2022 (7) TMI 1542 - HC - Income Tax

Calcutta HC Dismisses Revenue's Appeal, Affirms Tribunal's Findings on PCIT's Erroneous Jurisdictional Assumption.

The HC of Calcutta dismissed the revenue's appeal under SS260A of the Income Tax Act, 1961, ruling that the PCIT improperly exercised powers under SS263. ... Assumption of jurisdiction by the PCIT u/s 263 - Estimation of income on bogus purchases - as per CIT AO having failed to disallow bogus purchases fully, but resorted to a certain percentage - HELD THAT:- The tribunal has elaborately examined this issue, taken note of the decision of the Hon’ble Supreme Court in Malabar Industrial Co. Ltd. [2000 (2) TMI 10 - SUPREME COURT] and allowed the appeal. Further, the tribunal has noted that the assessing officer had made an addition of 2% to the gross profit over and above the rate of gross profit of 4.63% totalling to 7.63%. It appears that after completing the assessment the assessing officer addressed the PCIT stating that certain error has occurred in the assessment order and requested him to review the order u/s 263 of the Act. Whether such a procedure adopted by the PCIT was legally sustainable was examined by the tribunal and in our considered view after taking note of the various decisions of the Hon’ble Supreme Court it was rightly pointed out that section 263 of the Act does not permit substituting one opinion for another. That apart, the tribunal has specifically recorded a factual finding that the assessee had produced all necessary details of the purchase, sales, audited books of accounts, quantity details, etc.. Tribunal found that the assessee’s books of accounts were audited by the Chartered Accountant, the quantity details were given in respect of opening stock, purchase, sales, closing stock, etc. Tribunal pointed out that no discrepancy was found between the purchase shown by the assessee and the sales decline. Thus, on facts, the tribunal concluded that assumption of jurisdiction by the PCIT u/s 263 of the Act was erroneous. Decided in favour of assessee. The High Court of Calcutta dismissed the revenue's appeal under section 260A of the Income Tax Act, 1961. The court held that the Principal Commissioner of Income Tax could not have exercised powers under section 263 of the Act as the tribunal found no error in the assessment order. The tribunal concluded that assumption of jurisdiction by the PCIT was erroneous, and there was no substantial question of law arising. Therefore, the appeals and connected applications were dismissed.