2024 (3) TMI 170 - AT - Income Tax

ITAT Ahmedabad Rules in Favor of Assessee, Finds No Error or Prejudice in Original Tax Assessment Order.

Shail P. Shah – HUF Versus The Principal Commissioner of Income Tax, Ahmedabad - 1.

The ITAT Ahmedabad allowed the assessee's appeal, ruling against the PCIT's order under Section 263 of the Income Tax Act, 1961. The Tribunal determined ... Revision u/s 263 - As per CIT assessee declared Net Profit from business & profession which is more than 8% of the total turnover of the business as per Section 44AD and profit was earned from transactions of derivative and commodity transactions with MCX, NSE cash and NSE (F&O) - HELD THAT:- PCIT, mainly based on his contention observed that the assessee has not disclosed its total turnover and has not claimed the profit as per the actual calculations but this is not correct observation of the PCIT. The assessee at the stage of assessment order has given all the details including total turnover which was summarised and put together and give the profit quantification of the total turnover as per Section 44AD of the Act and, therefore, invocation of Section 263 of the Act in the present case is not justifiable when the assessee has given all the details. The Assessment Order is not at all erroneous or prejudicial to the interest of Revenue and, therefore, the order passed under Section 263 of the Act is not justified - Decided in favour of assessee. Issues Involved:The issues involved in this case are the initiation of revision proceedings under Section 263 of the Income Tax Act, 1961 by the Principal Commissioner of Income Tax (PCIT) against the order passed by the Assessing Officer under Section 143(3) for the Assessment Year 2015-16. The grounds of appeal raised by the assessee include the alleged errors by the PCIT in initiating revision proceedings beyond the scope of limited scrutiny, setting aside the original assessment order, and directing a fresh assessment order to be passed.Grounds of Appeal:1. The PCIT initiated revision proceedings under Section 263 without appreciating the limited scrutiny nature of the case to verify commodity and derivative transactions.2. The PCIT set aside the Assessing Officer's order under Section 143(3) without justifying it as prejudicial to revenue.3. The PCIT invoked Section 263 by holding proper enquiry was needed for commodity and derivative transactions, despite details being available.4. The PCIT initiated revision beyond the limited scrutiny scope, which is legally impermissible.5. The PCIT disregarded factual details already on record and directed a fresh assessment order under Section 263.Detailed Judgment:The assessee filed the return of income for the assessment year 2015-16, which was selected for limited scrutiny to verify commodity and derivative transactions. The Assessing Officer completed the assessment under Section 143(3) accepting the returned income. Subsequently, the PCIT initiated revision proceedings under Section 263, contending that the original assessment was made without proper investigation and directed a fresh assessment order.The Ld. AR argued that the Assessing Officer had inquired about the transactions, and the assessee provided detailed explanations and documents regarding turnover and profits. The PCIT's observation that the profit exceeded 8% of turnover under Section 44AD was challenged, as the assessee had disclosed all details during assessment. The Ld. AR emphasized that the PCIT's intervention was unwarranted as the assessment was not erroneous or prejudicial to revenue.After hearing both parties, the Tribunal found that the PCIT's contention about undisclosed turnover was incorrect, as the assessee had provided all necessary details during assessment. Therefore, the invocation of Section 263 was deemed unjustified, and the appeal of the assessee was allowed.Conclusion:The Appellate Tribunal ITAT Ahmedabad ruled in favor of the assessee, allowing the appeal against the PCIT's order under Section 263 of the Income Tax Act, 1961. The Tribunal found that the original assessment order was not erroneous or prejudicial to revenue, as the assessee had provided all relevant details during the assessment process.