SR BUILDERS CHENNAI LLP,CHENNAI vs. PCIT, CENTRAL, CHENNAI-1, CHENNAI

ITA 3253/CHNY/2026Status: DisposedITAT Chennai06 October 2026AY 2022-2317 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the assessment order was erroneous and prejudicial to the interests of the revenue due to the Assessing Officer's failure to examine specific issues. The Tribunal cited various High Court and Supreme Court decisions, including K.A. Ramaswamy Chettiar v. CIT (Madras High Court) and PCIT v. Zuari Maroc Phosphates Ltd. (Bombay High Court), emphasizing that the AO has a responsibility to investigate facts when circumstances warrant it. The failure to make an inquiry renders the order erroneous. The Tribunal found that the PCIT had exercised revisional jurisdiction properly as the proceedings were initiated on the PCIT's own motion after examining the assessment records, and there was no material to show that the same issues were pending before the CIT(A). Therefore, the Tribunal found no illegality in the assumption of jurisdiction under Section 263 by the PCIT and no merit in the grounds of appeal raised by the assessee. The appeal filed by the assessee was dismissed.

What were the facts?

The assessee, SR Builders Chennai LLP, filed its return of income for Assessment Year 2022-23 on November 5, 2022, showing an income of Rs. 6,69,10,120. This was revised on December 31, 2022, to Rs. 11,59,10,120. The Assessing Officer (AO) completed the assessment on March 29, 2024, accepting the returned income. The revision proceedings under Section 263 of the Income Tax Act, 1961, were initiated by the Principal Commissioner of Income Tax (PCIT) based on a review of the assessment records. The PCIT opined that the assessment order was erroneous and prejudicial to the revenue due to the AO's alleged failure to properly examine reconciliation of unaccounted income, variations in cost of goods sold, and omission of other income. The PCIT set aside the assessment order and directed the AO to conduct necessary inquiries.

What were the issues?

1. Whether the order passed by the Principal Commissioner of Income Tax (Central), Chennai-1 under Section 263 of the Income Tax Act, 1961, is without jurisdiction and bad in law, particularly as it arises out of an audit objection and involves issues pending before the Commissioner of Income Tax (Appeals)? (Assessee's contention: The PCIT's order is without jurisdiction, bad in law, and contrary to principles of equity and natural justice. It was passed without complying with statutory requirements and arose from an audit objection. The issues were pending before the CIT(A), and there was no error or prejudice to warrant Section 263 invocation. The Explanation to Section 263(2)(a) is not invocable, and the AO had applied his mind.) 2. Whether the Principal Commissioner of Income Tax (Central), Chennai-1 erred in invoking Section 263 of the Income Tax Act, 1961, when the Assessing Officer had applied his mind to the issues concerning the difference between the original and revised returns, including additional income offered and reclassification of cost of goods sold? (Assessee's contention: The AO had verified the additional income offered in the revised return and the reclassification of cost of goods sold was revenue neutral. The sum of Rs. 2,00,00,000 was declared as 'Any other income' in the original return and was included in the revised return.) 3. Whether the assessment order passed by the Assessing Officer was erroneous and prejudicial to the interests of the revenue, warranting revision under Section 263 of the Income Tax Act, 1961? (Revenue's contention: The AO failed to properly examine and verify the reconciliation of admitted unaccounted income, the variation in cost of goods sold, and the omission of other income, resulting in under-assessment of income.)

Which sections of the Income-tax Act were involved?

Section 263,Section 139,Section 143(3),Section 132

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, CHENNAI

Pronounced: 06.10.2026

PER INTURI RAMA RAO, ACCOUNTANT MEMBER :

This appeal filed by the Assessee directed against the order of the Learned Principal Commissioner of Income Tax(Central), Chennai-1 dated 24.03.2026 passed u/s.263 of the Income Tax Act, 1961 for the Assessment Year 2022-23. 2. The Assessee raised the following grounds of appeal :

“1. For that the order of the Principal Commissioner of Income Tax (Central), Chennai -1 is without juri iction and is contrary to law, facts and circumstan

The order continues below.

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