Mere Difference of Opinion Cannot Justify Section 263 Revision: Gujarat High Court Rules in Favour of Assessee
Case Overview
Case Name: PCIT Vs NYA International (Gujarat High Court)
Appeal Number: R/Tax Appeal No. 567 of 2023
Date of Order: 18/09/2023
Court: Gujarat High Court
Assessment Year: 2012-13
Background and Factual Matrix
M/s. NYA International, the respondent assessee firm, filed its return of income for Assessment Year 2012-13 on 16.08.2012, declaring total income as NIL. The case was subsequently picked up for scrutiny, and an assessment order was passed under Section 143(3) of the Income Tax Act, 1961 on 25.03.2015.
Following the completion of assessment, intelligence was received from DDIT (Inv) Unit-7(2), Mumbai, revealing that the assessee had maintained bank account no. 550011032480 with ING Vysya Bank, which carried credit entries aggregating to Rs. 70,13,43,319/-. This bank account had not been disclosed in the return of income filed for AY 2012-13.
Furthermore, during the relevant assessment year, the assessee had claimed exemption under Section 10AA of the Act amounting to Rs. 87,21,44,414/-. This claimed deduction was, however, disallowed by the Assessing Officer when passing assessment orders for AY 2013-14 and AY 2014-15.
Reopening of Assessment
On the basis of the information received regarding the undisclosed bank account, the assessment was reopened under Section 147 of the Income Tax Act, 1961 through the issuance of a notice under Section 148. A consequential reassessment order was passed on 31.12.2019, resulting in a disallowance of Rs. 87,21,44,414/-.
Exercise of Revisionary Jurisdiction Under Section 263
After the reassessment order was passed, the Principal Commissioner of Income Tax (PCIT), Surat, invoked revisionary jurisdiction under Section 263 of the Act. The PCIT observed that the assessee had been operating three bank accounts in total — two with Allahabad Bank and one with ING Vysya Bank — none of which had been reported in the ITR for AY 2012-13.
The PCIT took the position that:
- The Assessing Officer had failed to conduct the necessary inquiry into the undisclosed bank accounts
- The assessment order was therefore erroneous and prejudicial to the interests of the Revenue
- Explanation 2 to
Section 263(1)was attracted given the alleged absence of inquiry
Following the issuance of a show cause notice, the PCIT set aside the reassessment order dated 31.12.2019 and directed the Assessing Officer to reframe the assessment afresh.
Proceedings Before the Income Tax Appellate Tribunal
The assessee challenged the PCIT's revisionary order before the Income Tax Appellate Tribunal (ITAT), Surat. In ITA No. 57/SRT/2022, the Tribunal carefully examined the facts and concluded that the exercise of jurisdiction under Section 263 was unwarranted.
Key Findings of the Tribunal
The Tribunal made the following crucial observations:
"We note that assessing officer has examined these two issues raised in reopening of assessment u/s 147 of the Act viz: (i) The credit entry in ING Vysya Bank Account No. 5500111032480 to the tune of Rs.70,13,43,319/- and; (ii) Disallowance of deduction under section 10AA of the Act to the tune of Rs.87,21,44,414/-."
The Tribunal further noted:
"The assessing officer after getting the reply of the assessee, has applied his mind and framed the assessment order. Therefore, such order passed by the assessing officer cannot be termed as erroneous and prejudicial to the interest of revenue."
On the dual role of the Assessing Officer, the Tribunal elaborated: