Swetal Vijaybhai Shah Vs PCIT (ITAT Ahmedabad)
Section 263 Revision Quashed: PCIT Failed to Prove AO’s Lack of Enquiry on Bogus Entry; Reassessment Restored: ITAT Finds PCIT’s 263 Order Lacked Foundation to Show Error & Prejudice; Bogus Loan Addition Overturned: PCIT Cannot Set Aside Assessment Without Factual Inquiry Findings; PCIT Action Invalid: Mere Suspicion of Non-Enquiry Does Not Justify Section 263 Revision
Assessee challenged the PCIT’s revisionary order u/s 263, which held that the reassessment order u/s 147 was erroneous & prejudicial to the Revenue for failure to make addition of a bogus accommodation entry of ₹33.94 lakh allegedly received from M/s. Prerna Infrabuild Ltd., controlled by entry operator Shri Jignesh Shah.
PCIT observed that reopening was initiated precisely for verifying this transaction, but AO accepted the returned income without examining the alleged fictitious loan. Hence, he set aside the reassessment directing AO to redo it after detailed verification.
Before ITAT, the Assessee argued that PCIT merely presumed non-enquiry without demonstrating how the AO failed to verify the transaction. The order contained only a narrative about information from Investigation Wing but no discussion of AO’s queries, replies, or findings.
ITAT agreed, noting that the PCIT’s order did not cite any instance of inadequate or absent inquiry, nor any material showing error in AO’s approach. It was a mechanical invocation of Section 263, solely relying on departmental information without factual verification. Relying on established jurisprudence that both error & prejudice must co-exist for Section 263 to apply, the Tribunal held that PCIT’s conclusion lacked foundation.
