Relief for Dabur India: ITAT Rules PCIT Erred in Setting Aside Assessment for Inadequate Enquiry Without Stating AO's View Unsustainable in Law [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) held that the PCIT erred in setting aside the assessment merely for alleged inadequate enquiries without establishing that the Assessing Officer's (AO) view was unsustainable in law or that the order was prejudicial to the interest of the Revenue.

Dabur India Limited (assessee), was subjected to scrutiny assessment under Section 143(3) of the Income-tax Act, 1961, which was completed on 29.10.2021. The PCIT, upon verifying the assessment record, observed that the AO's order was erroneous and prejudicial to the interest of the Revenue.

The PCIT noted that mainly because a disallowance under Section 35(2AB) had been made in AY 2017-18, but no such disallowance was made in the current year. The PCIT also noted that proper enquiries were not made regarding several issues, including the claim for deduction under Section 35(2AB) of the Income Tax Act.

The PCIT issued a notice under Section 263 of the Act and subsequently rejected the assessee's objections and directed the AO to re-examine various claims and redo the assessment.

The PCIT disallowed the claims under Section 35(1) and 35(2AB) and instructed the AO to verify the correctness and admissibility of claims under Sections 80IA/80IC , duty drawback received , and deduction under Section 80JJAA of the Income Tax Act. Aggrieved by the PCIT’s order, the assessee filed an appeal before the ITAT.

The Counsel for the assessee argued that the AO's order was neither erroneous nor prejudicial to the Revenue's interest and that the PCIT's order was arbitrary and bad in law.

The counsel relied on the twin conditions for invoking Section 263, as established by the Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT which is the AO's order must be erroneous and prejudicial to the interest of the Revenue.

The two-member bench, comprising S. RifaurRahman (Accountant Member) and Vimal Kumar (Judicial Member), noted that the AO had taken a possible view based on the various documents submitted by the assessee, such as audited financial statements and auditor reports.

The Tribunal observed that the units claiming deductions under Section 80IB and 80IC were old entities and not claiming benefits for the first time.

Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here

The Tribunal found that the PCIT's directions for making fresh enquiries and verification were erroneous since the directions provided no clear findings on how the AO's order was erroneous and prejudicial to the interest of the Revenue.

The tribunal concluded that the PCIT's order was based on an impression and consisted of general enquiries without any specific finding of prejudice to the Revenue's interest. The tribunal held that the PCIT erred in setting aside the assessment under Section 263 of the Income Tax Act. The appeal filed by the assessee was allowed.

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