TaxTMI 
TaxTMI 
2026 (6) TMI 1263
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.... 3. The appellant reserves the right to addition, after or omit all or any of the grounds of appeal in the interest of justice." 3. The relevant facts giving rise to this appeal are that the assessee runs petrol pump. He filed his Income Tax Return ('ITR') on 09.03.2022 declaring income of Rs. 4,28,71,220/-. The case was scrutinised and the consequential assessment was completed at returned income of Rs. 4,28,71,220/- vide order dated 20.12.2022 passed under section 143(3) r.w.s. 144B of the Act. Meanwhile, the assessment order dated 07.12.2022 was revised under section 263 of the Act by the Ld. PCIT, who set aside the assessment order and directed the Ld. Assessing Officer ('AO') to make afresh assessment as under: "8. Considering the above legal provisions of the Act and the factual position of this case as emanating from the assessment order and case records as well as the judicial precedents as discussed above, I am of the considered opinion that the assessment order is erroneous in so far as it is prejudicial to the interests of revenue in view of Section 263 of the Income tax Act. Thus, the assessment order is held to be erroneous in so far as it is prejudicial....
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.... was Rs. 19,71,55,161/-. During verification, it was also observed that the assessee has claimed deduction of Rs. 8,01,43,272/- u/s 54F and deduction of Rs. 4,95,08,860/- u/s 548 of the Act. Further, it was found that deduction claimed u/s 54B of the Act hears a piece of agricultural land having cost of actual purchase of Rs. 1,64,00,000/- only but valued at Rs. 2,63,92,000/- for the purpose of Section 50C of the Act. Further, the assessee has incorporated the difference of Rs. 99,92,000/- in his income u/s 56(2)(x) of the Act and has claimed as deduction u/s 54B of the Act of Rs. 2,63,92,000/- by incorporating the difference amount of Rs. 99,92,000/- with actual cost paid of Rs. 1,64,00,000/-. Such adoption made by the assessee is not in accordance with the provisions of the Act. Section 54B of the Act provides cost of the land so purchased. Here, cost of purchase means the actual cost of purchase and not the deemed value covered u/s 50C of the Act. Further, value taken u/s 50C has limited objective which is confined only to computation of income u/s 48 chargeable u/s 45 of the Act only and the same has not extended to Section 54B and any sections dealing with deductions under Par....
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...., Clix Finance India Ltd. ITA No. 1428/2018, Sunbeam Auto Ltd. [2009 SCC Online Del 4237 and Purna Purshottam Exports [2025 (2) TMI 764]. The relevant part (Page 9 to 12 of the PB) of the assessee's submission is scanned hereunder: "11. It is with reference to this assessment your honour has been pleased to issue notice u/s.263 of the Act on the grounds that the assessment order is erroneous and prejudicial to the interest revenue for two reasons that issues of a) deduction under section 54B of the Act and b) excess shortage of Petrol and Diesel were not properly and adequately verified by the AO while passing assessment order by conducting proper enquiries and examination of accounts. 12. The averments contained in this notice are not correct and it appears that they were drawn without consulting the relevant records and without proper appreciation of the details available on the records. 13. As regards issue 11 (a) referred above, it is submitted that the assessee had purchased a land for Rs. 1,64,00,000/- whose value as per Section 50C of the Act was Rs. 2,63,92,000/-. Accordingly, the assessee has incorporated the difference of Rs. 9....
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....dy in the possession of the Assessing Officer, and therefore, the observation that the assessment order was erroneous and prejudicial to the interest of revenue is not correct. The assessee has fully disclosed the shortage details as required, and the claim was made in accordance with established norms. 18. The assessee operates a petrol pump under Reliance Petroleum where stringent monitoring mechanisms are in place to ensure accuracy and prevent any fuel adulteration or manipulation. The fuel tanks are secured with keys held exclusively by Reliance Petroleum, and the quantity of fuel received is carefully recorded. Additionally, all sales data is monitored centrally by the company, further eliminating the possibility of any discrepancies in reported quantities or shortages. Any shortage that occurs is due to genuine reasons such as evaporation loss, handling loss, and transportation loss. In some instances, petty theft during transportation may occur, which cannot be easily detected, as there is no precise way to measure the exact quantity of fuel received upon delivery. Given these robust controls and the inherent limitations in fuel transportation, it is practically im....
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....section 54B of the Act and the evaporation loss of petrol and diesel and therefore, the proceedings under section 263 of the Act were due to change of opinion on the same issues which had been once looked into by the Ld. AO. The assessee submitted during the proceedings under section 263 of the Act that the Ld. AO, after analysing the detailed submissions furnished in response to notice u/s 142(1) of the Act, did not find anything adverse; hence, he did not draw any adverse inference thereon. Accordingly, the assessee submitted that the revisionary proceedings initiated under section 263 of the Act were nothing but a case of change of opinion only. He therefore, prayed for dropping the proceedings initiated under section 263 of the Act. 3.4 The Ld. PCIT, analysing the sale deeds submitted by the assessee, further noticed that the land sold for consideration of Rs. 18,28,14,161/- resulting Capital Gains was not used for agricultural purposes for the period of two years before its sale/transfer. Hence, the transfer of said land would not entitle the assessee to claim deduction under section 54B of the Act on purchase of new agricultural land. Thus, the Ld. PCIT opined that the ded....
