Case Law Details
Rohit Grover Vs PCIT (ITAT Chandigarh)
The Income Tax Appellate Tribunal (ITAT) considered an appeal filed by the assessee against an order passed by the Principal Commissioner of Income Tax (PCIT), Chandigarh-1 dated 28.03.2024 under Section 263 of the Income Tax Act, 1961 for Assessment Year 2013–14.
The assessee had filed a return declaring total income of ₹55,11,460. Subsequently, the assessment was reopened under Section 147 based on information that the assessee had received ₹3,98,00,000 from a company towards transfer of the “right to carry the business” during the relevant year. The assessment was completed under Sections 147 read with 144/144B, accepting the returned income.
On examination of the assessment records, the PCIT observed that the Assessing Officer (AO) had failed to properly examine the nature and taxability of the amount received. The assessee had treated the receipt as a capital receipt not chargeable to tax, claiming it represented goodwill of a medical profession. However, the PCIT noted that the agreement with the company involved transfer of business along with infrastructure, equipment, client base, approvals, and other commercial rights.
The PCIT further observed that the AO had issued notices under Sections 148 and 142(1), and the assessee had submitted replies and certain details. Despite this, the AO completed the assessment without conducting detailed verification or inquiry into the nature of the receipt or its taxability. The assessment order did not reflect any meaningful examination of the agreement or the basis for treating the receipt as non-taxable.
It was also noted that the assessee, along with his spouse, was running a hospital on commercial lines, and the transaction appeared to involve transfer of business rather than merely professional goodwill. Separate agreements for professional services were also present, indicating that the consideration was not solely for goodwill. The PCIT concluded that the AO had not examined these aspects or verified the claim made by the assessee.
On this basis, the PCIT held that the assessment order was erroneous and prejudicial to the interests of the Revenue due to lack of necessary inquiry and verification. Accordingly, the assessment was set aside with a direction to the AO to conduct a fresh assessment after proper examination.
The assessee challenged this order before the Tribunal. However, during the hearing, no one appeared on behalf of the assessee, while the Department relied on the PCIT’s findings.
After considering the material on record, the Tribunal observed that the AO had failed to examine the agreement and did not conduct inquiries regarding the nature of the consideration received or its taxability. It also noted that no investigation was carried out regarding the claim of professional goodwill.
The Tribunal held that necessary inquiries were not made at the assessment stage, and therefore, the conclusion of the PCIT that the assessment order was erroneous and prejudicial to the interests of the Revenue was justified. It found no infirmity in the order passed under Section 263.
Accordingly, the Tribunal dismissed the appeal filed by the assessee and upheld the order of the PCIT directing fresh assessment. The order was pronounced on 27.04.2026.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
This appeal filed by the assessee is directed against the order passed by the Ld. Principal Commissioner of Income Tax, Chandigarh-1 dt. 28/03/2024 under section 263 of the Income-tax Act, 1961 for the Assessment Year 2013-14.
2. In the present appeal Assessee has raised the following grounds:
1) That the orders of PCIT, Chandigarh-1 have been passed in haste and have ignored basic aspects and facts of the case thus causing undue hardship to the appellant.
2) That the Ld. PCIT, Chandigarh 1 has erred both on facts and law in holding the order of assessment to be erroneous and prejudicial to the interests of the revenue. The order passed by the PCIT, Chandigarh 1 u/s 263 of the Income tax Act is illegal and has been passed in haste without considering the facts and circumstances of the case and deserves to be quashed
It is prayed that the directions may be given to quash the order passed u/s 263 of the Income tax Act.
3) That the appellant craves to add, delete, concede, modify any or all the grounds of appeal at the time of hearing of appeal.
3. The brief facts of the case are that the assessee filed his return of income declaring total income of Rs. 55,11,460/-. Subsequently, the case was reopened under section 147 of the Act on the basis of information that the assessee had received a sum of Rs.3 ,98,00,000/- from M/s Vasan Healthcare Pvt. Ltd. towards transfer of “Right to carry the business during the year under consideration”. The assessment was completed under section 147 read with section 144/144B of the Act accepting the returned income.
3.1 Thereafter, the Ld. PCIT examined the assessment records and found that the Assessing Officer had failed to properly examine the nature and taxability of the said receipt of Rs.3.98.00.000/- . It was noticed that the assessee had claimed the said receipt as capital receipt not chargeable to tax, stating it to be goodwill of medical profession. However, as per the agreement with M/s Vasan Healthcare Pvt. Ltd., the transaction involved transfer of business along with infrastructure, equipment, client base and other commercial rights.
3.2 Accordingly, the Ld. PCIT initiated proceedings under section 263 of the Act on the ground that the assessment order passed by the Assessing Officer was erroneous and prejudicial to the interests of the Revenue.
3.3 The Ld. PCIT has observed that the Assessing Officer reopened the assessment under section 147 and issued notices under sections 148 and 142(1) of the Act. The assessee submitted replies and certain details; however, the Assessing Officer, without conducting detailed verification regarding the nature of receipt of Rs.3,98,00,000/-, accepted the returned income and completed the assessment at Rs. 55,11,460/-.
3.4 The assessment order does not reflect any meaningful inquiry or examination regarding the agreement with M/s Vasan Healthcare Pvt. Ltd., the nature of consideration received, or its taxability under the head capital gains or otherwise.
3.5 The Ld. PCIT, after examining the record, held that the Assessing Officer had failed to make necessary inquiries and verifications which were required in the facts of the case. It was observed that the assessee along with his wife was running a hospital on commercial lines and the transaction was in substance a transfer of business and not merely professional goodwill. The agreement clearly indicated transfer of infrastructure, equipment, clientele, approvals, and right to carry on business. Separate agreements existed for professional services, indicating that the consideration was not for professional goodwill alone. The Assessing Officer had not examined the agreement or verified the basis of the assessee’s claim.
3.6 Accordingly, the Ld. PCIT held that the assessment order was erroneous insofar as it was prejudicial to the interests of the Revenue and set aside the assessment with a direction to make fresh assessment after proper inquiry.
4. Against the order of the Ld. PCIT the assessee preferred in appeal before the Tribunal.
5. During the course of hearing none appeared on behalf of the Assessee.
6. Per contra, the Ld. DR relied on the order of Ld. PCIT.
7. We have heard the rival submissions and perused the material available on record. In the present case, we find that the AO, during the assessment proceedings, failed to examine or conduct inquiries regarding the assessee’s agreement with M/s Vasan Healthcare Pvt. Ltd. The AO also failed to examine the nature of the consideration received and its subsequent taxability.
7.1 Furthermore, no inquiry or investigation was conducted regarding the professional goodwill claimed by the assessee in the proceedings before the lower authorities. Therefore, in our considered view, since the necessary inquiries were not made at the assessment stage regarding the issues discussed above, the finding of the Ld. PCIT that the assessment is erroneous and prejudicial to the interest of the Revenue is appropriate.
7.2 We find no infirmity in the findings recorded by the Ld. PCIT in the order passed under Section 263. Accordingly, the appeal filed by the assessee is dismissed.
8. In the result, appeal of the Assessee is dismissed.
Order pronounced on 27/04/2026
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