Case Law Details
PCIT Vs Mohak Real Estate Pvt Ltd (Delhi High Court)
The Delhi High Court, in the case of PCIT vs Mohak Real Estate Pvt Ltd, delivered a significant ruling on the invocation of Section 263 of the Income Tax Act. The Court found that inadequate enquiry alone is insufficient to justify invoking Section 263, providing clarity on the requirements for revising assessment orders.
The dispute arose from the Assessment Year 2016-17 when Mohak Real Estate Pvt Ltd filed its return of income. The Principal Commissioner Income Tax (PCIT) later cancelled the Assessment Order under Section 143(3) and directed a fresh assessment, resulting in additional disallowances. The Income Tax Appellate Tribunal (ITAT) allowed Mohak Real Estate’s appeal, stating that the PCIT’s invocation of Section 263 was not in accordance with law.
The legal position under Section 263 was reiterated by the Court, emphasizing that an order can be revised only if it is both erroneous and prejudicial to the interest of revenue. The Court referred to precedents, including the Max India Ltd case, highlighting that loss of revenue does not automatically make an order prejudicial unless it is unsustainable in law.
In the present case, the Court examined whether the PCIT’s conclusion about the order being erroneous and prejudicial was justified. The Court found that the assessment order, though subject to technical difficulties during manual scrutiny, involved an adequate enquiry. The Assessing Officer had considered details submitted by Mohak Real Estate, sent a detailed questionnaire, and conducted hearings.
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