Shree Balaji Associates Pune LLP Vs PCIT (Central) (ITAT Pune)
The Income Tax Appellate Tribunal (ITAT), Pune, recently ruled in favor of Shree Balaji Associates Pune LLP, setting aside an order passed by the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act. The case revolved around an addition of ₹65,415 made by the Assessing Officer (AO) under Section 69C r.w.s. 115BBE of the Act during the assessment year 2019-20. The PCIT had invoked Section 263, deeming the AO’s assessment order erroneous and prejudicial to the interests of the revenue.
The ITAT, after hearing arguments from both sides and reviewing the assessment records, found merit in the assessee’s contention that the AO had conducted sufficient inquiry during the assessment proceedings. The records indicated that the AO had issued multiple notices under Section 142(1) of the Act, seeking detailed information from the assessee regarding the discrepancies noted during a search action on the Annuj Goel Group. These queries specifically pertained to the Work-in-Progress (WIP) and the application of the Percentage Completion Method (PCM) of accounting for the financial year 2018-19.
The assessee had provided detailed replies to these queries, explaining the reasons for the difference in revenue recognition between the provisional workings submitted during the search and the figures presented in the income tax return. The assessee clarified that the initial workings were based on estimated costs and that the actual costs incurred up to March 31, 2019, were higher. Additionally, there was a variance in the estimated and actual saleable area. The AO, after considering these explanations and supporting documents, passed the assessment order.
The ITAT relied on several judicial precedents, including the Bombay High Court’s decision in CIT vs. M/s. Fine Jewellery (India) Ltd., which held that if specific queries are raised during assessment and responded to by the assessee, the absence of detailed discussion in the assessment order does not automatically imply a lack of application of mind by the AO. The Pune Tribunal’s own decision in M/s. Angre Port Private Ltd. vs. PCIT and the Ahmedabad Tribunal’s ruling in Zahurahmed Abdulrazzak Valjiwala vs. PCIT were also cited. These cases established the principle that revision under Section 263 is warranted only in cases of a lack of inquiry, not merely an inadequate inquiry, and that the AO’s decision, if a plausible view, should not be overturned.
In light of the fact that the AO had raised specific queries on the issues highlighted by the PCIT and the assessee had provided detailed responses, which were considered before passing the assessment order, the ITAT concluded that it was not a case of lack of inquiry. Therefore, the invocation of jurisdiction under Section 263 by the PCIT was deemed unjustified. Consequently, the ITAT set aside the PCIT’s order and allowed the grounds raised by the assessee. An additional ground raised by the assessee regarding the approval under Section 153D was not pressed and was subsequently dismissed.
FULL TEXT OF THE ORDER OF ITAT PUNE
