PCIT Cannot Ignore Subsequent Section 153A Assessment While Invoking Section 263: Calcutta High Court

Introduction

In PCIT Vs Techno Tracom Pvt. Ltd. (Calcutta High Court), the Calcutta High Court clarified an important aspect of revisional jurisdiction under Section 263 of the Income Tax Act 1961. The Court affirmed that when the Principal Commissioner of Income Tax (PCIT) exercises powers under Section 263, the PCIT must consider all relevant assessment records that exist at that time, including a later assessment finalized under Section 153A read with Section 143(3) for the same assessment year.

By dismissing the Revenue’s appeal against the order of the Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) dated 18 April 2022, the Court reinforced that a Section 263 revision cannot proceed on the assumption that a particular issue was never examined, if a subsequent search assessment order clearly shows that such inquiry was in fact undertaken.

Background of the Case

Procedural History

  • The assessee, Techno Tracom Pvt. Ltd., was originally assessed for AY 2009-10 under Section 143(3) on **28 March 2011`.
  • The PCIT invoked Section 263 and passed a revisional order on **28 March 2013`, holding the original assessment to be erroneous and prejudicial to the interests of the Revenue.
  • On **18 February 2013`, a search and seizure operation was carried out at the premises of the assessee.
  • Pursuant to the search, the Assessing Officer (AO) completed an assessment under Section 153A read with Section 143(3) on **23 March 2015 for **AY 2009-10.
  • Meanwhile, the assessee challenged the original Section 263 order before the Tribunal.
  • The Tribunal, by its order dated **1 October 2019, set aside the Section 263 order dated **28 March 2013 and remanded the matter to the PCIT for fresh adjudication.
  • The assessee also filed a miscellaneous application before the Tribunal pointing out that, in view of the subsequent Section 153A assessment order dated **23 March 2015, the PCITcould not again exerciseSection 263` jurisdiction on the same issue.
  • By order dated **22 January 2020, the Tribunal dismissed the miscellaneous application but specifically **directed the PCIT** to consider the impact of the Section 153Aassessment while passing the fresh order underSection 263`.

Despite this direction, when the PCIT issued a fresh revisional order on **30 March 2021underSection 263, he declined to take into account the Section 153A` assessment, terming it irrelevant.

The assessee again approached the Tribunal, which quashed the Section 263 order. The Revenue then preferred an appeal before the Calcutta High Court under Section 260A.

Delay in Filing the Appeal

The appeal before the High Court was filed with a delay of 168 days. The Revenue filed an application for condonation of delay (IA No.GA/1/2023). The Court:

  • Examined the affidavit filed in support of condonation.
  • Heard both sides on the issue of limitation.
  • Concluded that sufficient cause had been demonstrated.
  • Accordingly, condoned the delay and allowed the condonation application.

With the delay condoned, the appeal was taken up on merits.

Substantial Questions of Law

The Revenue framed the following substantial questions of law before the High Court:

  1. Whether the Tribunal was justified in quashing the revisional order under Section 263 passed by the PCIT as being bad in law, thereby deleting the addition made under Section 68 on account of alleged unexplained cash credits?