Manoj Singhal vs. Pr. CIT-5 – 2015-16 – Jurisdiction of Section 263 Case
Case Number: ITA 1731/DEL/2020
Appellant: Manoj Singhal, New Delhi
Respondent: Pr. CIT-5, New Delhi
Assessment Year: 2015-16
Case Filed On: 2020-10-19
Order Type: Final Tribunal Order
Date of Order: 2021-05-28
Pronounced On: 2021-05-28
Case Background
The case involved Manoj Singhal (the appellant), challenging the order under Section 263 of the Income Tax Act, 1961, issued by the Principal Commissioner of Income Tax (Pr. CIT-5), New Delhi. The appellant contested the legality and jurisdiction of the Pr. CIT’s order, which directed a revision of the original assessment made under Section 143(3) of the Act for the assessment year 2015-16.
Key Issues and Arguments
The primary issue was whether the Pr. CIT-5 was justified in invoking Section 263 to revise the original assessment order, claiming it was erroneous and prejudicial to the interests of the revenue.
Appellant’s Arguments
The Pr. CIT wrongly assumed jurisdiction under Section 263, making the order void ab initio.
The original assessment order was neither erroneous nor prejudicial to the interests of the revenue.
The directions issued under Section 263 were vague, ambiguous, and untenable.
The Pr. CIT’s order was passed without proper application of mind and against the principles of natural justice.
The scope of scrutiny was limited to verification of property purchase and deduction claimed under capital gains. The Pr. CIT’s order exceeded this scope.
Respondent’s Arguments
The Pr. CIT has wide powers to examine the entire case to address revenue losses and plug loopholes.
The original assessment overlooked significant issues, justifying the revision under Section 263.
Tribunal’s Analysis and Findings
The ITAT considered the submissions from both parties and reviewed the case record. Key findings included:
The appellant’s return for the assessment year 2015-16 declared an income of (-Rs.3,30,61,960). The case was selected for limited scrutiny on the grounds of property purchase verification and deduction under capital gains.
The Pr. CIT issued a notice under Section 263, questioning the eligibility of the deduction claimed under Section 54F, alleging an error in the computation and questioning the genuineness of the investment in the new residential house.
The ITAT noted that the AO had duly examined the details related to the property purchase and deduction claim during the original assessment.
The computational error of Rs.90,600 in the deduction claimed under Section 54F could have been rectified under Section 154, and did not warrant invoking Section 263.
The Pr. CIT’s directions to revisit issues beyond the scope of the original limited scrutiny were deemed legally invalid.
The ITAT cited the jurisdictional High Court’s precedent that if two reasonable constructions of a taxing provision are possible, the one favoring the assessee must be adopted.
Conclusion and Order
The ITAT ruled in favor of Manoj Singhal, quashing the Pr. CIT-5’s order under Section 263. The tribunal found that the original assessment was neither erroneous nor prejudicial to the interests of the revenue and that the Pr. CIT exceeded the scope of permissible scrutiny. The appeal filed by the appellant was allowed.
Significance of the Case
This case underscores the importance of adhering to the defined scope of scrutiny and the necessity for the tax authorities to exercise their powers judiciously. The decision provides clarity on the invocation of Section 263, emphasizing that it should not be used to expand the scope of limited scrutiny assessments unjustifiably.
References
CIT Vs. Alom Extrusion Ltd (2010) 1 SCC 489
CIT Vs. Vinay Cement Ltd 213 CTR 268
CIT Vs. AIMIL Ltd 321 ITR 508 (Delhi)
Order pronounced in the open court on 28/05/2021 by Judicial Member Bhavnesh Saini and Accountant Member Dr. B. R. R. Kumar.
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