Ajay Kumar Singh Vs PCIT (ITAT Delhi)
Revision under section 263 is not sustainable where the very basis adopted by the PCIT fails, namely, that jewellery expenditure incurred by a company could be taxed as a perquisite in the hands of an individual without establishing an employer-employee relationship.
Income Tax Appellate Tribunal (ITAT), Delhi, allowed the appeal of an assessee against the revisionary order passed under Section 263 of the Income Tax Act for AY 2019-20. The case arose after a search operation in which jewellery purchase bills amounting to Rs. 31.28 lakh were found at the assessee’s premises. The Assessing Officer had initially added only Rs. 1.92 lakh as unexplained jewellery expenditure under Section 17(2). Subsequently, the Principal Commissioner of Income Tax held that the balance amount of Rs. 29.35 lakh should also have been added as perquisite income and treated the assessment order as erroneous and prejudicial to the interests of revenue. The assessee contended that the jewellery purchases were made by Ajayvision Education Pvt. Ltd. out of unaccounted cash generated through bogus billing and that no employer-employee relationship existed between the company and the assessee for invoking Section 17(2). It was also argued that only bills were found during the search and no physical jewellery was recovered. The Tribunal observed that the expenditure on jewellery had been incurred by the company and agreed that the PCIT failed to establish any employer-employee relationship between the assessee and the company. Accordingly, the Tribunal held that treating the expenditure as a taxable perquisite in the hands of the assessee was unjustified. It concluded that the reassessment order was neither erroneous nor prejudicial to the interests of the revenue and quashed the proceedings initiated under Section 263.
