PCIT Vs Britannia Industries Ltd (Calcutta High Court)
The appeal before the Calcutta High Court arose from an order of the Income Tax Appellate Tribunal (ITAT) concerning assessment year 2018–19, where the Principal Commissioner of Income Tax (PCIT) had invoked revisionary jurisdiction under section 263 of the Income Tax Act, 1961. The central question was whether the PCIT was justified in setting aside the assessment order on the grounds that it was erroneous and prejudicial to the interests of the Revenue, particularly in relation to the applicability of section 56(2)(x) on acquisition of property and disallowance under section 43B.
The High Court examined the statutory framework of section 263 and reiterated that the power can be exercised only when two conditions are satisfied: the assessment order must be erroneous and prejudicial to the interests of the Revenue. Additionally, the PCIT must independently examine the record and form a clear satisfaction, which must be reflected in the show-cause notice. The Tribunal had found that the PCIT invoked jurisdiction under section 263 primarily at the instance of the Assessing Officer, which was impermissible. The High Court agreed with this finding and held that such invocation lacked proper application of mind.
On the issue of valuation and applicability of section 56(2)(x), the Court noted that the assessee had acquired leasehold and freehold land and building pursuant to agreements entered into before the introduction of section 56(2)(x), though registration occurred in the relevant assessment year. The valuation of the property was supported by a registered valuer using recognized methods, while stamp duty authorities adopted higher values. The Court observed that the assessee had disclosed all relevant facts, including valuation reports, in the tax audit report and computation of income, and these were examined during scrutiny assessment. It held that the Assessing Officer had taken into account all material facts and applied his mind. Therefore, it could not be said that the assessment order suffered from lack of inquiry or verification.
