Kanaiya Food Products Vs. PCIT (ITAT Rajkot)
No Second Guessing AO’s Judgment – ITAT Nullifies PCIT’s 263 Revision as Overreach- PCIT’s 263 Order Quashed – AO’s Enquiry on Cash Payments Found Adequate
Assessee, a partnership firm engaged in manufacturing Urad Papad, filed appeal against revision order u/s 263 passed by PCIT, who held that the reassessment order u/s 147 r.w.s. 144B (dated 24.03.2022) was erroneous & prejudicial to Revenue because AO failed to disallow cash payments of ₹42.92 lakh allegedly violating Section 40A(3).
Assessee’s Stand:
The payments were made to agriculturists for purchase of Urad Dal, an agricultural produce, covered by Rule 6DD(d)(i). AO had already verified these transactions during reassessment by issuing detailed notice u/s 142(1) & considering Assessee’s replies with supporting documents (confirmations, Aadhaar & 7/12 extracts). Hence, the order was neither erroneous nor prejudicial.
Tribunal’s Findings:
- AO had made due enquiries during reassessment, & the issue had also been examined in original assessment.
- As per Malabar Industrial Co. Ltd. v. CIT (243 ITR 83 SC), both conditions—“erroneous” & “prejudicial to Revenue”—must co-exist for invoking s.263.
- When AO adopts a permissible view after inquiry, mere difference of opinion cannot justify revision.
- Holding that AO had taken a plausible view based on enquiry & that PCIT’s revision was without jurisdiction, ITAT quashed the 263 order as null & void ab initio.
Held: Once AO conducted enquiry & adopted one permissible view, order cannot be termed erroneous or prejudicial; 263 revision invalid.
