ITAT Jaipur Overturns PCIT’s Order U/S 263, Citing Ignored Submissions

In a ruling, the Income Tax Appellate Tribunal (ITAT) Jaipur has ruled in the appellant’s favour, setting aside the order of the Principal Commissioner of Income Tax (PCIT) u/s 263 of the Income Tax Act, 1961. It was discovered by the tribunal that PCIT has overlooked various submissions incurred by the taxpayer breaking the norms of natural justice.

The taxpayer/applicant, Dinesh Kumar Chaurasia, submitted his ITR for AY 2013-14, specifying an income of Rs 3,70,630. U/s 143(1), his return was processed and no assessment was performed. The tax officials discovered the two sale agreements pertinent to the land transactions in a survey conducted dated October 29, 2019.

The department based on such documents alleged that the appellant had incurred unexplained cash investments totalling Rs 1.65 crore which had not undergone assessment.

U/s 148 a reassessment notice was issued and the income was reassessed at Rs 1,67,70,630 (One Crore Sixty Seven Lakh Seventy Thousand Six Hundred Thirty) on a protective basis, with the addition made in the hands of Mahendra Mehra, who was the registered buyer in the agreements.

Subsequently, PCIT has furnished a notice u/s 263 alleging that the Assessing Officer (AO) did not analyze the case effectively and therefore passed an ex-parte order against the appellant.

As the authorities committed multiple legal and procedural errors a Two Member Bench of Dr S Seethalakshmi (Judicial Member) and Gagan Goyal (Accountant Member) quashed the Section 263 order.

It was discovered by the tribunal that the taxpayer has furnished various replies dated January 6, October 9, January 23, and March 4. PCIT overlooked such submissions and wrongly claimed that the taxpayer did not answer.

It was carried by the ITAT that the order was passed without acknowledging the defence of the taxpayers which breaches the norms of natural justice.

Jaipur ITAT Rules Against Unjustified Tax Adjustments, Strengthens Due Process It was marked by the tribunal that the addition had been made earlier in the hands of Mahendra Mehra, validating that the income is of him.

As the income could be levied to tax twice therefore the protective addition made against Chaurasia, the appellant was no longer valid. Hence the continued proceedings against him had no statutory basis.

Also, ITAT noted that the PCIT is unable to deliver an effective justification for invoking section 263. It was discovered by the tribunal that new problems were raised that were not the portion of the original show cause notice (SCN). ITAT held that the section 263 order was not valid as the PCIT could not prove that the reassessment order was incorrect and restored the original assessment.

Consequently, the plea was authorized.