KOHINOOR CTNL INFRASTRUCTURE CO. PRIVATE LIMITED,DADAR WEST vs. DY COMMISSIONER OF INCOME TAX 6(1)(2), CHURCHGATE MUMBAI

Facts

The assessee company e-filed its return for AY 2018-19, declaring a total loss. An assessment order was passed under Section 143(3) of the Income Tax Act. Subsequently, the PCIT examined the assessment records and found that a significant portion of 'Finance Cost' and 'Civil Work' expenses, treated as revenue expenditure, should have been categorized as Work-in-Progress (WIP), leading to an under-assessment of income.

Held

The Tribunal upheld the PCIT's decision to invoke Section 263, finding that the Assessing Officer failed to conduct proper inquiries despite the case being selected for scrutiny, leading to an erroneous assessment order prejudicial to the revenue's interest. The Tribunal confirmed that the PCIT was justified in setting aside the AO's order for a fresh examination.

Key Issues

Whether the PCIT was justified in invoking Section 263 of the Income Tax Act to set aside an assessment order, on the grounds that the AO failed to conduct proper inquiries regarding the capitalization of expenses as WIP, thereby rendering the order erroneous and prejudicial to the revenue's interest.