Case Law Details
Jakhau Salt Co. P. Ltd. Vs DCIT (ITAT Chennai)
ITAT Chennai held that revisional power u/s 263 of the Income Tax Act exercisable only in case of lack of enquiry and not in case of inadequate enquiry.
Facts- Post completion of scrutiny assessment, the case of the assessee was taken up for revision proceedings and accordingly, show cause notice u/s.263 of the Act was issued.
In the said show cause notice, the PCIT observed that on perusal of annual accounts for FY 2016-17 relevant to AY 2017-18, it is seen that a sum of Rs.24.32 Crs. was debited to profit and loss account under the head loss on sale of investments. It was further observed that Note No.33 of Notes annexed to and forming part of the accounts, it was stated that the company had sold investments of 40 lakhs equity shares in the capital of M/s. Archaen Chemical Industries Pvt. Ltd. (M/s.ACIPL), and incurred loss of Rs.24.32 Crs. Although, the loss on investment is not allowable expenditure, the assessee company had not been added back the above capital loss in the statement of total income. AO, while completing the assessment u/s.143(3) of the Act, not examined the issue of loss on investment debited to P & L A/c. Since, above loss on sale of investment is a capital loss, the same is required to be added back to the business income, but the AO has failed to do so. Therefore, the PCIT opined that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue and thus, called upon the assessee to explain ‘as to why’ the assessment order passed by the AO u/s.143(3) of the Act, dated 28.12.2019 shall not be revised u/s.263 of the Act.
PCIT after considering the submissions, set aside the assessment order u/s 263 with a direction to AO to examine the issue and pass a fresh order.
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