2021 (12) TMI 498 - AT - Income Tax

Revision u/s 263 by CIT - disproportionate purchase of structural steel - HELD THAT - Show cause notice related to the purchases was for the entire purchases and not for the specific purchase. In fact the assessee s submissions to the show cause notice revealed that the details were presented before the Assessing Officer as there were specific purchases and the same was properly taken into account by the Assessing Officer. Thus, Section 263 of the Act does not attract, as the Pr. CIT has taken divergent view on particular issue which is not contemplated while invoking the provisions of Section 263 of the Act, hence appeal of the assessee is allowed.

Summary

Issues:
1. Jurisdiction of CIT under section 263 of the Income Tax Act, 1961.
2. Proper examination and verification of assessment by the Assessing Officer.
3. Validity of the order passed under section 263 of the Act.

Jurisdiction of CIT under section 263 of the Income Tax Act, 1961:
The appeal was filed against the order passed by the CIT, Central-II, New Delhi, for the assessment year 2014-15. The revised grounds of appeal by the assessee challenged the legality and jurisdiction of the notice issued under section 263 of the Act. The appellant contended that the assessment order passed by the Assessing Officer under section 143(3) was not erroneous or prejudicial to the revenue's interest. The appellant argued that the assessment was conducted after due consideration of detailed replies and explanations provided during the assessment proceedings. Additionally, the appellant highlighted that specific issues, such as the loss amount and expenses, were duly examined and verified by the Assessing Officer.

Proper examination and verification of assessment by the Assessing Officer:
The Commissioner of Income Tax, Circle-2, New Delhi, found the assessment order completed by the Assessing Officer to be erroneous and prejudicial to the revenue's interest. The CIT issued a show cause notice under section 263 of the Act, directing the Assessing Officer to examine and verify specific points. The appellant challenged the validity of this order, arguing that the show cause notice and the subsequent verification were on different points. The appellant contended that the details related to purchases were presented before the Assessing Officer and were properly taken into account during the assessment. The ITAT held that the CIT had taken a divergent view on a particular issue not contemplated under section 263, thereby allowing the appeal of the assessee.

Validity of the order passed under section 263 of the Act:
After hearing both parties and examining the relevant material, the ITAT noted that the show cause notice related to purchases was for the entire purchases and not specific ones. The ITAT found that the CIT had taken a divergent view on a particular issue not covered under section 263. Consequently, the ITAT allowed the appeal of the assessee, concluding that section 263 of the Act did not apply in this case. The appeal was allowed, and the order was pronounced in the open court in November 2021.