The Income Tax Appellate Tribunal (ITAT), Rajkot Bench quashed the revisionary order and held that the Principal Commissioner of Income Tax (PCIT) cannot impose his own understanding of the extent of inquiry under Section 263 of the Income Tax Act, 1961.
The assessee, M/s. Rishi Kiran Logistics Pvt. Ltd is a Private Limited Company engaged in the business of Clearing, forwarding, Handling & Storage liquid Cargo. The assessee has filed its original return of income and declared income of Rs. 7,14,60,410/- only. The case of the assessee was selected for complete scrutiny under CASS. The assessment was completed by the AO after Disallowing the deduction claimed u/s 80IA(4)(i) of Act for Rs. 4,85,50,551/- only.
The PCIT on examination of the case records of the assessee found that there was an investment in quoted and unquoted shares and mutual funds, which can earn exempt income. The amount of investment as on 01-04-2016 and as on 01-04-2017 was Rs. 4,47,86,678/- and Rs. 4,47,86,478/- respectively. According to the learned PCIT, there should have been disallowance u/s 14A and rule 8D, but the AO failed to do so. It is clear that the AO has not properly examined this issue during the assessment proceedings by the AO. Accordingly, the PCIT initiated the proceedings under section 263 of the Act vide show cause notice
The assessee filed a response to the show cause notice but still, the PCIT observed that the assessment has been completed without conducting any inquiry/ verification or incorrect application of law which is tantamount that the order being erroneous and also prejudicial to the interest of Revenue. Aggrieved the assessee is in appeal before the Tribunal.
The Bench consisting of Waseem Ahmed, Accountant Member, and Siddhartha Nautiyal, Judicial member observed that “PCIT erred in taking the course of such provisions while deciding the issue against the assessee. Secondly, the learned PCIT has also not specified the nature and the manner in which the inquiries should have been conducted by the AO in the assessment proceedings. Thus, in the absence of any specific finding of the learned PCIT with respect to the inquiries which should have been made, we are not convinced by his order passed under section 263 of the Act.”
“We hold that there is no error in the assessment framed by the AO under section 143(3) causing prejudice to the interest of revenue. Thus, the revisional order passed by the learned PCIT is not sustainable and therefore we quash the same” the Tribunal ruled.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
