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Facts
The assessee filed its return for AY 2017-18, and an assessment under Section 153A/143(3) was completed. The Pr. CIT initiated proceedings under Section 263, observing that the Assessing Officer (AO) had failed to make an addition of Rs. 3,12,07,100/- related to bogus transactions for stock-in-trade, which had been treated similarly in prior assessment years. The Pr. CIT concluded that the AO's assessment was erroneous and prejudicial to the interest of revenue due to inadequate inquiries.
Held
The Tribunal noted the assessee's submission that they did not receive a proper notice of hearing from the Pr. CIT, thus lacking an opportunity to present their case. Considering the principles of natural justice and fair play, the Tribunal decided to set aside the Pr. CIT's order and remitted the matter back for a fresh order under Section 263, ensuring the assessee is provided a reasonable opportunity of being heard.
Key Issues
Whether the Pr. CIT's order under Section 263 was valid given the alleged lack of opportunity of hearing provided to the assessee, and whether the original assessment order by the AO was erroneous and prejudicial to the revenue for failing to make additions for bogus transactions.
Sections Cited
263, 153A, 143(3), 132, 133A, 68, 115BBE
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Income Tax Appellate Tribunal, KOLKATA ‘C’ BENCH, KOLKATA
Before: SH. GEORGE MATHAN & SH. RAKESH MISHRA
order
: 24-July-2025 ORDER
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of the Pr. Commissioner of Income Tax (Central)-1, Kolkata [hereinafter referred to Ld. 'Pr. CIT'] passed u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2017-18 dated 11.03.2024, which has “1. That the Learned Principal Commissioner of Income Tax erred in passing an order under Section 263 of the Income Tax Act, 1961, without serving notice of hearing to the assessee. Consequently, the order violated the principles of natural justice and ought to be set aside.
That the Learned Principal Commissioner of Income Tax erred in directing that the assessment order dated 22/09/2021, passed under Sections 153A/143(3) of the Income Tax Act, 1961, was erroneous and prejudicial to the interest of revenue. The said assessment order could not have been revised under Section 263 of the Income Tax Act, 1961.
That the Learned Principal Commissioner of Income Tax erred in holding the assessment order dated 22/09/2021, passed under Sections 153A/143(3) of the Income Tax Act, 1961, as erroneous and prejudicial to the interest of revenue, despite the fact that it pertained to an unabated assessment. The additions highlighted in the order under Section 263 of the Income Tax Act, 1961, were made without reliance on any incriminating material, and thus the assessment order should not have been disturbed.
4. That the Learned Principal Commissioner of Income Tax erred in holding the assessment order as erroneous and prejudicial to the interest of revenue. The conditions necessary for invoking the provisions of Section 263 of the Income Tax Act were not satisfied in this case, and therefore, the order under Section 263 of the Act should be quashed.
5. That the order passed by the Learned Principal Commissioner of Income Tax under Section 263 of the Income Tax Act is bad in law, lacks merit, is invalid, and thus liable to be quashed.
6. That the Learned Principal Commissioner of Income Tax neither conducted any independent enquiry nor provided a decision on the merits of the case. Therefore, the assessment order could not be set aside by labeling it as erroneous and prejudicial to the interest of revenue.
7. That the appellant reserves the right to file additional grounds and/or modify or amend the existing grounds at any stage before or during the hearing of the appeal.”
The Ld. Pr. CIT also highlighted from the details of sale of stock furnished by the assessee in the course of assessment proceedings that many buyers viz. Mainak Vanijya Pvt. Ltd., Amanat Mercantile Pvt. Ltd., Hooghly Vinimay Pvt. Ltd., Blow Vinimay Pvt. Ltd., Sketch Agency Pvt Ltd., Improve Vincome Pvt. Ltd. and Star Merchants Pvt. Ltd were already proved to be not genuine in as much as having no creditworthiness and the transactions were proved to be bogus as held in the assessment orders passed u/s 153A of the Act in the AYs 2014- 15, 2015-16 & 2016-17 and the sums were charged to income tax by invoking the statutory provisions of section 68 r.w.s. 115BBE of the Act. Hence, the total amount of Rs.3,12,07,100/- received during the F.Y. 2016-17 relevant to A.Y. 2017-18 in the guise of sale of stock in trade was required to be charged to income tax by invoking the statutory provisions of sec. 68 r.w.s. 115BBE of the Income Tax Act, 1961 as it was done in the previous A.Ys. However, the Ld. AO failed to make adequate enquiries or verification and completed the assessment proceedings without making the addition of Rs.3,12,07,100/-, which has resulted in erroneous assessment of income and this was held to be prejudicial to the interest of Revenue. The Ld. AO, however, at the
Accordingly, the assessment order completed under section 153A of the Act vide order dated 22.09.2021 was considered to be erroneous in so far as it was prejudicial to the interest of revenue in terms of clause (a) of Explanation-2 to section 263 of the Act and proceedings u/s 263 of the Act were initiated by issuing show cause notice date 20.02.2024 and the assessee was provided an opportunity to represent the case either personally or through an Authorized Representative with all supporting materials along with written submission if any on 27.02.2024. No one appeared on that date and no submission was made by the company. Therefore, the order dated 22.09.2021 made u/s 153A of the Act was set aside to be passed afresh after making proper enquiries. Aggrieved with the order of the Ld. Pr. CIT, the assessee has filed the appeal before the Tribunal.
Rival submissions were heard and the record and the submissions made have been examined. The Ld. AR stated that the Ld. Pr. CIT examined the assessment order and noted that the assessee had
We have considered the submissions made, gone through the facts of the case and perused the record and the order of the Ld. Pr. CIT. Since there was no proper compliance before the Ld. Pr. CIT, in the interest of justice and fair play it was considered that the request of the Ld. AR to set aside the order of Ld. Pr. CIT may be allowed so that a proper opportunity of being heard may be provided. Hence, after examining the facts of the case, we deem it appropriate to set aside the order of the Ld. Pr. CIT and remit the matter for passing a fresh order u/s 263 of the Act. Needless to say, the assessee shall be given a reasonable opportunity of being heard to make any further submission it wants to make in support of its grounds of appeal and shall not seek unnecessary adjournments. Accordingly, all the grounds taken by the assessee in his appeal are allowed for statistical purposes.