Neeraj Vs PCIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT), Delhi, adjudicated two appeals concerning the validity of revisionary jurisdiction exercised under Section 263 of the Income Tax Act, 1961, and consequent assessment proceedings. The assessee, engaged in trading of clothes, had filed a return of income under Section 44AD declaring income on a presumptive basis without maintaining books of accounts. The return was initially accepted.
Subsequently, the Principal Commissioner of Income Tax invoked Section 263, holding that the assessment order was erroneous and prejudicial to the interests of revenue, primarily on the ground that the Assessing Officer had failed to properly examine cash deposits and verify business activities. The PCIT directed fresh assessment and suggested treating certain deposits as unexplained cash credits under Section 68.
The Tribunal examined whether such revisionary jurisdiction could be exercised where income was declared under Section 44AD. It noted that under Section 44AD, the assessee is not required to maintain books of accounts and income is computed on a presumptive basis. Consequently, invocation of Section 68, which applies to entries in books of accounts, was not applicable in the absence of such books.
The Tribunal further observed that this legal position had been consistently upheld in earlier decisions on similar facts. It held that the PCIT had erred in assuming jurisdiction under Section 263, as the assessment order could not be termed erroneous merely for lack of further enquiry when the assessee had opted for presumptive taxation.
