Appeal Allowed: ITAT Delhi Overturns Section 263 Order, Assessee Prevails

M/s Rutvi Oilfields Services Pvt. Ltd. Versus Principal Commissioner of Income Tax, Gurgaon

M/s Rutvi Oilfields Services Pvt. Ltd. Versus Principal Commissioner of Income Tax, Gurgaon - TMI Issues:
Appeal against order under Section 263 of the Income Tax Act, 1961 for assessment year 2014-15.

Analysis:
The appeal was filed by the assessee against the order passed by the Principal Commissioner of Income Tax, Gurgaon under Section 263 of the Income Tax Act, 1961. The grounds of appeal focused on the contention that the order under Section 263 was arbitrary, erroneous, and unlawful. The assessment for A.Y. 2014-15 involved scrutiny due to various reasons like large share premium received, unsecured loans, and mismatch in amounts paid to related persons. The AO made additions and disallowances during the assessment. The Principal Commissioner issued notices under Section 263 due to the AO's failure to examine the justification of share premium and creditworthiness of subscribers. The Pr. CIT set aside the assessment order, directing a fresh assessment on this specific issue only.

The assessee argued that proper verification was done by the AO during assessment proceedings under Section 143(3) of the Act. The AR highlighted the queries raised by the AO, documents submitted, and compliance with the assessment process. The AR also emphasized technical flaws in the notice issued under Section 263 and cited relevant legal precedents to support the appeal. On the other hand, the DR contended that the valuation report was not before the AO, and no proper verification was conducted regarding the fair market value of share premium.

After hearing both parties, the ITAT Delhi observed that the AO had raised queries related to fair market value, and relevant documents were presented during assessment. The tribunal noted that the explanation provided by the assessee was supported by bank statements, valuation reports, and audit documents. It was concluded that there was no prejudice to revenue, and Section 263 could not be invoked. The tribunal emphasized that the AO had conducted inquiries and passed a reasoned assessment order, negating the need for further scrutiny under Section 263. Legal precedents were cited to support the decision that not every loss of revenue constitutes an erroneous order prejudicial to revenue. The tribunal set aside the order under Section 263, allowing the appeal of the assessee.

In conclusion, the ITAT Delhi allowed the appeal of the assessee, setting aside the order passed by the Principal Commissioner of Income Tax under Section 263 of the Income Tax Act, 1961 for the assessment year 2014-15.