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Facts
The assessee's case for AY 2015-2016 involved an assessment under Section 153A with an addition of Rs.2.56 crore, where the PCIT later set aside the AO's order under Section 263. For AY 2017-2018, the AO added VAT on closing stock but failed to make corresponding adjustments to purchases, sales, and opening stock.
Held
For AY 2015-2016, the Tribunal restored the matter to the PCIT, directing a fresh examination due to a natural justice violation. For AY 2017-2018, it was held that the AO must make corresponding adjustments to purchases, sales, and opening stock as per Section 145A when adding VAT on closing stock.
Key Issues
Validity of PCIT's order under Section 263 setting aside a Section 153A assessment and alleged violation of natural justice; and whether corresponding adjustments are required under Section 145A for VAT on closing stock.
Sections Cited
153A, 263, 145, 145A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Inturi Rama Rao & Shri Prakash Chand Yadav
: Asst.Year 2017-2018 ABC Buildwares India (P) Ltd. The Principal Pariyaram v. Commissioner of Income- Kannur – 670 502. tax, Central, Kochi. PAN : AALCA5971A. (Appellant) (Respondent) Appellant by : Sri.Arun Raj S, Advocate Respondent by : Sri.Sundarasan S, CIT-DR Date of Pronouncement : 26.05.2025 Date of Hearing : 22.05.2025. O R D E R Per Prakash Chand Yadav, JM : Both these appeals relating to same assessee, however, pertain to different assessment years are decided by way of this consolidated order for the sake of convenience.
Asst.Year 2015-2016 2. The brief facts of the case as coming out from the orders of the authorities below are that the assessee is a company served by the department on 27th February, 2020. Thereafter, the case of the assessee was assed u/s.153A of the Income-tax Act, 1961 and addition of Rs.2.56 crore has been made to the returned income of the assessee. Against which the assessee filed an appeal before the CIT(A). Thereafter the PCIT called for & 389/Coch/2024. ABC Buildwares India (Pvt.) Ltd. assessment records and after examining the records, took a view that the order of the A.O. is erroneous insofar as prejudicial to the interest of revenue. Accordingly, the PCIT set aside the order of the A.O. and directed the AO to assess the income of the assessee after considering the observations made by the PCIT in its order.
Aggrieved with the order of the PCIT, the assessee has come up in appeal before us. The learned Counsel for the assessee inter alia argued that it is a case where sec.263 has been invoked after the completion of assessment u/s.153A of the Act. It is the contention of the learned Counsel for the assessee that in cases where assessments are completed u/s.153A of the Act, an approval from the JCIT has to be obtained by the concerned AO, and unless and until it is shown that the said approval was not mechanical, the PCIT cannot have any jurisdiction to exercise his power of review u/s.263 of the Act. When the Bench asked the learned Counsel for the assessee as to whether the assessee has appeared before the PCIT in review proceedings, the Counsel for the assessee pointed out that the assessee could not appear before the PCIT.
The learned CIT-DR relied upon the orders of the authorities below.
We have heard the rival submissions and perused the material available on recorded. In ground No.3 before us, the assessee has contested the order of the PCIT on the ground the & 389/Coch/2024. ABC Buildwares India (Pvt.) Ltd. PCIT has violated the principle of natural justice. In such cases, the only recourse is to restore the matter to the file of the PCIT for examining the issue as held by the Hon’ble jurisdictional High Court in the case of CIT(E) v. Love in Action Society reported in (2022) 442 ITR 358 (Ker.). Respectfully following the verdict of the Hon’ble jurisdictional High Court, cited supra, we restore this matter to the file of the PCIT and give liberty to the assessee for raising all its legal contentions before the PCIT.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
: Asst.Year 2017-2018
In this year the solitary issue is regarding the action of AO against the addition of VAT on closing stock without increasing the value of purchases, sales and opening stock of goods as provided in clause 11 of section 145.
Ld counsel for the assessee has relied on the provisions of section 145A and the provisions of AS-2 as issued by ICAI.
Ld DR relied on the orders of the AO and CIT(A)
After considering the rival submissions we are of the view that is the settled position of law that & 389/Coch/2024. ABC Buildwares India (Pvt.) Ltd. corresponding adjustments to be made to the purchase, sales and opening stock, in terms of the provisions of section 145A. Therefore the AO is directed to provide the same.
Appeal filed by the assessee is allowed as indicated above.
Order pronounced on this 26th day of May, 2025.