PCIT Revision Order: ITAT Rules Assessment Order not erroneous, Rules Unexplained Money matter Properly Verified [Read Order]

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) quashed the revisionary order passed by the Principal Commissioner of Income Tax (PCIT), ruling that the assessment order was not erroneous.

Chandrakant Vallabhbhai Koladia (assessee) had filed his return of income for Assessment Year 2018-19 declaring a total income of Rs. 1,23,69,720. Based on the survey findings, the assessee disclosed an additional income of Rs. 55,14,000 in his return.

Clear all Your Doubts on RCM, TCS, GTA, OIDAR, SEZ, ISD Etc... Click Here

The Assessing Officer (AO) completed the assessment under Section 143(3), accepting the declared income and taxing it under regular provisions. However, the PCIT invoked revisionary powers under Section 263 of the Income Tax Act. 

Read More: Karnataka HC Quashes Rejection of GST Appeal Filed on 90th Day, Finds It Within Limitation [Read Order]

The PCIT alleged that the AO failed to examine the nature and source of the additional income, and had not invoked provisions under Sections 69A and 115BBE for taxing unexplained money at a higher rate.

Aggrieved by the PCIT’s order, the assessee filed an appeal before ITAT. The counsel for assessee submitted that the AO had conducted a thorough inquiry during assessment proceedings.

The counsel also submitted that the AO had called for extensive details, including those related to the impounded material, disclosure of income, trading activities, and related parties. The assessee had provided explanations and supporting documents, which were examined by the AO.

On the other hand, the counsel for the revenue submitted that the AO failed to recognise that if survey action would have been conducted, the assessee may not have disclosed the income.

The two-member bench comprising Dr. B.R.R. Kumar (Vice President) and Ms. Suchitra Kamble (Judicial Member) observed that the AO made a decision after due verification which cannot be revised by the PCIT.

Read More: No Tax on Redevelopment Flats u/s 56(2)(x) of Income Tax Act: ITAT

The tribunal observed that the purview of section 263 of the Income Tax Act did not give about going into adjudication on merit made by the AO after verification of evidence. The tribunal highlighted that the PCIT should look into whether the assessment order is erroneous or prejudicial to the revenue.

Get a Copy of Direct Taxes Law and Practices Including Tax Planning with Free E-Book Access, Click Here

The tribunal relied on the decision of the Hon’ble Gujarat High Court in PCIT vs. Dharti Estate, where it was held that revision under Section 263 cannot be invoked where the AO had conducted inquiries and made a reasoned assessment.

The tribunal held that the AO properly verified the matter and also held that the assessment order was not erroneous. The appeal of the assessee was thus allowed.

To Read the full text of the Order CLICK HERE

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