Case Law Details
Prakashbhai Ishwarbhai Changela Vs PCIT (ITAT Rajkot)
The Income Tax Appellate Tribunal (ITAT) heard two appeals filed by Prakashbhai Ishwarbhai Changela against separate orders passed by the Principal Commissioner of Income Tax (PCIT), Rajkot. The PCIT had exercised his revisionary powers under Section 263 of the Income Tax Act, 1961 and set aside the assessment orders for Assessment Years (AYs) 2012-13 and 2013-14, finding them to be erroneous and prejudicial to the revenue.
The ITAT considered the facts leading to the exercise of power under Section 263 by the PCIT as identical in both years. The key issue was whether the cash deposits found in Changela’s bank account were related to his business or not, and if so, how much should be taxed.
The ITAT examined the assessment orders passed by the Assessing Officer (AO) for each year and concluded that the AO had made no inquiries while treating the cash deposits as relating to Changela’s business turnover and taxing only 3% of them as net profits. The ITAT agreed with the PCIT’s finding that the entire amount should be subjected to tax, given the lack of any plausible explanation from Changela for treating these cash deposits as business receipts.
Changela argued before the ITAT that adequate inquiries had been made by the AO and that his assessment order could not be held erroneous or prejudicial to the revenue. He also contended that since an appeal against the PCIT’s orders was pending with the Commissioner of Income Tax (CIT), the revisionary powers under Section 263 should not have been exercised by the PCIT on the same issue.
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