Comprehensive Challenge: Assessing Multifaceted Contentions in the Recent Appeal Against the Section 263 Order by the Principal Commissioner of Income Tax for AY 2015-16, Unveiling Procedural and Substantive Objections.

The recent appeal lodged by the assessee against the order issued by the Principal Commissioner of Income Tax, Central, Rajkot, dated 30th March 2021 under Section 263 of the Income Tax Act, 1961 for the Assessment Year 2015-16 reveals multifaceted contentions challenging both procedural and substantive aspects of the decision.

Grounds of Appeal:

The appeal outlines several key contentions:

1. Validity of Section 263 Order: The order under Section 263 is deemed unwarranted, unjustified, and contrary to the law.

2. Treatment of New Sundry Creditors: The Principal Commissioner allegedly erred in setting aside the issue of additional sundry creditors, labeling them as unexplained cash credits under Section 68 of the IT Act without sufficient verification.

3. Assessment Proceedings & Order Validity: The order contests that the Assessing Officer conducted thorough verification during the assessment, rendering the Principal Commissioner's objections unjustified.

Lack of Fair Opportunity in Proceedings:

• During the oral arguments presented, the assessee's counsel raised concerns regarding the lack of adequate opportunity for the assessee to present their case. The contention highlighted that the notices issued during the revisionary proceedings were within a period affected by the COVID-19 pandemic, limiting the possibility of a proper response. This lack of a substantial hearing was argued to be a violation of natural justice principles.

Judicial Perspectives:

• The counsel referenced various judicial precedents, including the Sona Builders vs UOI case, emphasizing that orders passed in contravention of natural justice principles must be set aside. They underscored the need for due opportunity of hearing as mandated by Section 263, citing the CIT vs Amitabh Bachchan case.

Merits of Assessment:

• The appeal also delved into the substantive issue of the assessment. The Principal Commissioner had deemed the assessment erroneous, specifically highlighting the acceptance of substantial sundry creditors without adequate inquiry. However, the counsel contended that the Assessing Officer did conduct due inquiries, seeking and receiving responses from the assessee regarding the sundry creditors' details, despite the unavailability of bank statements from these creditors.

Evaluation of Assessment Order:

• The argument presented by the Principal Commissioner regarding the inadequacy of inquiry due to the absence of bank statements was challenged. The contention was that the provided details by the assessee were comprehensive, including creditor names, addresses, PAN details, and transaction specifics. It was emphasized that the lack of bank statements should not invalidate the thoroughness of the inquiry.

Judicial Precedents on Adequacy of Inquiry:

• In support of their argument, the counsel cited the Delhi High Court cases of CIT vs Sunbeam Auto Ltd. and CIT vs Anil Kumar Sharma, highlighting the distinction between "lack of inquiry" and "inadequate inquiry" for invoking Section 263.

Conclusion:

• Conclusively, the appeal contends that the Principal Commissioner's order lacks merit on both procedural and substantive grounds, emphasizing the failure to provide adequate opportunity for hearing and the adequacy of the inquiry conducted by the Assessing Officer. The request is made to set aside the Section 263 order due to these significant inadequacies and to allow the appeal.

Topic-Iconic Infrabuild Llp Versus Principal Commissioner of Income Tax

Court-ITAT-Rajkot

Date-17/11/2023

Team Taxonation