Case Law Details
Sourabh Sharma Vs PCIT (ITAT Jaipur)
In a significant ruling by the ITAT Jaipur in the case of Sourabh Sharma Vs PCIT, the tribunal examined the jurisdiction of Section 263, particularly in scenarios where the Principal Commissioner of Income Tax (PCIT) sought additional inquiries post-assessment. The case pivoted on whether the PCIT could revise an already completed assessment based on the belief that the Assessing Officer (AO) might not have fully grasped the assessee’s claim, leading to potential revenue loss.
Background and Tribunal’s Order: The case stemmed from the PCIT’s dissatisfaction with the AO’s handling of sales promotion expenses claimed by the assessee, Sourabh Sharma. Despite the AO raising nine specific questions regarding these expenses and ultimately allowing them based on the assessee’s responses, the PCIT issued notices under the assumption of inadequate inquiry.
However, the ITAT Jaipur highlighted a critical aspect of the ‘faceless assessment’ process, emphasizing the collaborative effort involving multiple units under the Income Tax Department. This process ensures a thorough review and consideration of the cases, negating the notion of inadequate inquiry by a single officer.
Legal Interpretation of Section 263: The tribunal delved into Explanation 2 of Section 263, inserted by the Finance Act 2015, which broadens the PCIT’s powers to revise assessments deemed prejudicial to the interest of the revenue. Despite this provision, the ITAT Jaipur reasoned that the mere desire for more detailed inquiries by the PCIT does not inherently render the AO’s order erroneous or prejudicial.
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