PCIT Fails to Mention as to How Assessment Order was Erroneous and Prejudicial to Interest of Revenue: ITAT sets aside Order issued u/s 263 [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal has held that Principal Commissioner of Income Tax (PCIT) fails to mention as to how assessment order was erroneous and prejudicial to interest of revenue and set asides order issued u/s 263

During the course of assessment proceedings, the Assessing Officer observed that assessee, Mr. Jai Parkash Garg deposited cash in the bank on the various dates. The AO noted that to plug the possible leakage in revenue on account of cash deposited in the bank, an addition of Rs.3,20,000/- is made subject to no penalty.

The  PCIT proceeded to assume jurisdiction u/s 263 of the Act against the assessment order presuming that no enquiry/verification has been done on the issue and AO simply accepted the version of the assessee. The PCIT directed that the assessment order is set aside and AO is directed to make the assessment afresh. Aggrieved, assessee preferred appeal before ITAT.

The counsel of the assessee submitted that AO has made proper and due enquiry and the AO has given a categorical finding in the assessment order itself that the source of cash deposited in bank account was duly examined and verified.

The Coram of Mr. Shamim Yahya, Accountant Member and Ms. Astha Chandra, Judicial Member has observed that the PCIT never mentioned in his order as to how the assessment order was erroneous so as to be prejudicial to the interest of the revenue. Hence, his direction qua cash deposit to consider the issue afresh is erroneous and not liable to be sustained. The Tribunal further observed that the observation of PCIT that he is invoking Explanation-2 to Section 263(1) for this assessment order i.e., Assessment Year 2011-12 is not sustainable as amendment is effective from 01.06.2015 and Delhi High Court has held that the same is not retrospective.

The Tribunal while allowing the appeal has held that “in our considered opinion the order of PCIT is not at all sustainable in law. Hence, we set aside the order of PCIT and decide the issue in favour of the assessee”.

Mr. Shweta Bansal, CA and Mr. Kumar Hrishikesh appeared on behalf of assessee and revenue respectively.

Support our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.