Section 263 proceeding based on mere audit objections without independent assessment is invalid: ITAT Jaipur
Pinkcity Jewelhouse Pvt. Ltd. Vs PCIT (ITAT Jaipur) Appeal Number : ITA No. 63/JP/2021
Facts:
- It was found by the ld. PCIT that assessee is transferring semi-finished goods from the Mahapura Unit (Non-deduction claiming unit) to Sitapura Unit(SEZ Unit deduction claiming u/s.10AA) for onwards sale/exports from SEZ Unit. During survey proceedings u/s 133A of the Income Tax Act it was learnt that SEZ Unit did not make any value addition on the same.
- The ld. PCIT noted that the AO had passed the assessment order without making necessary inquiries regarding eligibility & allowability of the deduction u/s 10AA of the IT Act. The PCIT, in his order under Section 263 of the Income Tax Act, held that the AO’s actions were erroneous and prejudicial to the interests of revenue.
ITAT Jaipur held as below:
- On an examination of procedural aspects of the case, including the basis of the proceedings initiated under Section 263, It can be noted that the action was primarily based on revenue audit objections, which raised questions about the independence and validity of the PCIT’s decision.
- A consistent approach in tax matters, especially when there is no material change to justify a different view, has to be maintained in tax matters and legal proceedings.
- The AO while framing the assessment had taken a possible view. In fact, when the ld. AO has conducted the required enquiry and not violated any of the conditions mentioned for revision of order as required by Explanation 2 of Section 263 of the Act, the order passed by the Assessing Officer could not be deemed to be erroneous so as to be prejudicial to the interests of the revenue
- The order passed by the PCITis hereby quashed.
The copy of the order is as under:
