SURAJ DADA,PUNJAB vs. DCIT CIRCLE-4, LUDHIANA, PUNJAB

ITA 827/CHANDI/2026Status: DisposedITAT Chandigarh07 October 2026AY 2022-2328 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the Pr. CIT erred in invoking revisionary jurisdiction under Section 263 of the Income Tax Act, 1961. The Tribunal found that the assessment proceedings were conducted under complete scrutiny, and the AO had specifically called for information concerning the issues later flagged by the Pr. CIT. The assessee furnished the requisite explanations and documentary evidence, which the AO considered before accepting the claim. The Tribunal emphasized that the assessment record demonstrated that the issues were specifically examined and replied to by the assessee to the satisfaction of the AO, indicating an enquiry followed by acceptance, not a complete lack of enquiry. The Tribunal cited the Supreme Court's decision in Malabar Industrial Co. Ltd. v. CIT, stating that where the AO has adopted one of the permissible views, the order cannot be treated as erroneous merely because the Commissioner prefers another view. The Tribunal concluded that the Pr. CIT had essentially substituted his own view for that of the AO, which is not permissible under Section 263. Furthermore, the Tribunal noted that on one of the issues, there was ultimately no loss to the revenue. Therefore, the jurisdiction assumed by the Pr. CIT was not sustainable, and the impugned order was quashed, restoring the original assessment order.

What were the facts?

The assessee, Shri Suraj Dada, is challenging the revisionary order passed by the Principal Commissioner of Income Tax (Pr. CIT), Ludhiana-1, for Assessment Year 2022-23. The Pr. CIT invoked Section 263 of the Income Tax Act, 1961, to revise an assessment order dated March 27, 2024, passed by the Assessing Officer (AO) under Section 143(3) read with Section 144B. The AO had accepted the assessee's returned income. The assessee, a proprietor of M/s Dada Motors, had converted his proprietorship into an LLP, M/s Dada Motor Enterprises LLP, effective April 1, 2021. The AO had selected the return for scrutiny on various issues, including high creditors/liabilities, business loss, remuneration, capital gains, and depreciation, and after receiving explanations and documents from the assessee, accepted the returned income.

What were the issues?

1. Whether the Pr. CIT erred in invoking revisionary jurisdiction under Section 263 of the Income Tax Act, 1961, when the AO had made enquiries and accepted one of the possible views, thereby rendering the assessment order neither erroneous nor prejudicial to the interest of the revenue? Assessee's contentions: The assessee argued that the AO had conducted a regular assessment with due application of mind. Various notices under Section 142(1) were issued, and the assessee furnished sufficient explanations and documents. The AO examined these submissions on a test check basis and accepted the returned income. The assessee contended that the Pr. CIT's order was unjustified as the AO had taken one of the possible views and that the assessment was not framed mechanically. Reliance was placed on various judicial decisions. Revenue's contentions: The revenue, through the Ld. CIT-DR, argued in support of the impugned revisionary order, referring to various case laws. The Pr. CIT flagged two main issues: (a) allowability of administrative and interest expenses claimed by the assessee which resulted in a business loss, despite transferring the entire stock to the LLP, and (b) the acceptance of the cost of improvement for capital gains without proper verification of whether the land was a capital or business asset and whether depreciation was claimed on it. The revenue contended that the AO failed to conduct necessary enquiries and verifications, making the assessment erroneous and prejudicial to the revenue.

Which sections of the Income-tax Act were involved?

Section 263,Section 143(3),Section 144B,Section 142(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, CHANDIGARH

Before: HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM & HON’BLE SHRI RAJESH DAMODARLAL SHARMA, JM

MANOJ KUMAR AGGARWAL (Accountant Member)

1.

By way of this appeal, the assessee assails invocation of revisionary juri iction u/s 263 by Ld. Pr. Commissioner of Income Tax, Ludhiana-1 (Pr. CIT) for the Assessment Year (AY) 2022-23 vide impugned order dated 24-03-2026 proposing revision of an assessment as framed by Ld. Assessing Officer [AO] u/s 143(3) r.w.s.

144B of the Act on 27-03-2024 accepting returned inco

The order continues below.

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