2024 (6) TMI 593 - AT - Income Tax

Revision u/s 263 - discrepancies in the assessment order - undisclosed TDS, differences in purchases shown in ITR, and wrong claims of deductions resulting in under-assessment - HELD THAT - We find that the Hon ble Calcutta High Court in the case of PCIT vs. M/s Sinhotia Metals and Minerals Pvt. Ltd. 2022 (1) TMI 1297 - CALCUTTA HIGH COURT categorically upheld the conclusion of the Tribunal that PCIT has not exercised his jurisdiction u/s 263 of the Act himself but only on proposal of AO. This is a question of fact which was appreciated by the Hon ble High Court to hold that there was irregular exercise of jurisdiction u/s 263 of the Act. The Tribunal in the case of Stewarts Lloyds of India Ltd. 2016 (3) TMI 178 - ITAT KOLKATA had thoroughly gone on the facts of the case and in that case, independently the AO had made a proposal. In the case in hand before us even the AO made a proposal on the basis of audit report objections. As we examine the notice u/s 263 it appears that the contents of the notice in a tabular form are similar to the proposal dated 27.09.2018 of the AO. The audit report is provided by Revenue and same only seems to be the foundation of all the reasons quoted by the PCIT, for giving a finding that assessment order is erroneous. Thus, though not mentioned specifically in the order of the PCIT, that the jurisdiction is being invoked on the basis of the audit objections and the proposal thereof, the manner in which the PCIT has approached the issues by issuing show-cause notice and the discussion made upon the issue establish non-application of independent mind. It appears that based upon the audit objections and proposal only the jurisdiction u/s 263 was invoked and exercised to hold assessment order to be erroneous so far as prejudicial to Revenue. The impugned order u/s 263 of the Act is set aside and the appeal of the assessee is allowed.

Summary

Issues:
1. Delay in filing the appeal
2. Invocation of powers under section 263 of the Income Tax Act, 1961 by the Principal Commissioner of Income Tax (Central)
3. Assessment order being erroneous and prejudicial to the interest of the Revenue
4. Response to show-cause notice by the assessee
5. Exercise of powers under section 263 of the Act by the Principal Commissioner of Income Tax (PCIT) based on a proposal from the Assessing Officer
6. Jurisdiction of the PCIT under section 263 of the Act

Analysis:

The appeal was filed by the Assessee against the order passed by the Principal Commissioner of Income Tax (Central), Delhi-3, invoking powers under section 263 of the Income Tax Act, 1961. The Assessee pointed out a delay in filing the appeal, which was allowed considering the extension due to the Covid-19 pandemic. The assessment order was found to be erroneous and prejudicial to the Revenue's interest by the PCIT, who identified various discrepancies in the assessment records for the assessment year 2015-16. These discrepancies included undisclosed TDS, differences in purchases shown in ITR, and wrong claims of deductions, resulting in under-assessment.

The PCIT issued a show-cause notice to the Assessee, who responded by seeking specific details and justifying the claims made in the assessment proceedings. The Assessee contended that the assessment order was not erroneous or prejudicial to the Revenue's interest. However, the PCIT maintained that there was no proper inquiry conducted by the Assessing Officer, leading to the invocation of section 263 of the Act.

During the arguments, the Assessee highlighted that the PCIT exercised powers under section 263 based on a proposal from subordinate tax authorities. The PCIT's actions were challenged, citing a judgment of the Calcutta High Court, which emphasized the need for the PCIT to exercise independent jurisdiction under section 263. The PCIT's reliance on audit objections and proposals for invoking section 263 was deemed as a lack of independent assessment.

After considering the submissions, the Tribunal found that the PCIT did not exercise jurisdiction under section 263 independently but acted on the proposal of the Assessing Officer. The Tribunal upheld the appeal, setting aside the PCIT's order under section 263. The decision was based on the principle that the PCIT should independently assess the situation rather than solely relying on proposals or audit objections.

In conclusion, the Tribunal ruled in favor of the Assessee, emphasizing the importance of the PCIT exercising independent judgment under section 263 of the Income Tax Act, 1961. The decision highlighted the need for a thorough assessment by the PCIT to ensure fairness and accuracy in tax assessments.