Assessment of Bread Manufacturer's Capital Withdrawals and Receivables Not Erroneous: ITAT Quashes PCIT's Revision Order [Read Order]
The Tribunal ruled that the assessment of capital withdrawals and receivables was not erroneous and quashed the Principal Commissioner of Income Tax’s revision order under Section 263 of the Income Tax Act
![Assessment of Bread Manufacturers Capital Withdrawals and Receivables Not Erroneous: ITAT Quashes PCITs Revision Order [Read Order]](https://images.taxscan.in/h-upload/2025/06/21/2051614-itat-itat-delhi-itat-quashes-pcit-revision-taxscan.webp "Assessment of Bread Manufacturers Capital Withdrawals and Receivables Not Erroneous: ITAT Quashes PCITs Revision Order [Read Order]")
Umesh Garg (assessee), the proprietor of M/s A.R. Foods, engaged in manufacturing breads and rusks, faced scrutiny for Assessment Year (AY) 2011-12. The assessee filed his Income Tax Return (ITR) on 30.09.2011, declaring an income of Rs. 2,26,070. The case was selected for scrutiny, and the assessment was completed on 04.06.2013 under Section 143(3) of the Income Tax Act. The...
Umesh Garg (assessee), the proprietor of M/s A.R. Foods, engaged in manufacturing breads and rusks, faced scrutiny for Assessment Year (AY) 2011-12. The assessee filed his Income Tax Return (ITR) on 30.09.2011, declaring an income of Rs. 2,26,070.
The case was selected for scrutiny, and the assessment was completed on 04.06.2013 under Section 143(3) of the Income Tax Act. The Assessing Officer (AO) accepted the return of income filed by the assessee.
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The Principal Commissioner of Income Tax (PCIT) initiated proceedings under Section 263, alleging inadequate inquiry by the Assessing Officer (AO). The PCIT issued notice to the assessee.
The Notice sought explanation regarding several transactions which included unexplained capital withdrawals of Rs. 44,80,400 and sundry receivables of Rs. 1,75,86,380 against sundry creditors of Rs. 1,27,689. The PCIT set aside the assessment and directed the AO to conduct fresh inquiries.
Aggrieved by the PCIT’s order, the assessee appealed to the ITAT. The counsel for the assessee argued that the AO conducted thorough scrutiny, issuing notices under Sections 143(2) and 142(1) and examining books of accounts.
The counsel submitted that withdrawals of Rs. 44,80,400 were explained (Rs. 4,80,400 for household expenses, Rs. 7,50,000 invested in M/s A.R. Dwelling Pvt. Ltd.), receivables were verified, funds from M/s Garg Agencies (Rs. 51,41,000 for goods, Rs. 1,48,90,000 credited) were examined, and bank charges were supported by records.
The two-member bench, comprising Mahavir Singh (Vice President) and Manish Agarwal (Accountant Member), observed that the AO examined all issues during scrutiny of the retu;rn filed by the assessee.
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The tribunal observed that capital withdrawals were not taxable, receivables were supported by books, funds from M/s Garg Agencies were verified, and bank charges were documented. The tribunal held that PCIT failed to establish error or prejudice to the revenue.
The tribunal quashed the PCIT’s order and held that the assessment was neither erroneous nor prejudicial. The appeal of the assessee was allowed.
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