Case Summary:

This case revolves around the appeal made by GM International against the order of Pr. CIT, Delhi-12 dated 26.03.2022 concerning the Assessment Year 2017-18. This appeal was filed under section 263 of the Income-tax Act, 1961, challenging the assessment order that was deemed not only erroneous but also prejudicial to the interest of the Revenue.

Background:

GM International, engaged in the business of fresh fruits, electronically filed their return of income on 04.11.2017 declaring a loss of Rs. 2,34,249. The return was selected for scrutiny assessment, leading to the issuance and serving of statutory notices upon GM International. Subsequent assessment by the AO resulted in converting the declared loss into a taxable income of Rs. 2,39,30,596, citing unexplained money under section 68, unsecured loans, and disallowance of interest expenses.

Proceedings and Hearing:

Extensive hearing took place, and both parties brought forward their arguments and documentary evidence. The deciding panel meticulously perused case records, evidence, and judicial decisions referenced by both sides. Ultimately, the appeal spotlighted the quarrel over the source of cash deposit during the demonetization period, which was partly subjudiced before the ld. CIT(A).

Findings and Judgment:

The ITAT held that the powers of PCIT under section 263 of the Act could not be rightly exercised in this case due to jurisdictional limitations imposed by appellate proceedings already in place. On examining the materials presented and the decisions referenced, the ITAT found the appeal of GM International to be valid, resulting in the quashing of the PCIT’s order. The tribunal painstakingly detailed the due diligence exercised by the AO during the assessment process, underlining that the order made was neither without application of mind nor devoid of inquiry.

Conclusion:

The appeal of GM International in ITA No. 786/DEL/2018 was allowed, marking a significant decision in income tax jurisprudence. The tribunal’s decision underscores the importance of proper inquiry and application of mind by the assessing officers and delineates the boundaries of revisionary powers under section 263 of the Income-tax Act, 1961. This case serves as a precedent for future disputes involving similar contentions.