SKN PROPMART PVT. LTD, GURGAON VS. PCIT, GURGAON, ITA 4214/DEL/2019
In a notable ruling, the Income Tax Appellate Tribunal (ITAT), Delhi Bench “B,” has quashed the Principal Commissioner of Income Tax’s (PCIT) order passed under Section 263 of the Income Tax Act, 1961, against SKN Propmart Pvt. Ltd. for the Assessment Year 2014–15. The Tribunal found that the Assessing Officer (AO) had already conducted due verification regarding the alleged short-term capital gains on share transactions, and therefore, the conditions necessary for invoking Section 263 were not met.
Background of the Case
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Assessee: SKN Propmart Pvt. Ltd.
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Assessment Year: 2014–15
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Original Assessment: Completed under Section 143(3) on 07.12.2016 with minor disallowances.
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PCIT’s Action: Invoked revisionary jurisdiction under Section 263, claiming the assessment was erroneous and prejudicial to the interests of the Revenue.
The PCIT set aside the assessment, directing a fresh inquiry into the genuineness of the share transactions, alleging lack of proper verification by the AO.
Tribunal’s Key Observations
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Specific Query Raised by AO:
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AO had issued a notice under Section 142(1) asking for details of short-term and long-term capital gains.
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The assessee responded with:
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Broker statements
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Demat account reconciliation
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Sale/purchase bills
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Ledger accounts
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Proper Application of Mind:
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AO scrutinized the books and conducted test checks.
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No additions were made after verifying all materials.
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Twin Conditions Under Section 263 Not Fulfilled:
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As per the landmark SC ruling in Malabar Industrial Co. Ltd., for valid invocation of Section 263:
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The order must be erroneous
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And it must be prejudicial to the interests of the Revenue
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ITAT ruled that since the AO had made a conscious decision based on available evidence, the order was neither erroneous nor prejudicial.
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Explanation 2 to Section 263 Not Cited:
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PCIT failed to refer to Explanation 2 in the show cause notice or final order.
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Hence, DR’s reliance on Paramount Propbuild Pvt. Ltd. was rejected.
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Legal Precedents Cited
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SC in Malabar Industrial Co. Ltd. v. CIT (243 ITR 83) – Clarified the conditions for invoking Section 263.
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Delhi HC in CIT v. Sunbeam Auto Ltd. (332 ITR 167) – Distinguished between lack of inquiry and inadequate inquiry.
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Delhi HC in CIT v. Clicks India Finance Pvt. Ltd. (2024) – Reaffirmed that a reasoned view by AO cannot be reversed merely due to a difference of opinion.
Final Decision
The ITAT held that:
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The PCIT’s order lacked legal validity.
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AO had exercised due diligence and applied his mind.
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No lack of inquiry was evident.
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Section 263 jurisdiction was wrongly assumed.
Accordingly, the Tribunal quashed the PCIT’s order and allowed the appeal in favor of the assessee.