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Facts
The appeals were filed challenging the order of the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act. The PCIT had held the assessment orders for AY 2021-22 to be erroneous and prejudicial to the interest of revenue, directing fresh verification of the fair market value of shares.
Held
The Tribunal held that the PCIT's invocation of Section 263 jurisdiction was unsustainable as the Assessing Officer had conducted necessary verifications and the assessment orders were not erroneous or prejudicial to the revenue. Relying on Apex Court and High Court decisions, the Tribunal found that the twin conditions for exercising Section 263 powers were not met.
Key Issues
Whether the PCIT's order under Section 263 of the Income Tax Act, directing re-verification of fair market value of shares, was justified when the Assessing Officer had already completed the assessment after due verification.
Sections Cited
263, 143(2), 142(1)
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”A-Bench” JAIPUR
Before: SHRI GAGAN GOYAL, AM& SHRI NARINDER KUMAR, JM
vkns'k@ORDER & 864/JPR/2025 Kishore Kumar Gurnani, Mumbai PER: NARINDER KUMAR, JUDICIAL MEMBER . The above captioned two appeals are being disposed of by this common order, as common issues are involved and common arguments have been advanced on behalf of both sides.
By way of this appeal, assessee has challenged order dated 26.03.2025, passed by Learned PCIT(Central), Jaipur, u/s 263 of the Act, relating to the assessment year 2021-22, whereby assessment order dated 30.12.2022, relating to the said assessment year has been held to be erroneous as the same was found to be prejudicial to the interests of the Revenue, and the Assessing Officer has been directed to make necessary verification particularly as regards the fair market value of shares of M/s Vankon Moduler Pvt. Ltd., which, as observed by Learned PCIT, should have been calculated at the rate of Rs. 45.54 per share instead of Rs. 32 per share, as claimed by the assessee, but, the Assessing Officer did not verify said details and passed the assessment order in a routine and causal manner without applying the relevant provisions of the Act.
By way of this appeal, assessee has challenged order dated 26.03.2025, passed by Learned PCIT(Central), Jaipur, u/s 263 of the Act, relating to the assessment year 2021-22, whereby assessment order dated 30.12.2022, relating to the said assessment year has been held to be erroneous as the same was found to be prejudicial to the interests of the Revenue, and the Assessing Officer has been directed to make necessary verification particularly, as regards the fair market value of shares of M/s Vankon Moduler Pvt. Ltd., which as observed by Learned PCIT, should have been calculated at the rate of Rs. 45.54 per share -instead of Rs. 32 per share, the rate claimed by the assessee, but, the Assessing Officer did not verify said details, and passed the assessment order in a routine and causal manner, without applying the relevant provisions of the Act.
Arguments heard. File perused.
Contentions
Ld. AR for the appellant has submitted that all the requisite details, information and documents as regards capital gain on sale of equity shares of M/s Vankon Moduler Pvt. Ltd. were made available to the Assessing & 864/JPR/2025 Kishore Kumar Gurnani, Mumbai Officer, and that since the Assessing Officer accepted the returned total income of the above named each assessee, after examination of all the details available on record and verification of facts, Learned PCIT fell in error in observing that the impugned assessment orders were passed by the Assessing Officer in a routine and causal manner and without verifying the details, particularly in respect of calculation of fair market value of shares of M/s Vankon Moduler Pvt. Ltd.
In support of his contention, Ld. AR has relied on following decisions:-
PCIT vs. Yogesh Kumar Shanilal Mehta (2023) 155 taxmann.com 612 ( Gujarat H.C.) CIT vs. Ganpat Ram Bishnoi (2006) 152 taxman 242 ( Rajasthan H.C.) Rashleela Enterprises Pvt. Ltd. vs. PCIT (Central), Jaipur dated 05.09.2024. Discussion
At this stage, it may be mentioned here that the case of the above said two assessees was selected for ‘compulsory scrutiny’, after approval dated 24.06.2022. Thereupon, notices u/s 143(2) of the Act, were issued to the assessees. Said notices were followed by notices u/s 142(1) of the Act. Each assessee submitted respective response, with requisite details and documents from time to time.
In para 5 of the assessment orders, the Assessing Officer clearly observed that he was accepting the returned total income of the assessees, after examination of the details available on record and verification of facts with reference to details filed by each assessee.
Thereupon, the Assessing Officer assessed total income of each assessee as specified therein.
From the above observations made the Assessing Officer, it can safely be said that the Assessing Officer had the opportunity to examine all the details available and the record submitted by each assessee, and it was on verification of the facts with reference to the details furnished by each assessee that the Assessing Officer passed the two assessment orders, thereby accepting returned total income of each of them.
In Ganpat Ram Bishnoi case (supra) our own Hon’ble High Court, while dealing with the issue regarding exercise of powers u/s 263 of the Act observed in the manner as:-
& 864/JPR/2025 Kishore Kumar Gurnani, Mumbai “Undoubtedly, the jurisdiction under section 263 is wide and is meant to ensure that due revenue ought to reach the public treasury and if it does not reach on account of some mistake of law or fact committed by the Assessing Officer, the Commissioner can cancel that order and require the concerned Assessing Officer to pass a fresh order in accordance with law after holding a detailed enquiry. But when enquiry in fact had been conducted and the Assessing Officer had reached a particular conclusion, though reference to such enquiries had not been made in the order of the assessment, but the same was apparent from the record of the proceedings, in the instant case, without anything to say how and why the enquiry conducted by the Assessing Officer was not in accordance with law, the invocation of jurisdiction by the Commissioner was unsustainable. As the exercise of jurisdiction by the Commissioner was founded on no material, it was liable to be set aside. Jurisdiction under section 263 cannot be invoked for making short enquiries or to go into the process of assessment again and again merely on the basis that more enquiry ought to have been conducted to find something.
In Malabar Industrial co. Ltd. Vs. CIT, 243 ITR 83 (SC) , Hon’ble Apex court, while dealing with the very issue specified two conditions to be fulfilled, for the purpose of recording of satisfaction by the Commissioner for exercise of powers u/s 263 of the Act, and in this regard, observed in the manner as :-
“A bare reading of section 263 of the Income Tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suomotu under it, is that the order of the Income Tax Officer is erroneous is so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent - if the order of the Income Tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue - recourse cannot be had to section 263(1) of the Act."
& 864/JPR/2025 Kishore Kumar Gurnani, Mumbai 12. It is significant to note that on behalf of the department nothing has been brought to our notice to suggest that the Assessing Officer recorded any note at any point of time that such and such document relating to the fair market value of shares of the above named company was not made available by the assessee to the Assessing Officer despite notices.
From the assessment orders, we do not find any observation that any of the assesses remained non compliant on any issue or information.
In other words, we have nothing on record to observe that the appellants withheld any information from the Assessing Officer depriving him from arriving at a just conclusion regarding any issue.
In view of the above discussion, when the Assessing Officer had collected all the relevant details, examined and verified the same, even as regards the fair market value of the shares pertaining to M/s Vankon Moduler Pvt. Ltd., it cannot be said that the Assessing Officer passed assessment orders in a routine and causal manner or without verifying details as regards the issue covered by the scrutiny.
As a result, when the impugned orders by Learned PCIT cannot be sustained in view of the above cited decision by Hon’ble Apex Court, and the provisions of law, both these appeals are allowed and the impugned orders by Learned PCIT are hereby set aside. File be consigned to the record room after the needful is done by the office. Copy of common order be placed in the file of connected appeal. Order pronounced in the open court on 16/10/2025.