PCIT Orders Reassessment of Investments and FDs u/s 263: ITAT Sets Aside Order, Holds AO Properly Verified Details [Read Order]
Citing judicial precedents, the bench held that Section 263 applies only when the AO’s order is both erroneous and prejudicial to revenue, which was not the case here.
PCIT - Investments and FDs - ITAT - taxscan
PCIT - Investments and FDs - ITAT - taxscan
The Chennai Bench of Income Tax Appellate Tribunal ( ITAT ) sets aside Principal Commissioner of Income Tax (PCIT) order directing reassessment of investments and fixed deposits under Section 263 of Income Tax Act,1961, holding that the Assessing Officer (AO) had properly verified details and the order was not erroneous or prejudicial to revenue.
Subramaniam Mohan Sundaram,appellant-assessee, operated a business as a proprietor of M/s. Coimbatore Vandana Beds and had not filed his income tax return. A survey under Section 133A was carried out on 26.11.2019, following which the case was reopened under Section 148 on 31.03.2021. He filed his return on 30.04.2021, declaring an income of Rs. 26,74,490 and agricultural income of Rs. 3,69,010 for A.Y. 2013-14.
The AO issued a notice under Section 143(2) for scrutiny assessment, seeking details of the appellant’s investments and sources of income. The assessee provided the requested information, and the AO completed the assessment under Sections 147 read with section 143(3) on 23.07.2021, accepting the declared income.
Later, the PCIT found that the AO had not adequately verified the investments and deposits revealed during the survey. The PCIT passed an order under Section 263 on 13.03.2024, directing the AO to reassess the assessee’s investments in residential properties and fixed deposits. The assessee appealed against this order before the Tribunal.
The two member bench comprising Manu Kumar Giri (Judicial Member) and S.R.Raghunatha (Accountant Member) heard the parties, reviewed the records, and examined the assessment orders and relevant case laws.
The assessee had not filed his return under Section 139(1). Following a survey under Section 133A and notice under Section 148, he filed his return declaring income. During assessment, he provided details of investments in residential properties and fixed deposits and the corresponding sources of income.
The AO examined and verified these details and accepted the returned income while completing the assessment under Section 147. The appellate tribunal noted that the AO had applied his mind and that the case did not involve “lack of enquiry” but at most “inadequate enquiry,” which does not justify the PCIT’s action under Section 263.
Relying on judicial precedents, the tribunal observed that Section 263 can be invoked only if the AO’s order is both erroneous and prejudicial to revenue. In this case, both conditions were not met. The bench held that the PCIT wrongly invoked Section 263, and therefore, the order under Section 263 was set aside.
Accordingly the appeal was allowed.
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