2023 (2) TMI 1358 - HC - Income Tax

Revision u/s 263 - Tribunal concluded that it is not a case of non verification or non application of mind and that PCIT failed to make out a case that order of the AO is erroneous as well as prejudicial to the interest of the revenue - HELD THAT - It is settled principle that to exercise the jurisdiction u/s 263 of the Act the order of the assessing officer has to be erroneous in so far as it is prejudicial to the interest of the revenue. The two conditions to be satisfied or that the order of the AO sought to be revised should be erroneous and the error committed by the AO in the order should be prejudicial to the interest of revenue and both these conditions should stand simultaneously satisfied. Tribunal on examining the facts of the case found that both the conditions were never satisfied nor were satisfied simultaneously. Therefore, the Tribunal granted relief to the assessee. In the light of the factual conclusion arrived at by the Tribunal we are of the clear view that no substantial questions of law arise out for consideration in this appeal. Appeal stands dismissed.

Summary

Issues:
1. Whether the Income Tax Appellate Tribunal erred in quashing the order under Section 263 of the Income Tax Act, 1961.
2. Whether the power of Principal CIT to examine and correct the order of the Assessing Officer was curbed unjustly.
3. Whether the order passed under Section 263 of the Income Tax Act, 1961 was rightly quashed by the Tribunal.

Analysis:
The High Court of Calcutta, comprising Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya, heard an appeal filed by the revenue under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Department Appellate Tribunal. The main issue was whether the Principal Commissioner of Income Tax Kolkata (PCIT) was justified in invoking his jurisdiction under Section 263 of the Act. The Tribunal observed that the assessing officer had conducted a thorough assessment by issuing notices, calling for details, and verifying the information provided by the assessee. The Tribunal found that the assessing officer did not commit any error prejudicial to the revenue's interest, as all necessary verifications were duly performed. The Tribunal concluded that the conditions for revising the assessing officer's order under Section 263 were not met, as the order was not erroneous or prejudicial to revenue. Consequently, the Tribunal ruled in favor of the assessee, leading to the dismissal of the appeal.

In detail, the Tribunal noted that the assessing officer had issued a notice under Section 142(1) of the Act, requesting specific details and information from the assessee. The assessee complied by submitting detailed replies, demat statements, contract notes, bank passbook copies, ledger copies, and broker account details. The assessing officer verified all transactions, especially those on the stock exchange platform, and found no discrepancies in the claims made by the assessee. The Tribunal emphasized that for Section 263 to apply, the assessing officer's order must be both erroneous and prejudicial to revenue. In this case, the Tribunal determined that neither condition was met, as there was no error in the assessing officer's order that would harm the revenue's interests. Therefore, the Tribunal concluded that the PCIT had failed to establish a case for revising the assessing officer's order.

In light of the factual findings and legal principles, the High Court concurred with the Tribunal's decision and held that no substantial questions of law arose for consideration in the appeal. Consequently, the appeal was dismissed, upholding the Tribunal's ruling in favor of the assessee.