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Facts
The assessee's assessment was completed with an addition of Rs. 60,33,481/- on account of bogus purchases. The PCIT invoked its powers u/s 263 of the Act, directing the AO to make the addition u/s 69C instead of 37(1). The assessee challenged this order.
Held
The Tribunal held that the PCIT's action of directing the AO to assess the amount under a different section, when the AO had already taken a view and applied a particular section, amounted to a change of opinion, which is not permissible under Section 263 of the Act. Therefore, the order passed u/s 263 was unsustainable.
Key Issues
Whether the PCIT's invocation of powers u/s 263 to change the section under which an addition was made, after the AO had already applied a section, is permissible. Whether the PCIT's order was sustainable on grounds of change of opinion and lack of inquiry.
Sections Cited
37(1), 69C, 263, 115BBE
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Income Tax Appellate Tribunal, CUTTACK BENCH CUTTACK
Before: SHRI GEORGE MATHAN & SHRI RAJESH KUMAR
आदेश / O R D E R Per Bench : This is an appeal filed by the assessee against the order of the Ld.CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the assessment year 2018-2019. 2. It was submitted by the Ld. AR that the return filed by the assessee came to be processed originally and the assessment came to be completed making an addition of Rs.60,33,481/- U/s. 37(1) of the Act on the ground of the bogus purchases. It was submission that the Ld. PCIT invoked its power u/s.263 of the Act on the ground that the AO in the show cause notice proposed the addition u/s 69C of the Act but had made the addition u/s. 37(1) of the Act in the course of assessment. The Ld. PCIT issued show cause notice and after the receiving the reply of the assesee, directed the AO to make the addition u/s. 69C of the Act instead of Section 37(1) of the Act. It was submission that the addition per se having been made, the Ld. PCIT has only shifted the addition from section 37(1) of the Act to section 69C of the Act. It was submission that order u/s. 263 of the Act is unsustainable, insofar as no enquiry has been done by the Ld.PCIT. It was prayer that the order u/s. 263 of the Act is liable to be quashed.
In reply, Ld CIT DR submitted that in the show cause notice issued by the AO in the course of original assessment, the AO had proposed the addition u/s. 69C of the Act but when the assessment order was passed, he had wrongly applied the provision of section 37(1) of the Act. It was submission that this had led to a loss of revenue, insofar as an addition u/s. 37(1) of the Act would have resulted in only 30% tax, whereas if the addition u/s. 69C of the Act is made, the tax would be at the special rate of 60% under Section 115BBE of the Act. It was further submission that application of wrong section can be corrected by the PCIT by invoking the power of U/s. 263 of the Act. It was further submission that the assessment order making the addition u/s. 37(1) of the Act being erroneous, the Ld. CIT(A) had corrected the error. It was further submitted that the assessment order making the addition u/s. 37(1) of the Act was also prejudicial to the interest of revenue, insofar as the wrong section had been applied leading to lower tax liability. We are vehemently supported the order of the Ld. PCIT, Sambalpur.
We have considered the rival submissions. A perusal of the order of the PCIT shows that, at the outset, the addition of Rs.60,33,481/- as raised in the assessment, has been challenged by the assessee in appeal before the CIT(A). Whether the same is to be assessed u/s. 37(1) or u/s. 69(C) of the Act, was well within the purview of the Ld. CIT(A), insofar as, obviously the AO should also have been granted another opportunity to represent its case before the Ld. CIT(A). It is admitted fact the ld. AO in the show cause notice has referred to the provision of section 69C of the Act in respect of said addition but the AO wisdom had applied his mind and has made the addition u/s. 37(1) of the Act. The act of Ld. PCIT in invoking its powers u/s. 263 of the Act to direct the AO to assess the said amount under section 69C of the Act, is nothing but a change of opinion, insofar as, he is proposing to impose his views over that of the AO. This is not permissible under the provisions u/s. 263 of the Act. The AO having taken a view on the issue and applied a particular section the action of the ld. Pr.CIT in directing that another section is to apply is not permissible and on this ground, we find that order passed u/s. 263 of the Act is unsustainable and consequently we quash the same.