Mohammed Tanweer Alam Vs PCIT (ITAT Patna)
Failure to Invoke Sections 69A/69B, Section 115BBE and Correct Penalty Provision Makes Assessment Erroneous and Prejudicial: Patna ITAT Upholds Section 263 Revision
During a search, the AO added ₹30 lakh as an undisclosed investment in properties and ₹47 lakh as unexplained cash. However, the assessment order did not specify the applicable provisions-Sections 69B and 69A –and the additions were not taxed at the special rate prescribed under Section 115BBE. The AO also initiated penalty under an incorrect provision instead of considering Section 271AAC.
The PCIT invoked Section 263, holding that the AO’s failure to apply the correct statutory provisions resulted in a short levy of tax and interest. He set aside the assessment and directed the AO to conduct proper inquiries and pass a fresh speaking order.
The Patna ITAT upheld the revision. It held that an assessment order is erroneous when it is based on an incorrect application of law, non-application of mind or failure to conduct necessary verification. It becomes prejudicial to the interests of the Revenue when such error results in the loss of tax lawfully payable.
The Tribunal observed that the nature of the additions prima facie attracted Sections 69A and 69B, which mandated taxation under Section 115BBE. Failure to invoke these provisions resulted in an incorrect computation and loss of legitimate revenue.
It further held that initiation of penalty under an incorrect provision could render the eventual penalty order vulnerable in appellate proceedings. Since AY 2022-23 was not a “specified previous year” for Section 271AAB, the AO ought to have examined the applicability of Section 271AAC.
Accordingly, the Tribunal held that the PCIT was justified in directing the AO to conduct further inquiries and apply the correct provisions. The assessee’s appeal was dismissed.
FULL TEXT OF THE ORDER OF ITAT PATNA
This appeal filed by the assessee is against the order of the Pr. Commissioner of Income Tax (Central), Patna [hereinafter referred to Ld. ‘PCIT’] passed u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2022-23 dated 30.03.2026.
