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Facts
The assessee's return of income for AY 2015-16, processed under Section 143(1) and subsequently assessed under Section 143(3), was reviewed by the PCIT under Section 263 based on a proposal from the Assessing Officer. The PCIT found the assessment erroneous and prejudicial to revenue, directing a de novo assessment. The assessee appealed the PCIT's revisionary order, with a significant delay that was condoned by the Tribunal.
Held
The Tribunal held that the PCIT's revisionary jurisdiction under Section 263 was invalid as it was invoked solely on the AO's proposal without the PCIT recording independent satisfaction regarding the erroneous and prejudicial nature of the assessment. Citing judicial precedents, the Tribunal emphasized that the PCIT must provide objective findings to justify invoking Section 263, which was absent in this case. Consequently, the PCIT's order was quashed.
Key Issues
Whether the PCIT validly exercised revisionary jurisdiction under Section 263 when the order was based solely on the AO's proposal without recording independent satisfaction that the assessment order was erroneous and prejudicial to the revenue.
Sections Cited
143(1), 143(3), 263
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Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
This is an appeal preferred by the assessee against the revisionary order of the Pr. Commissioner of Income Tax, Kolkata (hereinafter referred to as the “Ld. PCIT”] dated 11.05.2020 for the AY 2015-16.
At the outset, we observed that the appeal of the assessee is delayed by 1595 days in filing the appeal for which the assessee filed the condemnation petition along with the affidavit of the Charter Accountant of the assessee Shri Gaurav Aggarwal.
After considering the reasons cited before us, we are inclined to condone the delay.
The only issue raised in the grounds of appeal is against the invalid exercise of jurisdiction by the ld. PCIT on the proposal moved by the ld. AO.
The facts in brief are that the assessee filed the return of income on 30-09-2015, declaring dividend income at ₹nil, which was processed under section 143(1) of the Act. Thereafter, the case of the assessee was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS) and passed order under section 143(3) of the Act, accepting the returned income. Thereafter, the ld. AO detected an error in the assessment order and accordingly, moved a proposal to the Office of the ld. PCIT for review of the assessment order under section 263 of the Act. The ld. PCIT on perusal of the proposal from
The ld. Counsel for the assessee vehemently submitted before us that the revisionary jurisdiction has been invoked by the Learned PCIT merely on the proposal moved by the Learned AO and the ld. PCIT without having recording any satisfaction passed order under Section 263 of the Act. The ld. PCIT merely relied on the information moved in the proposal and simply revised the order thereafter, without giving his own finding on the issue as to how the assessment framed is erroneous and prejudicial to the interest of the revenue. The counsel submitted that the order passed by the PCIT on the proposal of the AO is invalid and may be quashed. The assessee, in defense of his argument, relied on the following decisions: -
a. Judgement of the Kolkata ITAT in case of Sinhotia Metals & Minerals Pvt Ltd in pronounced on 16.01.2019. b. Judgement of the Calcutta High Court in case of Sinhotia Metals & Minerals Pvt Ltd in IA No. GA/1/2019 pronounced on 07.01.2022. d. Judgement of the Calcutta High Court in case of Karabi Dealers Pvt Ltd in IA No. GA/1/2023 pronounced on 12.04.2023.
The learned year, therefore, prayed that the divisionary order passed by the learned PCIT may kindly be quashed.
The ld. DR, on the other hand, relied on the order of the learned PCIT.
After hearing the rival contentions and perusing the materials available on record, we find that apparently the jurisdiction under section 263 of the Act was invoked upon a proposal was received from the Learned AO that in assessment frame under section 143 (3) of the Act, there are certain mistakes and the learned PCIT acting on the said proposal initiated the proceedings under Section 263 of the Act. We note that even in the order framed under Section 263 of the Act, the ld. PCIT has not recorded his own satisfaction as to how the assessment order is erroneous and prejudicial to the interests of the revenue. The case of assessee finds support from the decision of Delhi High Court in the case of D. G. Housing vs. ITO [2012] 343 ITR 329(Del) wherein the Hon’ble High Court has held that it is incumbent upon the PCIT to record an objective finding as to how the issues raised in the revisionary proceedings has rendered the assessment as erroneous.
Besides, the case is squarely covered by the decision of the Hon'ble Jurisdictional High Court in the case of Sinhotia Metals &
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 26.08.2025.