Jitendrasinh Zala Vs PCIT (ITAT Rajkot)
PCIT’s 263 Revision Quashed – AO Had Made Due Enquiry; No “Lack of Enquiry” to Invoke 263 Jurisdiction
In this appeal the Assessee challenged the revisional order passed u/s 263 wherein Ld. PCIT held that the scrutiny assessment u/s 143(3) r.w.s.144B dated 06.09.2022 was erroneous & prejudicial to the interest of Revenue due to alleged failure of AO to examine four issues: (i) ₹22,88,000 provision-based expense booked by Fin Tech Corporation Pvt. Ltd., (ii) variation in agricultural income, (iii) non-declaration of rental income from other properties, & (iv) non-deduction of TDS on several expenses.
Assessee demonstrated before Tribunal, with reference to assessment records, that AO had in fact issued detailed notice u/s 142(1) (page 38 of paper book) raising queries on contract receipts mismatch, refund interest, house-property loss, and other issues. Assessee had filed written replies with reconciliation statements, ledger accounts, TDS details, room-rent summary, site-expense ledger, and salary/overtime TDS workings (pages 40 onward). AO, after considering explanations & evidences, accepted the returned income. Thus enquiry was not absent; AO had applied his mind.
Tribunal observed that the PCIT’s allegation was not of “no enquiry”, but only that “further enquiry” should have been made—this falls within the domain of AO’s discretion. Relying on Sunbeam Auto Ltd. (Delhi HC), Tribunal held that where AO has made enquiries—even if inadequate—section 263 cannot be invoked merely because PCIT has a different view. Tribunal also applied principles from Malabar Industrial Co. Ltd. (SC) that twin conditions—order being erroneous and prejudicial to Revenue—must co-exist; mere loss of revenue is not enough. PCIT must show that AO’s view was unsustainable in law, which was not the case here.
Tribunal also noted that PCIT himself found all relevant details in the assessment record; thus this was not a case of lack of investigation. AO had consciously taken a plausible view on each issue based on material on record. Therefore, jurisdiction u/s 263 could not be exercised under the guise of directing “further verification”.
Accordingly, ITAT held that the AO’s order was neither erroneous nor prejudicial to the interest of Revenue & quashed the 263 order. Assessee’s appeal was allowed
FULL TEXT OF THE ORDER OF ITAT RAJKOT
