Assessment order under section 263 upheld by ITAT, ruling in favor of assessee

The ITAT allowed the appeal filed by the assessee, finding that the assessment order framed under section 263 of the Income Tax Act was not erroneous and prejudicial to the interest of revenue. The ITAT held that the AO had taken a plausible view during the original assessment, and as per legal precedent, such view cannot render the assessment order erroneous. Therefore, the ITAT quashed the order under section 263, ruling in favor of the assessee.

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Issues involved:
The only issue raised in the appeal is whether the assessment framed under section 143(3) of the Income Tax Act was erroneous and prejudicial to the interest of revenue, leading to the direction to make an addition under section 68 of the Act.

Details of the Judgment:

Issue 1: Assessment under Section 143(3) deemed erroneous:
The appeal was filed against the order of the Learned PCIT, Ahmedabad, regarding the assessment order passed under section 263 of the Income Tax Act for the Assessment Year 2013-2014. The learned PCIT directed to make an addition of Rs. 1,68,34,500.00 under section 68 of the Act, considering the long-term capital gain shown by the assessee arising from the sale purchase of a penny stock company as not genuine. The PCIT deemed the share transactions as sham, bogus, and managed, leading to unexplained cash receipts to be added back to the total income of the assessee. Penalty proceedings under section 271(c) were also directed to be initiated.

Issue 2: Appeal against PCIT's order:
The assessee appealed against the PCIT's order, contending that the assessment was not erroneous insofar prejudicial to the interest of revenue. The AR argued that the assessment was done after necessary application of mind, and all required enquiries from brokers and the stock exchange confirmed the legitimacy of the share transactions.

Issue 3: ITAT's decision and directions:
The ITAT, in an earlier round of litigation, had set aside the issue to the PCIT for fresh adjudication. The ITAT directed the PCIT to consider the order passed by the Kolkata ITAT in a specific case. The ITAT noted that the assessee had provided detailed documentation and evidence supporting the share transactions, including confirmations from brokers and the stock exchange.

Issue 4: Decision of the ITAT:
The ITAT found that the AO had taken one of the possible views during the original assessment proceedings, and as per legal precedent, any plausible view taken by the AO cannot render the assessment order as erroneous. Citing a judgment of the High Court of Karnataka, the ITAT held that there was no infirmity in the assessment order requiring revision under section 263 of the Act. Consequently, the ITAT quashed the order framed under section 263, allowing the ground of appeal of the assessee.

Conclusion:
The ITAT allowed the appeal filed by the assessee, pronouncing the order in the Court at Ahmedabad on 30-06-2023.

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