Revision of u/s 263 is unsustainable if no finding about escapement of income is recorded
Fact and issue of the case
The assessee is in appeal before the Tribunal against the order of ld. Principal Commissioner of Income Tax, Patna-1 dated 12.03.2022 passed under section 263 of the Income Tax Act in Assessment Year 2017-18.
The assessee has taken five grounds of appeal, but in brief his grievances revolve around a single issue, namely ld. CIT has erred in taking cognizance under section 263 and thereby setting aside the assessment order.
Brief facts of the case are that the assessee at the relevant time was running a Petrol Pump in the name and style of ‘Kuldeep Service Station’. It was engaged in purchase and sale of petroleum products. He has filed its return of income electronically on 12.03.2018 declaring total income of Rs.6,86,240/-. The case of the assessee was selected for scrutiny assessment on the issue of cash deposit during demonetisation. A notice under section 143(2) was issued and served upon the assessee. After hearing the assessee, the ld. Assessing Officer has passed an assessment order on 24.12.2019 under section 143(3) of the Income Tax Act. The ld. Assessing Officer has determined the total taxable income at Rs.8,09,810/- as against the returned income. He made certain disallowances out of salary to staff, miscellaneous expenses, travelling expenses etc. The ld. Commissioner took cognizance under section 263 of the Income Tax Act and observed that a perusal of the assessment record would reveal that the assessee received contractual income of Rs.15,84,602/- from Indian Oil Corporation Limited. This contractual receipt was not disclosed in the Profit & Loss Account and ld. Assessing Officer did not raise any query in this regard, therefore, the order of the ld. Assessing Officer is erroneous as well as prejudicial to the interest of revenue. In response to the show-cause notice, it was contended by the assessee that all the books of account were produced before the ld. Assessing Officer, who has duly investigated them.
Observation of the court
In the light of above, we have gone through the record carefully. During the course of hearing, our attention was drawn towards the judgment of the Hon’ble Delhi High Court in the case of ITO –vs.- D.G. Housing Projects (343 ITR 329). In this judgment, Hon’ble Delhi High Court has propounded that ld. Commissioner cannot remit the matter to the ld. Assessing Officer to decide whether the findings recorded are erroneous. In the present case, the ld. Commissioner harboured a belief that there is a contractual receipt of Rs.15,00,000/- and the ld. Assessing Officer did not make any inquiry about this contractual receipt. The moment assessee has explained the transaction, then it was for the ld. Commissioner to pinpoint, as to how this explanation is to be rejected and where error has been committed by the ld. Assessing Officer. But no such step has been taken by the ld. Commissioner. It is the ld. CIT who has to come to the conclusion that assessment order is erroneous before setting aside the order. In the present case, he has to examine and recorded a finding as to how this contractual receipt goad escapement of income for which assessment order is to be termed as erroneous. We find no such efforts have been made. Therefore the impugned order is not sustainable and it is quashed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 12.10.2023.
Read the full order from herePrabhakar-Jha-Vs-PCIT-ITAT-Kolkata-2