The appeal before the Income Tax Appellate Tribunal, Delhi Bench, arose from the order passed by the Principal Commissioner of Income Tax (Central), Kanpur under Section 263 of the Income Tax Act, 1961, seeking to revise an assessment framed under Section 143(3) for Assessment Year 2021-22.

During scrutiny assessment, the Assessing Officer examined substantial trading liabilities and outstanding creditors reflected in the assessee’s books. Detailed enquiries were undertaken, including issuance of notices under Section 133(6) to sixteen creditors. Responses were received from thirteen parties. After evaluating the material on record and finding deficiencies in the assessee’s explanation regarding creditworthiness and genuineness, the Assessing Officer made an addition of ₹12.48 crore under Section 68 read with Section 115BBE.

Subsequently, the PCIT invoked revisionary jurisdiction under Section 263 on the premise that the Assessing Officer failed to make adequate enquiries and that the addition ought to have been made under Section 41(1) instead of Section 68. The entire assessment order was set aside with directions for fresh enquiry.

The Tribunal held that invocation of Section 263 was legally untenable. It was categorically observed that this was not a case of lack of enquiry, as the Assessing Officer had conducted detailed verification, applied his mind, and taken a conscious view supported by statutory provisions. The mere difference of opinion regarding the appropriate charging section does not render an assessment order erroneous.

Further, the Tribunal clarified that Section 41(1) applies only where there is evidence of remission or cessation of liability resulting in a benefit to the assessee, which was absent in the present case. In contrast, Section 68 squarely covered unexplained credits found in the books, and the addition under Section 115BBE resulted in a higher tax incidence, negating any allegation of prejudice to the revenue.

Additionally, the Tribunal found a fundamental jurisdictional defect in the PCIT’s order, as the revision notice pertained only to a specific addition, whereas the final order set aside the entire assessment, which is impermissible in law.

Accordingly, the ITAT quashed the revision order passed under Section 263 and restored the assessment framed under Section 143(3), allowing the assessee’s appeal in full.

 Source Link- https://itat.gov.in/public/files/upload/1767179400-KnBV6B-1-TO.pdf

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