SUN EXPORTS,VERAVAL vs. PR. CIT, RAJKOT-1, RAJKOT, RAJKOT

ITA 322/RJT/2024Status: DisposedITAT Rajkot30 June 2025AY 2019-2034 pages
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What did the Tribunal hold?

The Tribunal held that the PCIT's assumption of revisional jurisdiction under Section 263 of the Income-tax Act, 1961, was invalid for most of the appeals. The Tribunal emphasized that for Section 263 jurisdiction to be invoked, the AO's order must be both erroneous and prejudicial to the interest of the revenue, which are sine qua non. The Tribunal noted that the AO has the dual role of investigator and adjudicator, and while a lack of inquiry makes an order erroneous, inadequate inquiry does not. If the AO's view is plausible, the PCIT cannot substitute his own view. The Tribunal found that the PCIT had failed to demonstrate that the AO's inquiries were insufficient or that his order was erroneous and prejudicial to the revenue. Consequently, the PCIT's orders were quashed as being ab initio void for all appeals except for ITA No. 331/Rjt/2024. In ITA No. 331/Rjt/2024, concerning Dhruv Print Pack Industries, the Tribunal upheld the PCIT's order regarding the disallowance of Rs. 1,41,718/- for late payment of employee's contribution to PF, citing judgments of the jurisdictional Gujarat High Court and the Supreme Court. This appeal was partly allowed.

What were the facts?

The appeals were filed by ten different assessees against orders passed by the Principal Commissioner of Income-tax (PCIT) under Section 263 of the Income-tax Act, 1961, for Assessment Years (AY) 2018-19 and 2019-20. The PCIT had invoked his revisional jurisdiction based on common issues. In the case of M/s Deepmala Marine Exports (ITA No. 324/Rjt/2024), during survey proceedings on September 12, 2018, excess finished goods stock of Rs. 81,32,250/- was found. The assessee disclosed Rs. 76,56,017/- as unaccounted income from business operations of FY 2018-19, but provided no explanation for the remaining Rs. 4,76,233/-. The PCIT also noted a fall in gross profit from 7.84% in the preceding year to 7.35% in AY 2019-20, without any apparent reason or explanation from the assessee. The PCIT believed the Assessing Officer (AO) ought to have treated the excess stock as unexplained under Section 69A and taxed it under Section 115BBE, and also failed to inquire into the fall in gross profit.

What were the issues?

1. Whether the Principal Commissioner of Income-tax (PCIT) erred in exercising revisional jurisdiction under Section 263 of the Income-tax Act, 1961, by treating the Assessing Officer's (AO) order as erroneous and prejudicial to the interest of the revenue, concerning the treatment of excess stock found during survey proceedings and the fall in gross profit. Assessee's contentions: The assessees argued that the AO had conducted necessary inquiries and verifications, and his order was not erroneous. They contended that the PCIT's assumption of jurisdiction under Section 263 was flawed, as the AO's assessment was based on a plausible view of the facts. They relied on the principle that inadequate inquiry does not make an AO's order erroneous, and the AO has the exclusive domain to decide how to finalize an assessment. The assessees also argued that Explanation 2(a) to Section 263, inserted by the Finance Act, 2015, was not applicable to the assessment years in question. Revenue's contentions: The revenue, through the PCIT, argued that the AO had failed to conduct adequate inquiries. Specifically, the PCIT contended that the excess stock found during the survey should have been treated as unexplained under Section 69A and taxed under Section 115BBE, and that the AO should have investigated the fall in gross profit. The PCIT believed these failures rendered the AO's order erroneous and prejudicial to the interest of revenue.

Which sections of the Income-tax Act were involved?

Section 263,Section 69A,Section 115BBE,Section 143(3),Section 142(1),Section 69B

AI-generated summary — verify with the full judgment below

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT

BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER AND SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER

Sr. ITA No. Asstt. Appellant Respondent No. Year 1. | 324/Rjt/2024 | 2019- | M/s. Deepmala Marine Exports The Pr. CIT-1, 20 New Fisheries Terminal Gate, Rajkot Bhidiya Plot, Veraval-362269 Aayakar Bhavan, PAN No.: AABFD4284G Race Course Ring Road, Rajkot-360001 2. | 322/Rjt/2024 | 2019- | M/s. Sun Exports The Pr. CIT-1, 20 Plot No.1313, GIDC Estate, Rajkot Somnath Road, Veraval — 362269 Aayakar Bhavan, PAN No.: ACAFS3664A Race Course Ring Road, Rajkot-360001 3. | 323/Rjt/2024 | 2019- | Shri Chunilal Govind Vanik The Pr. CIT-1, 20 Ashaganga Exports, Plot No. 310/B, | Rajkot Somnath Road, GIDC Estate, Aayakar Bhavan, Veraval — 362267 Race Course PAN No.:AAUPV5100G Ring Road, Rajkot-360001 4. | 312/Rjt/2024 | 2019- | Shri BharatkumarKalyanjibhai The Pr. CIT-1, 20 Bhindi Rajkot Prop. of M/s. K. D. Bhindi, Kalyan | Aayakar Bhavan, Complex, Haveli Lane, Junagadh- Race Course 362001 Ring Road, PAN No.:ABWPB2758D Rajkot-360001 5. | 326/Rjt/2024 | 2019- | Shri Kishor VeljibhaiFofandi The Pr. CIT-1,

ITA No. 312, 322 to 329/Rjt/2024

ITA No.

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