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Facts
The assessee, a partnership firm, filed a return disclosing a loss. The assessment was completed ex-parte under Section 144 as the assessee remained absent. The PCIT invoked revisionary powers under Section 263, finding the assessment order erroneous and prejudicial to revenue.
Held
The Tribunal held that the PCIT correctly invoked Section 263 as the ex-parte assessment order was erroneous and prejudicial to the interest of revenue. The direction to frame a fresh assessment after providing an opportunity of being heard was considered appropriate.
Key Issues
Whether the PCIT was justified in invoking Section 263 to set aside an ex-parte assessment order that was allegedly erroneous and prejudicial to revenue, especially when the assessee was not given adequate opportunity.
Sections Cited
144, 263, 143(2), 142(1), 43B, 68, 115BBE, 45(4)
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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI MANISH BORAD & SHRI VINAY BHAMORE
Assessment Year : 2018-19 Proxima Creations, Vs. PCIT, Pune-2. Prop. -1, Business Centre, Level-1, Senapati Bapat Road, Pune- 411016. PAN : AAKFP9790Q Appellant Respondent Assessee by : None Revenue by : Shri Ajay Kumar Keshari Date of hearing : 08.04.2025 Date of pronouncement : 03.06.2025 आदेश / ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the assessee is directed against the order dated 13.03.2024 passed by Ld. PCIT, Pune-2 [Ld. PCIT’] for the assessment year 2018-19.
The appellant has raised the following grounds of appeal :-
1. Order passed by the Ld. Principal CIT u/s 263 is not tenable either in law or in the facts of the case as the order passed by the AO u/s 144 did not contain any error which was prejudicial to the interest of revenue.
2. Order passed by the Additional Principal CIT u/s 263 is bad in law being violative of principle of natural justice.
3. The Ld. Principal CIT has erred in holding that two different sets of Profit & Loss accounts were prepared by the assessee.
4. The Ld. Principal CIT has failed to give proper and sufficient opportunity to the assesse to explain the alleged difference in the Profit & Loss Account before drawing an adverse inference that the accounts were manipulated & fudged by the assesse.
The Ld. Principal CIT completely ignored that the alleged difference between the figures submitted before him and reflected in the returns of income was due to valid reasons and the same could have been explained by the assesse had opportunity been given by him.
6. The Ld. Principal CIT is not justified in directing the AO to consider the issue of applicability of section 45(4) without giving notice of the same to assessee and without giving the assesse an opportunity to offer his explanation in the matter.
7. All the above grounds are without prejudice to each other.
The appellant craves leave to alter modify or delete any of the above Grounds of Appeal
or to add new Grounds of appeal.”
3. Facts of the case, in brief, are that the assessee is a partnership firm and furnished its return of income on 31.10.2018 disclosing loss of Rs.6,00,61,758/-. The return was selected for complete scrutiny through CASS and statutory notices u/s 143(2) and 142(1) respectively were issued to the assessee along with questionnaire. Since the assessee remained absent and did not complied to any of the notices issued by the Assessing Officer, the Assessing Officer completed the assessment ex-parte u/s 144 of the IT Act by determining total income at Rs.7,96,00,000/- and also allowed business loss of Rs.2,19,10,086/- to be carry forward.
4. Upon perusal of the assessment record, it was noticed by Ld. PCIT that three errors had crept in the aforesaid assessment order and therefore show cause notice u/s 263 of the IT Act was issued to the assessee asking him to reply and furnish supporting documents if any. After considering the reply furnished by the assessee. Ld. PCIT was of the opinion that the assessment order passed u/s 144 of the IT act by the FAO is erroneous in so far as it is pre-judicial to the interest of Revenue and the same is set-aside for framing fresh assessment by observing as under :- “10. In consideration of the discussion above, I am not in agreement with the assessee's contention before me that the assessment order is neither erroneous nor prejudicial to the interest of revenue. Here, we have a case where no response was made by the assesse during the entire length of the assessment proceedings, two sets of profit & loss account and balance sheet for A.Y. 2018-19 have been brought on record by the assessee, serious adverse remarks in respect of its accounts have been made by its Tax Auditor and also where the assessee's method of accounting is neither reliable nor consistent and where incredible figures of profit/loss earned have been reported by it for the pre-reconstitution and post-reconstitution periods. It is also seen that the FAO's decision to make additions to the assessee's total income was correct but the manner of estimating its income in lieu of its business receipts was not as per law. During the revision proceedings, concrete evidence came on record that not only confirmed the deficiencies in the assessment order but also pointed to manipulation on the part of the assessee, which are strong indicators of fudging of accounts and under assessment by the FAO. Therefore, I am convinced that the provisions of section 263 are squarely applicable to the facts of this case. Directions 11. In view of the above facts, I am of the considered opinion that the assessment order passed under section 144 on 29.04.2021 by the FAO is erroneous in so far as it is prejudicial to the interests of revenue and the same is set aside for framing fresh assessment in respect of the issues discussed above in light of the observations made in this order. The assessment is to be completed within the stipulated time-frame after conducting the necessary enquiries and giving due opportunity of being heard to the assessee. Further, wherever applicable, the Assessing Officer is also directed to initiate penalty and prosecution proceedings as per the provisions of the Income Tax Act, 1961.”
5. It is this order against which the assessee is in appeal before this Tribunal.
When the case was called for hearing neither anybody appeared from the side of the assessee nor any application for adjournment was filed despite due service of notice of hearing. However, a detailed written submission along with enclosures was furnished with a request to consider the same for deciding the appeal filed by the assessee.
Ld. DR appearing from the side of the Revenue relied on the order passed by LD. PCIT and submitted that the FAO has passed an ex-parte order u/s 144 of the IT Act, since the assessee has not participated in the assessment proceedings which resulted in various errors in the impugned order and therefore Ld. PCIT rightly invoked the proceedings u/s 263 of the IT Act and when he was satisfied that the ex-parte order passed u/s 144 of the IT Act is erroneous in so far as it is pre-judicial to the interest of Revenue, he directed the Assessing Officer to reframe the assessment after providing reasonable opportunity of hearing to the assessee. Accordingly, Ld. DR requested to dismiss the appeal filed by the assessee and further requested to confirm the order passed by Ld. PCIT u/s 263 of the IT Act.
8. We have heard Ld. DR and perused the material available on record including the written submission furnished by the assessee in support of grounds of appeal. In this regard, we find that admittedly the assessment order was passed ex-parte i.e. u/s 144 of the IT Act and in the absence of the assessee. However, it is also observed that proper notices were issued to the assessee but he chose not to appear before the Assessing Officer which compelled Assessing Officer to pass ex-parte order. We also find that the assessee himself has not accepted the impugned assessment order passed u/s 144 of the IT Act by the Assessing Officer and challenged the same before Ld. CIT(A). We also find that the Assessing Officer has made additions on account of disallowance u/s 43B, addition u/s 68 r.w.s. section 115BBE of the IT Act on account of unproved loans and estimated addition on account of long-term capital gain. However, according to Ld. PCIT, the manner of estimating its income in lieu of its business receipts was not as per law. We also find that as per Ld. PCIT two sets of Profit & Loss Accounts and Balance Sheets have been brought on record. From the perusal of detailed written submissions, we find that all these additions are not acceptable to the assessee and therefore he furnished first appeal before Ld. CIT(A) which is still pending. We also find that according to Ld.