2022 (7) TMI 1453 - HC - Income Tax

Revision u/s 263 - Estimation of income - Addition u/s 69C - Tribunal has elaborately examined this issue, taken note of the decision of Malabar Industrial Co. Ltd. 2000 (2) TMI 10 - SUPREME COURT and allowed assessee appeal - HELD THAT - Tribunal has noted that the assessing officer had made an addition of 2% to the gross profit over and above the rate of gross profit of 4.63% totalling to 7.63%. It appears that after completing the assessment the assessing officer addressed the PCIT stating that certain error has occurred in the assessment order and requested him to review the order u/s 263. Whether such a procedure adopted by the PCIT was legally sustainable was examined by the tribunal and in our considered view after taking note of the various decisions of the Hon'ble Supreme Court it was rightly pointed out that section 263 of the Act does not permit substituting one opinion for another. Tribunal has specifically recorded a factual finding that the assessee had produced all necessary details of the purchase, sales, audited books of accounts, quantity details, etc. Tribunal found that the assessee's books of accounts were audited by the Chartered Accountant, the quantity details were given in respect of opening stock, purchase, sales, closing stock, etc. Tribunal pointed out that no discrepancy was found between the purchase shown by the assessee and the sales decline. Thus, on facts, the tribunal concluded that assumption of jurisdiction by the PCIT under section 263 of the Act was erroneous. There is no error in the order passed by the tribunal nor there is any perversity in its approach for us to interfere. Revenue Appeals are dismissed.

Summary

Issues involved:
1. Jurisdiction of Principal Commissioner of Income Tax under section 263 of the Income Tax Act, 1961.
2. Interpretation of section 69C of the Income Tax Act, 1961.

Analysis:

Issue 1: Jurisdiction of Principal Commissioner under section 263
The appeal before the Calcutta High Court challenged the order of the Income Tax Appellate Tribunal (ITAT) regarding the exercise of revisionary jurisdiction under section 263 of the Income Tax Act, 1961 by the Principal Commissioner of Income Tax - 10, Kolkata (PCIT). The key question was whether the PCIT's exercise of powers under section 263 was appropriate. The Court noted that the tribunal extensively analyzed the issue, considered the decision in Malabar Industrial Co. Ltd. vs. CIT [2000] 243 ITR 83 [SC], and ultimately allowed the appeal. The tribunal found that the assessing officer had added 2% to the gross profit, resulting in a total of 7.63%, and subsequently requested the PCIT to review the order under section 263. However, the tribunal concluded that the PCIT's assumption of jurisdiction under section 263 was erroneous. It emphasized that section 263 does not allow substituting one opinion for another and highlighted that the assessee had provided all necessary details and no discrepancies were found. The Court upheld the tribunal's decision, stating that there was no error or perversity in its approach, leading to the dismissal of the appeals.

Issue 2: Interpretation of section 69C
Regarding the interpretation of section 69C of the Income Tax Act, 1961, the Court addressed whether the Assessing Officer had taken the correct view out of two possible views. The tribunal found that the Assessing Officer had made an addition to the gross profit, and the PCIT subsequently reviewed the order under section 263. However, the Court concurred with the tribunal's decision that the PCIT's assumption of jurisdiction was not justified. The tribunal emphasized that the assessee had provided detailed information, and there were no discrepancies in the accounts. The Court agreed that section 69C allows only one possible view, and in this case, the PCIT's intervention was unwarranted. The appeals were dismissed, and all connected applications were also rejected.

In conclusion, the Calcutta High Court's judgment focused on the jurisdiction of the Principal Commissioner under section 263 of the Income Tax Act, 1961 and the interpretation of section 69C. The Court upheld the tribunal's decision, emphasizing that the PCIT's assumption of jurisdiction was erroneous and that there was no legal basis for substituting one opinion for another. The detailed examination of facts and the absence of discrepancies in the assessee's accounts led to the dismissal of the appeals and connected applications.