2022 (3) TMI 1207 - AT - Income Tax

Tribunal overturns PCIT's order under Income Tax Act, emphasizes statutory compliance

Mr. Navinchandra Shah Versus PR. CIT- 20, Mumbai

The Tribunal allowed the appeals filed by the assessee for A.Y. 2014-15 and 2015-16, setting aside the PCIT's order under section 263 of the Income Tax ... Revision u/s 263 by CIT - denial of claim of exemption u/sec 10(38) - Addition u/s 68 - purchases price as the part of the long term capital gains and the whole sale proceeds are to be treated as income u/sec 68 - HELD THAT:- We find that the assessee has complied with the statutory notice u/sec148 and 142(1) of the Act and the show cause notice. The submissions of the Ld. AR are realistic duly supported with the material information and judicial decisions. We Considering the overall facts, circumstances, ratio of the judicial decision and the details submitted in the course of hearing are of the view that the if any query is raised in the assessment proceedings and it was responded by the assessee, mere fact that it is not dealt within by the A.O. in the order cannot implied that there is no application of mind. Hence, the PCIT action cannot be acceptable as the order passed by the A.O. does not satisfy the twin conditions of erroneous and prejudicial to the interest of the revenue. Accordingly we do not find any merits in the order and we set aside the order u/s 263 passed by the PCIT and allow the grounds of appeal of in favour of the assessee. Issues involved:Appeals filed against orders of PCIT under section 263 of the Income Tax Act, 1961.Comprehensive Analysis:1. Grounds of Appeal:The appellant challenged the PCIT's order under section 263, arguing that the assessment order was not erroneous or prejudicial to revenue. The PCIT directed the AO to add undisclosed income under section 68 of the Act. The appellant contended that the PCIT lacked jurisdiction as the AO had already considered the same material. The appellant sought to amend the grounds of appeal.2. Brief Facts:The assessee filed the return for A.Y. 2014-15 with total income of Rs. 60,77,230. The AO reopened the assessment under section 147, denying exemption under section 10(38) for long-term capital gains on penny stock shares. The AO added sale proceeds under section 68, assessing total income at Rs. 9,42,52,171. The PCIT found the AO's order erroneous and prejudicial, directing a fresh assessment.3. PCIT's Order:The PCIT observed the AO did not investigate the purchase transactions of shares, considering the entire sale proceeds as taxable under section 68. The PCIT set aside the assessment, directing a fresh assessment. The appellant appealed to the Tribunal.4. Tribunal's Analysis:The Tribunal considered whether the PCIT's directions were justified. The appellant argued the AO had properly examined the disputed issues. Referring to a previous case, the Tribunal emphasized that for revision under section 263, the order must be both erroneous and prejudicial to revenue. The Tribunal found the AO's actions reasonable and set aside the PCIT's order.5. Decision and Conclusion:The Tribunal concluded that the AO's assessment was not erroneous or prejudicial to revenue. The appellant had complied with statutory notices, and the AO had applied due diligence in assessing the case. The Tribunal found no merit in the PCIT's order under section 263 and allowed the appeals in favor of the assessee for both A.Y. 2014-15 and 2015-16.In summary, the Tribunal set aside the PCIT's order, emphasizing the importance of meeting the twin conditions of being both erroneous and prejudicial to revenue for invoking revision under section 263 of the Income Tax Act, 1961. The Tribunal found the AO's assessment reasonable and in compliance with statutory requirements, leading to the allowance of the appeals filed by the assessee.