PCIT Vs Shreeji Prints Pvt. Ltd. (Supreme Court of India)
Supreme Court has dismissed a special leave petition filed by the Principal Commissioner of Income Tax (PCIT) against Shreeji Prints Pvt. Ltd., affirming the order of the Gujarat High Court. The High Court had earlier upheld the Income Tax Appellate Tribunal’s (ITAT) decision to cancel the PCIT’s order under Section 263 of the Income Tax Act, 1961. This section allows the PCIT to revise an assessment order if it is deemed erroneous and prejudicial to the revenue’s interest. Read Gujarat High Court Order: Different View by PCIT Doesn’t Make AO’s Order Erroneous or Prejudicial: Gujarat HC
The case originated from an assessment year 2013-14 assessment where the Assessing Officer (AO) accepted unsecured loans amounting to ₹2.49 crore received by Shreeji Prints from Georgette Tradecom Pvt. Ltd. (GTPL) and Purba Agro Food Pvt. Ltd. (PAFPL). Subsequently, the PCIT invoked Section 263, finding that the AO had passed the assessment order without conducting adequate inquiries or verifications regarding these loans. The PCIT noted that the loans were shown as investments in the share application and balance sheets of the lending companies. Consequently, the PCIT directed the AO to conduct a fresh assessment.
Shreeji Prints challenged the PCIT’s order before the ITAT, which ruled in favor of the assessee. The Tribunal concluded that the AO had indeed made detailed inquiries about the unsecured loans. It noted that the AO had issued a notice under Section 142(1) seeking details of the outstanding unsecured loans, to which the assessee had provided comprehensive information, including ledger accounts, income tax acknowledgments, audited financial statements, and bank statements of the lenders. The ITAT found that the assessee had established the identity of the lenders, the genuineness of the transactions, and their creditworthiness. Based on this, the Tribunal held that the AO had taken a plausible view after due inquiry, and therefore, the PCIT’s invocation of Section 263 was unwarranted.
The Gujarat High Court upheld the ITAT’s decision, stating that no substantial questions of law arose from the Tribunal’s factual findings. The High Court concurred with the ITAT’s observation that the AO had conducted detailed inquiries and applied his mind before accepting the genuineness of the loans. The High Court also noted the Tribunal’s finding that the PCIT had not specifically mentioned the invocation of Explanation 2 to Section 263 in the show-cause notice issued to the assessee, which the Tribunal deemed inappropriate. The Supreme Court’s dismissal of the PCIT’s special leave petition effectively seals the matter in favor of Shreeji Prints, upholding the principle that revisional powers under Section 263 cannot be exercised when the AO has already conducted reasonable inquiries and taken a plausible view.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
