PCIT wrongly invokes Revisionary Powers u/s 263 of IT Act on order issued by AO with Sufficient Enquiry: ITAT revives Assessment Order [Read Order]

The Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) recently revived the assessment order and held that it was not justified for the PCIT to invoke the revisionary powers under Section 263 of the Income Tax Act. This decision was based on the evidence in the record, which showed that the Assessing Officer had conducted a thorough enquiry and passed the assessment order with due application of mind.

The assessee M/s Synergy India, a bicycle parts manufacturer, experienced a significant increase in cash sales from October 3, 2016, onwards, but this abnormal increase was not investigated by the Assessing Officer or explained by the assessee during the assessment proceedings.

The cash in hand also saw a substantial rise from Rs. 5,76,892/- on April 30, 2016, to Rs. 41,68,545/- on October 31, 2016, attributed to these cash sales. However, the lack of maintained stock and production registers, as well as misplaced or lost stock inventories, hindered the reconciliation of stock with cash sales.

The source of the cash deposit of Rs. 38,50,000/- during the demonetization period remained unexamined and unexplained by the Assessing Officer and the assessee, respectively. Furthermore, while total sales decreased, gross profit (GP) increased without a reasonable explanation for the sudden surge in GP and cash sales during the assessment year 2017-18.

The Counsel for the Assessee argued that the PCIT (Principal Commissioner of Income Tax), in wrongly assuming jurisdiction under Section 263 of the Income Tax Act, set aside the assessment order without acknowledging the detailed inquiries made by the Assessing Officer (AO) during the assessment proceedings.

The Counsel highlighted the various questionnaires, show cause notices, and replies submitted by the Assessee, demonstrating the Assessing Officer's investigation into the cash deposited during the demonetization period. They also refer to correspondence between tax authorities proposing actions under different sections of the Income Tax Act.

The Counsel further contended that despite the thorough examination of the matter by the Assessing Officer and the Assessee's replies during the revision proceedings, the PCIT issued the impugned order without considering the Assessee's submissions.

The Bench consisting of a Vice President A D Jain and an Accountant Member Vikram Singh Yadav observed that it was amply clear that due enquiry was carried out by the Assessing Officer in the Assessee’s case during the scrutiny proceedings, where-after, the assessment order was passed with due application of mind on requisite verification of the facts and documentary evidence filed concerning the issue of cash deposits. Complete books of account were produced and mention of the same has been made in the reply. The Assessing Officer, thus, took a possible view which could not have been sought to be substituted by the PCIT on a mere change / difference of opinion.

The Bench added  that the PCIT was not justified in invoking the revisionary powers under Section 263 of the Income Tax Act, when, as evident from the record, due enquiry had been carried out by the Assessing Officer  and the assessment order was passed with due application of mind by the Assessing Officer. Accordingly, the grievance sought to be raised by the Assessee is found to be justified. Therefore, the assessment order was revived.

In result, the appeal filed by assessee was allowed

To Read the full text of the Order CLICK HERE

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