Sunray Cotspin Pvt Ltd contested the assumption of jurisdiction under section 263 of the Income Tax Act by Pr. CIT, Gurgaon for the assessment year 2014-15 in ITA No. 5239/DEL/2019, questioning the corrections suggested by the Pr. CIT on the original assessment for the fiscal year.
The case filed on June 7, 2019, addresses issues pertaining to the jurisdiction under section 263, challenging the validity of the revisionary powers exercised by the Pr. CIT regarding the assessment order for the year 2014-15. The final tribunal order was pronounced on February 21, 2020.
During the tribunal proceedings, the assessment framed under section 143(3) by the IT department on August 18, 2016, was scrutinized. Sunray Cotspin Pvt Ltd’s legal team argued that the Pr. CIT erroneously assumed jurisdiction under section 263 to enhance the assessment, thereby impacting the company’s declared income of just Rs.12,350.
The dispute focused on the substantial share premium received by the company and whether proper inquiries were conducted regarding the creditworthiness and identity of the shareholders involved. The tribunal reviewed the assessments, share premiums, and relevant financial details submitted by the company.
The tribunal concluded that the Pr. CIT’s revision under section 263 was unjustified. It noted that adequate inquiries had been conducted during the initial assessment, and the assumptions made by the Pr. CIT were not supported by substantial evidence, leading to the restoration of the original assessment order.
The decision emphasizes the boundaries of the Pr. CIT’s revisionary powers under section 263 and underscores the necessity for tax authorities to rely on concrete evidence when challenging the findings of an original assessment. It also highlights the importance of detailed documentation and compliance by companies during assessments.
The tribunal’s decision in favor of Sunray Cotspin underscores the procedural safeguards that protect taxpayers from arbitrary revisions, reinforcing the principles of justice and fairness in tax assessments. The case serves as a crucial reference for similar disputes regarding the application of section 263 of the Income Tax Act.
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