City Land Associates Vs PCIT (ITAT Nagpur)
ITAT Nagpur order directing fresh assessment and The assessee should not be allowed to be enriched at the cost of mistake by AO
Background of the Case
Assessee: City Land Associates, a builder and developer, filed its return of income for AY 2016-17, declaring ₹4.04 crore, including an additional disclosure of ₹2.20 crore made during a survey under Section 133A conducted on 22/09/2015. The Assessing Officer (AO) accepted the return without making any further verification.
Issue Identified by PCIT:
A seized diary (A-32) recorded cash receipts of ₹5.76 crore, whereas only ₹2.20 crore was disclosed and offered to tax.
The AO failed to examine this discrepancy and did not investigate the source of the additional ₹3.56 crore.
The PCIT invoked Section 263, stating that the AO’s order was erroneous and prejudicial to revenue, and directed a fresh assessment.
Key Legal Points
Findings of ITAT:
The AO failed to conduct proper inquiries into the seized diary (A-32) and its contents. The mere acceptance of a disclosure statement without verification is not sufficient compliance under the law. Consistency in past years’ assessments is not a valid defense if a material error is found in the current assessment. The Tribunal upheld the PCIT’s invocation of Section 263 and dismissed the assessee’s appeal.
