The case between Kisan Steel Corporation (the appellant) and the Principal Commissioner of Income Tax (Pr. CIT), Ghaziabad (the respondent), pertains to the Assessment Year (AY) 2014-15. The case was filed on 13th June 2019 and concluded with a final order on 29th October 2020. The case was heard by the Income Tax Appellate Tribunal (ITAT) Delhi Bench “D” via video conferencing.
Kisan Steel Corporation is a partnership firm engaged in the wholesale trading of iron and steel. The firm filed its return of income on 30th November 2014, declaring a total income of Rs. 65,88,200/-. The Assessing Officer (AO) completed the assessment under section 143(3) on 4th November 2016, determining the total income at Rs. 68,38,200/-, making an ad-hoc disallowance of Rs. 2,50,000/- out of various expenses.
Subsequently, the Pr. CIT called for the records and noted certain discrepancies in the AO’s order. Accordingly, a show-cause notice was issued to the assessee asking it to explain why proceedings under section 263 of the Income Tax Act should not be initiated. The discrepancies noted were:
The assessee appeared before the Pr. CIT and explained its case. However, the Pr. CIT was not satisfied with the explanations and held that the AO’s order was erroneous and prejudicial to the interest of revenue due to the following reasons:
The Pr. CIT set aside the AO’s order and directed the AO to pass a fresh order after necessary verification. Aggrieved, the assessee appealed to the ITAT.
The appellant’s counsel argued that the Pr. CIT exceeded jurisdiction under section 263. The interest and salary to partners were allowed as per the original partnership deed and supplementary deed, both of which were consistent with past assessments accepted under section 143(3). The computation of long-term capital gains was based on cost details consistently shown in the balance sheets since AY 2001-02 and accepted in past assessments. The deposits and withdrawals in the partners’ capital accounts were already recorded and verified by the AO.
The Departmental Representative (DR) argued that the AO did not properly examine the issues under sections 40(b)(iv) and 40(b)(v) and failed to verify the cost of improvement for the capital gains computation. The Pr. CIT was justified in invoking section 263 due to lack of detailed enquiry by the AO.
The ITAT found that:
The ITAT concluded that the AO’s order was not erroneous and prejudicial to the interest of revenue. The Pr. CIT exceeded jurisdiction under section 263, and the ITAT set aside the Pr. CIT’s order, allowing the assessee’s appeal.
The appeal by Kisan Steel Corporation against the Pr. CIT Ghaziabad’s order was allowed by the ITAT. The Tribunal found that the AO’s order was neither erroneous nor prejudicial to the interest of revenue, thus setting aside the Pr. CIT’s order under section 263.
Order pronounced on 29th October 2020.
Accountant Member: Shri R.K. Panda
Judicial Member: Ms. Suchitra Kamble
Date of Order: 29.10.2020
Copy forwarded to:
Assistant Registrar, ITAT, New Delhi
Revision of Assessment Order: Kisan Steel Corporation vs Pr. CIT Ghaziabad for AY 2014-15
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