Manoj Padaliya Vs PCIT (ITAT Ahmedabad)
Conclusion: For invoking the provisions of section 263, the foundation/ basis of initiation of 263 proceedings must emanate from the findings given by the AO in his assessment order of the assessee itself and section 263 could not be initiated on the basis of “borrowed satisfaction” (i.e on the basis of findings in assessment done in case of a third person).
Held: Assessee had filed his income tax returns (ITR) for the AY 2013-14 and declared his total income at Rs. 3,31,310. Although the case of assessee was reopened, no additions were made by AO. PCIT observed that in AY 2013-14, another assessee, Shri Mahendrakumar S. Mathukiya, had received a similar amount of Rs. 1,50,95,174 from Mr. V Nitin and M/s Kiran Gems Pvt. Ltd., which was added under Section 68 in reassessment. PCIT observed that no such addition was made in the present assessee’s case for receipts from the same parties, and thus PCIT reached the conclusion that the assessment order was erroneous and prejudicial to Revenue. In response to the notice under Section 263, assessee argued that the issue had already been examined during reassessment proceedings and that the AO had taken a plausible legal view. It was held that in order to invoke the provisions of section 263, the foundation/ basis of initiation of 263 proceedings must emanate from the findings given by the AO in his assessment order of the assessee itself and 263 could not be initiated on the basis of “borrowed satisfaction” (i..e on the basis of findings in assessment done in case of a third person). Therefore, the very basis of initiation of 263 proceeding in the present case was fallacious and for this reason u/s.263 proceedings were liable to be set-aside. PCIT had only asked the AO to make the further inquiries on the basis of additions made in the case of a third person, who had received similar payments from Mr.V Nitin and M/s.Kiran Gems Pvt. Ltd. and in the 263 order and there was no specific finding/observation as to how the assessment order was erroneous and prejudicial to the interest of Revenue. Therefore, for this reason as well, the order u/s.263 was liable to be set-aside.
