do so, either under Section 139 or in response to the notice. By data analysis, the Revenue found that the assessee had deposited substantial cash during the demonetization period but had not filed a return.

It was observed by the Assessing Officer (AO) that Rs. 47,69,500 was deposited during this time. Since the assessee did not respond to statutory notices, the Assessing Officer proceeded under Section 144 of the Income Tax Act. A show-cause notice was issued on 09.10.2019, to which the assessee replied on 03.12.2019 and 24.10.2019. After reviewing the response, the Assessing Officer made an addition of Rs. 44,07,549/- under Section 69A as unexplained money.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

Later on, an order was passed by the AO which resulted in an assessment of income of Rs. 6,34,87,602/- with a consequent short levy of tax of Rs. 7,79,80,234 under Section 115BBE of the Act.

After that, the PCIT issued a notice under Section 263 of the Income Tax Statute on 24.02.2022. After considering the assessee's submissions, the PCIT set aside the assessment order passed under Section 143(3) of the Income Tax Act, 1961, and directed the Assessing Officer to issue a fresh assessment order. The assessee, who was aggrieved by the above order, approached ITAT for relief.

The counsel on behalf of the assessee contended that the assessee was unaware of the technically complicated issues related to income tax, which led to a 360-day delay in filing the appeal.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The counsel on behalf of the respondent opposed the condonation of delay.  

The ITAT bench observed that the PCIT suggested a protective addition for the assessee, expressing a second view without identifying any errors in the assessment order that are prejudicial to the Revenue, and thus the order passed by the PCIT under Section 263 of the Income Tax Act, 1961, is unjustifiable.

The ITAT bench, comprising Makrand Vasnat Mahadeokar (Accountant Member) and Suchitra Kamble (Judicial Member), allowed the appeal of the assessee.

To Read the full text of the Order CLICK HERE

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