Suba Valli Vilas Vs PCIT (ITAT Chennai)
Chennai ITAT Quashes Section 263 Revision: PCIT Cannot Invoke Revision Merely to Tax Excess Stock Under Section 69B Instead of Business Income
The Chennai ITAT quashed the revision order passed under Section 263, holding that where the Assessing Officer had already conducted detailed enquiries regarding excess stock detected during search, the PCIT could not invoke revision merely because he preferred taxation under Section 69B read with Section 115BBE instead of treating the amount as business income.
The assessee, a jewellery concern, was subjected to a search under Section 132 during which alleged excess stock of gold was detected. In the assessment completed under Section 143(3), the Assessing Officer made an addition of ₹5.36 crore towards excess stock after examining the seized materials, software records, sworn statements and explanations furnished by the assessee. However, the PCIT subsequently invoked Section 263 and directed the Assessing Officer to examine taxation of the excess stock of ₹5.36 crore and an additional amount of ₹5.41 crore disclosed as creditors written off under Section 69B read with Section 115BBE.
The Tribunal noted that the very issue raised by the PCIT had already been specifically examined by the Assessing Officer during assessment proceedings through a detailed show-cause notice, wherein the assessee was asked to explain why the excess stock should not be taxed under Section 69B. After considering the explanation, the Assessing Officer consciously chose to assess the income under the normal business provisions of the Act.
The ITAT observed that the Assessing Officer had carried out adequate enquiries, analysed the software data, examined the source and nature of the excess stock, considered the assessee’s replies and thereafter adopted a plausible view permissible in law. Merely because the PCIT preferred another view regarding the head of income or rate of taxation did not render the assessment order erroneous.
The Tribunal further held that the additions arose out of the assessee’s business operations and trading activities, and therefore the Assessing Officer’s view that the income was taxable as business income under Section 28 was a legally sustainable view. It reiterated the settled principle that when two views are possible and the Assessing Officer has adopted one of the permissible views, Section 263 cannot be invoked merely because the PCIT disagrees with that view.
The ITAT also observed that the issue was already pending before the CIT(A) on merits and therefore the doctrine of merger and the proviso to Explanation 1(c) to Section 263 further restricted the PCIT’s jurisdiction. Since the Assessing Officer had conducted proper enquiries and the assessment order was not shown to be erroneous, the twin conditions of “erroneous” and “prejudicial to the interests of the Revenue” were not satisfied.
Accordingly, the Tribunal quashed the revision order under Section 263, holding that the PCIT had impermissibly attempted to substitute his opinion for that of the Assessing Officer on an issue that had already been thoroughly examined during assessment.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
