Case Analysis: ITA No. 1119/DEL/2022 Between Kaur Kookies (P) Ltd. and Pr, CIT, Delhi-4

Case Analysis: ITA No. 1119/DEL/2022 Between Kaur Kookies (P) Ltd. and Pr, CIT, Delhi-4

Introduction

In a significant ruling by the Income Tax Appellate Tribunal (ITAT) Delhi Bench ‘C’, the appeal filed by Kaur Kookies (P) Ltd., against the order of the Principal Commissioner of Income-tax, Delhi-4, dated 24.03.2022, was allowed. This article discusses the background, arguments, and conclusion derived by the ITAT in case number ITA No. 1119/DEL/2022 for the assessment year 2017-18.

Background

Kaur Kookies (P) Ltd., based in New Delhi, filed an appeal against the order of the Principal Commissioner of Income-tax (PCIT), Delhi-4. The appellant was represented by Sh. Lalit Mohan, CA, whereas the department was represented by Sh. Mohd. Gayasuddin Ansari, CIT(DR). The crux of the appeal was the order passed under section 263 of the Income-tax Act, 1961, by the PCIT, which was contended to be without satisfying the statutory preconditions, thus claimed to be without jurisdiction and meriting quashing.

Submissions and Proceedings

The appellant contested the PCIT’s order on multiple grounds, primarily focusing on the lack of jurisdiction and erroneous findings impacting the appellant’s tax liabilities. Notably, the case involved scrutiny around the disallowance related to Provident Fund (PF) and Employee’s State Insurance Corporation (ESIC) payments, VAT, and entertainment tax, which were allegedly not added back as per the statutory requirements, leading to the deemed concealment of income.

ITAT’s Analysis and Decision

The ITAT’s deliberation revolved around the proper application of section 263 of the Income-tax Act, emphasizing that for revisionary powers to be exercised, the original order should be erroneous and prejudicial to the interests of the revenue. The bench pointed out procedural lapses and the lack of proper inquiry on the part of the PCIT concerning the disallowances made in the tax audit report and the subsequent returns filed by the assessee. The tribunal meticulously dissected the allegations, evidences, and legislative intent behind section 263.

After hearing both parties and reviewing the submissions, the ITAT concluded that the PCIT’s order was not based on proper appreciation of facts and was not in accordance with the law. Consequently, the tribunal set aside the order passed by the PCIT and restored the original assessment order by the AO.

Conclusion

The decision in ITA No. 1119/DEL/2022 sets an important precedent regarding the boundaries of the PCIT’s revisionary powers under section 263 of the Income-tax Act. It underscores the necessity for thorough inquiry and evidence-based conclusions before any assessment order is deemed erroneous and prejudicial to the interest of the revenue. The ruling highlights the ITAT’s role in ensuring that tax assessments are made fairly and within the ambit of the law, thus safeguarding the interests of taxpayers.

Case Analysis: ITA No. 1119/DEL/2022 Between Kaur Kookies (P) Ltd. and Pr, CIT, Delhi-4