ITAT quashed order passed by PCIT u/s 263 without mentioning specific Section under which AO should have made the addition
In a recent judgment, ITAT Delhi has held that order passed by the PCIT under Section 263 without mentioning the specific charging Section under which the AO should have made the addition, was unjustifiable to hold the order passed by the AO as erroneous in so far as it is prejudicial to the interest of Revenue.
ABCAUS Case Law Citation:
4647 (2025) (07) abcaus.in ITAT
In the instant case, the assessee had challenged the revisionary order passed by the PCIT under section 263 of the Income Tax Act, 1961 (the Act) arising out of the Assessment Order passed by the Assessing Officer (AO) under Section 143(3) of the Act.
During the course of survey action initiated under Section 133A of the Act conducted on the business premises of the assessee the assessee admitted additional income. Subsequently, the assessee filed return of income for the relevant Assessment Year reflecting the surrendered income in the income tax return and paid due tax on the said income. The returned income thus declared by the assessee was accepted by the AO by and under the order passed under Section 143(3) of the Act.
The PCIT thereafter initiated a proceeding under Section 263 of the Act and according to him the amended provision of Section 115BBE was applicable to the case. Further that the surrendered income clearly being unexplained in nature should be held unexplained income/money/investment etc. under Section 68/69/69A/69D etc read with amended provision of Section 115BBE with taxation laws 2nd Amendment of 2016.
According to the PCIT the AO had completed the assessment without carrying out necessary and proper inquiry in respect of the taxability of the surrendered income and without examining the applicability of Section 68/69/69A/69D of the Act which he ought to have carried out in respect of the said surrendered income during survey proceeding.
Accordingly, he held that the Assessment Order under Section 143(3) of the Act was erroneous insofar it is prejudicial to the interest of revenue in terms of Section 263 of the Act read with explanation given therein and thus, the AO had been directed to pass order afresh in accordance with the observations made by the PCIT.
Before the Tribunal, the assessee submitted that once the proceeding initiated under Section 263 of the Act by the PCIT culminated in quashing the order passed by the AO holding it erroneous and prejudicial to the interest of the revenue without confirming as to which section out of Sections 68/69/69A/69B/69C/69D of the Act was applicable, the order itself was bad in law and thus, not sustainable.
In this regard, the assessee relied upon a judgment passed by the Coordinate Bench in a case where the AO has not made any addition either under Section 68 or Section 69 of the Act as the surrendered income was already included by the assessee in his return of income.
The assessee also submitted that nothing has been stated either in the pre-amended or in the post amended provision of Section 115BBE of the Act that where the assessee surrendered the undisclosed income during search action for relevant assessment year the tax rate has to be charged as per provision of Section 115BBE of the Act. The applicability of that amended provision of Section 115BBE of the Act which prompted the PCIT to assume assessment under Section 263 of the Act as highly debatable issue and therefore, the assumption of jurisdiction under Section 263 of the Act alleging the order of AO erroneous and prejudicial to the interest of Revenue by way of picking up the debatable issue was wrong.
It was submitted that the Co-ordinate Bench had held that PCIT was not correct and justified in invoking revisionary provision of Section 263 of the Act on debatable issue and when no specific charging section has been mentioned by the PCIT which was to be applied while making addition by the AO.
The Tribunal observed that the order passed by the PCIT u/s 263 which did not mention the specific charging Section under which the AO should have treated the surrendered amount and mentioning number of sections as optional, was not justifiable enough to hold the order passed by the AO under Section 143(3) of the Act was erroneous in so far as it is prejudicial to the interest of Revenue in terms of Section 263 of the Act.
Accordingly, the Tribunal held that the impugned order was not sustainable in the eyes of law and thus, quashed.
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