TaxTMI 
TaxTMI 
2026 (8) TMI 1782
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....fied in quashing the order of the Pr. CIT passed under section 263 ignoring the vital fact that the Assessing Officer had allowed excess claim of cost of acquisition and cost of improvement of impugned property while passing assessment order u/s 143(3) r.w.s. 143(3A) & 143(3B) of the Act dated 05.02.2021 which rendered the assessment order erroneous and prejudicial to the interest of Revenue in terms of Explanation 2(a) to section 263(1) of the Act? B) Whether on the facts and circumstances of the case and in law, the Appellate Tribunal has erred in observing that PCIT was not empowered and entitled to revise assessment order u/s. 263 of the Act r/w Explanation 2 even though there was loss to the Revenue and the assessment order was erroneous and prejudicial to the interest of Revenue as per the decision of Hon'ble Apex court in case of CIT vs M/s. Paville Projects Pvt. Ltd?" 4. Brief facts of the case are that the assessee is an individual who filed return of income for the Assessment Year 2018-2019 on 27.03.2019 declaring total income at Rs. 3,23,75,540/-. Subsequently, the assessee's case was selected for limited scrutiny, under e-assessment scheme 2019 to ve....
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....port of cost of improvement shows that payments have been made by Prakashbhai and others and no specific bifurcation/percentage or specific amount incurred by each of them has been mentioned therein. Therefore, cost of improvement is to be divided in the ownership ratio. Further, the assessee has not furnished any receipt/bill in respect of improvement of cost being the payment of Rs. 4,23,708/- made to Surat Municipal Corporation and also, no receipt/bill for payment of Rs. 1,67,493/- made to Surat Mahanagr Seva Sadan has been furnished. Instead, receipt is furnished for payment made by Shri Chetankumar Balubhai Patal and same is of Rs. 24,395/- only. PCIT holding that it is the duty of the assessee to produce the documentary evidences, supporting bills, vouchers, documents etc., to substantiate his claim and as the assessee had not discharged his onus and filed partial supporting documents, the claim of Rs. 5,91,201/- (4,23,708 + 1,67,493) as improvement cost was rejected. 9. Based on such facts, PCIT noted that total cost of improvement stands at Rs. 1,08,92,800/- (1,14,84,000 - 5,91,200) as against the assessee's claim of Rs. 1,14,84,000/- and the assessee's share fo....
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....t (vide pages 119-121 of paper book). 13. After considering such documents, the Tribunal held that the assessee submitted all the information during the course of assessment and the Assessing Officer has duly verified the same. 14. Learned advocate Mr. Manish Shah for the assessee submitted that the notice under section 142(1) of the Act was issued on two issues namely, details of immovable property sold by the assessee jointly with his brother and computation of capital gains. 15. It was submitted that all the information sought for was submitted by the assessee and after considering the same, the Assessing Officer passed the order under section 143(3) of the Act. Whereas learned Senior Standing Counsel Mr. Karan Sanghani for the appellant Revenue submitted that the PCIT has observed that the assessee failed to produce the receipt issued by the Surat Municipal Corporation for payment of Rs. 4,23,708/- as the assessee claimed 50% thereof as cost of improvement and therefore, to that extent, the order is erroneous and prejudicial to the interest of Revenue. 16. It was therefore, submitted that in absence of further inquiry made by the Assessing Officer regarding non prod....
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....i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent-if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to Sec. 263(1) of the Act. 7. There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. 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 conferred (confined) to loss of tax. The High Court of Calcutta in Dawjee Dadabhoy and Co. V/s. S. P. Jain, the High Court of Karnataka in Commissioner of ....