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....00) 243 ITR 83 (SC) 2. Mahavir Ashok Enterprises Pvt Ltd. [2024] 167 taxman.com 396 (CG) 3. Arvind Jewellers (2003) 259 ITR 502 (Guj) 4. Sunbeam Auto Ltd. 332 ITR 167 (Del) 5. DG Housing Project Ltd. 343 ITR 329 (Del) 6. Max India Ltd. 295 ITR 282 (SC) 7. Clix Finance India Ltd. (supra) 8. Purna Purshottam Exports (supra) 8. The Ld. AR, drawing our attention to the notice issued under section 263 of the Act, assailed that the Ld. PCIT, without pointing it out in the show-cause notice under section 263 of the Act, had raised the 3rd issue; i.e. the non-justification of deduction of Rs. 4,95,08,860/- under section 54B of the Act on the reasoning that the land sold for sale consideration of Rs. 18,28,14,161/- resulting Capital Gains was not used for agricultural purposes for the period of two years before its sale/transfer. It was categorically submitted by the Ld. AR that this issue was never raised during the proceedings under section 263 of the Act; hence, the impugned order on this score was unjustified in violation of the principle of natural justice. 9. On the other hand, Mrs. Manish Kinnu, Ld. CIT-DR defended ....
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....up was not called during the assessment proceedings. 12. On the issue of claim of excess deduction of Rs. 4,95,08,860/- under section 54B of the Act, the Ld. CIT-DR contended that this issue was not examined at all by the Ld. AO as there was no specific mention of this issue in the notice issued under section 142(1) of the Act or otherwise. Further, she contended that the Ld. AO had just called general details as evident from the notice issued under section 142(1) of the Act and did not analyse/examine the same in proper perspective. 13. The Ld. CIT-DR, therefore, contended that the assessment order was rightly held erroneous and prejudicial to the interest of revenue to the extent of issues raised in the order under section 263 of the Act. The Ld. PCIT, vide notice under section 263 of the Act had raised the issue of deduction under section 54B of the Act and that was why the submission filed before him at point 11 (page 9 of the PB) specifically admitted that there were two issues raised in notice under section 263 of the Act: i. Deduction under section 54B of the Act and ii. Excess shortage of petrol and diesel She therefore, contended that the issue o....
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.... enquiry and verification on these issues during the assessment proceedings. However, we find that the Ld. AO has not carried out any enquiry or verification on these issues. 17. The relevant part of the section 263 of the Act is extracted hereunder: - "Explanation 2. - For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner, - (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person." 18. From perusal of the reassessment order, it is not discernible that whether the Ld. AO has carr....
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....erpretation of Section 263 of the Income Tax Act, it is observed and held that in order to exercise the jurisdiction under Section 263(1) of the Income tax Act, the Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. It is further observed that if one of them is absent, recourse cannot be had to Section 263(1) of the Act. "What can be said to be prejudicial to the interest of the Revenue" has been dealt with and considered in paragraphs 8 to 10 in the case of Malabar Industrial Co. Ltd. (supra), which are as under:- "8. The phrase "prejudicial to the interests of the Revenue" is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The High Court of Calcutta in Dawjee Dadabhoy & Co. v. S.P. Jain [(1957) 31 ITR 872 (Cal)], the High Court of Karnataka in CIT v. T. Narayana Pai [(1975) 98 ITR 422 (Kant)], the High Court of Bombay in CIT v. Gabriel India Ltd. [(1993) 203 ITR 108 (Bom)] and the High Court of Gujarat in CIT v. Minalben S. Parikh ....
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....evy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. It is further observed that if due to an erroneous order of the Income Tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. However, only in a case where two views are possible and the Assessing Officer has adopted one view, such a decision, which might be plausible and it has resulted in loss of Revenue, such an order is not revisable under Section 263. 7.3 Applying the law laid down by this Court in the case of Malabar Industrial Co. Ltd. (supra) to the facts of the case on hand and even as observed by the Commissioner, the order passed by the Assessing Officer is erroneous as well as prejudicial to the interest of the Revenue. Having gone through the assessment order as well as the order passed by the Commissioner of Income Tax, we are also of the opinion that the assessment order was not only erroneous but prejudicial to the interest of the Revenue also. In the facts and circumstances of the case, it cannot be said that the Commissioner exercised the jurisdiction under Section 263 n....
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.... the Revenue. Explanation 2(a) to section 263 of the Act, in an unambiguous manner states that where the order is passed without making enquiries or verification which should have been made, the same shall be deemed to be erroneous and in so far as it is prejudicial to interest of revenue. Applying the law laid down by the Hon'ble Supreme Court in the case of Paville Project Pvt. Ltd. (supra) to the facts of the present case mentioned in the impugned order and keeping in view the above discussions, we hold that the Ld. PCIT has rightly exercised his jurisdiction under section 263 of the Act in setting aside the assessment order of the Ld. AO being erroneous in so far it is prejudicial to the interest of the Revenue. Accordingly, we uphold the order of the Ld. PCIT and dismiss the appeal of the assessee. 22. In the result, appeal of the assessee is dismissed as above. Order pronounced in the open court on 03/06/2026. ============= Document 1 278 ACZPG6957H- SANTOSH GOLECHHA A.Y. 2021-22 ITBA/AST/F/142(1)/2022-23/1047709678(1) अनà¥à¤²à¤—à¥à¤¨à¤• ANNEXURE आयकर अधिनियम, 1961 ....