Daffodills Pharmaceuticals Ltd Vs PCIT (ITAT Delhi)
ITAT Delhi held that invocation of revisionary power u/s 263 of the Income Tax Act without satisfying two conditions i.e. order was erroneous and it was prejudicial to the interest of revenue is unsustainable in law and liable to be quashed.
Facts- The assessment was completed by PCIT-1 u/s. 143(3) r.w.s. 147 of the Act, wherein the A.O. accepted the returned income at Rs.40,87,730/-. PCIT on examination of the assessment records issued a show cause notice u/s. 263 of the Act.
On receipt of the show cause notice, the assessee gave reply. PCIT on not satisfying with the reply given by the Assessee, observed that Assessee is involved in infamous NRHM scam and was raided by CBI and the key persons of the assessee company namely were made accused. According to the PCIT, the original assessment was completed on 28.03.2014 u/s. 143(3) of the Act making addition of Rs.16,573/- on account of unverified sundry creditors and disallowed expenditure of Rs.4,74,445/-. Later on, examining the records of the case along with detailed report received from DDIT, the AO had reason to believe that there was a difference of Rs.12,98,24,582/- between turnover and credit in the bank account, which are not reconciled during the original assessment proceedings.
According to PCIT, during the course of reassessment, AO did not enquire the issues properly and there was lack of enquiry on the part of AO resulted the proceedings in erroneous as well as prejudicial to the interest of revenue.
Conclusion- Held that the pre-requisite condition to exercise jurisdiction by PCIT suo-motu condition is not satisfied. Since PCIT has to be satisfy 2 conditions namely (i) the order of AO sought to be revised is erroneous (ii) it is prejudicial to the interest of the revenue. If one of them is absent, even if the order of the AO is erroneous, but is not prejudicial to the interest of the revenue or if it is not erroneous but it is prejudicial to the interest of revenue, recourse cannot be taken u/s. 263(1) of the Act. If due to an erroneous order of the AO, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interest of the revenue.
The assessment framed by AO u/s. 143(3) r.w.s. 147 of the Act and the A.O. had recorded various reasons for reopening assessment and went on framing the assessment on the said basis and collected the information with reference to the reasons so recorded for reopening of the assessment and the A.O. was satisfied with the explanation given by the assessee regarding various issues raised by him. Now PCIT cannot find fault with the action of the AO and direct A.O. to carry out further enquiry on the materials or judgments of the High Court which are not part of the assessment records. Accordingly, we do not find any merit in the issues raised by the PCIT in the order passed u/s. 263 of the Act. Accordingly, we quash the order passed u/s. 263 of the Act by PCIT.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by assessee is directed against order of Principal CIT passed u/s 263 of the Income Tax Act, 1961 (“the Act” for short) for the assessment year 2012-13 dated 29.3.2022. The assessee has raised following grounds of appeal:
“1. That having regard to facts & circumstances of the case, Ld. Pr.CIT has erred in law and on facts in assuming jurisdiction u/s 263 of Income Tax Act, 1961 and has erred in holding the reassessment order dated 29-12-2019 as erroneous as well as prejudicial to the interest of revenue and that too by recording incorrect facts and findings and in violation of principles of natural justice.
2. That having regard to facts & circumstances of the case, Ld. Pr.CIT has erred in law and on facts in setting aside the reassessment order dated 29-12-2019 and directing the assessing officer to make the assessment afresh after taking into account the alleged facts mentioned in para 4.1 to 4.7 after due verification and inquiry in this case and after taking input from the CBI wing relating to this case and pass an appropriate order as per the provisions of Income Tax Act and that to by recording incorrect facts and findings and without observing the principles o natural justice and more particularly when all the necessary details/information/evidences were examined at the time of re- proceedings.
3. That having regard to facts & circumstances of the case, Ld. Pr.CIT has erred in law and on facts in observing as under:-
