ITAT Allows Appeal, Says PCIT Can’t Expand Scope of Reassessment via Section 263

ITAT Allows Appeal, Says PCIT Can’t Expand Scope of Reassessment via Section 263

The assessee company is in the business of taking loans at interest and advancing the same in the form of interest-bearing loans and earns interest.
Income filed its return for AY 2014-15, declaring an income of Rs. 1.45 lakh. The case was reopened under Section 147 based on information that the assessee had received Rs. 4.46 crore in accommodation entries from five tainted entities. The reassessment was completed with additions on this specific ground. While this reassessment order was pending appeal before the CIT(A), PCIT invoked Section 263 revision powers, alleging that the AO failed to tax an additional Rs. 1.45 crore allegedly received from another company, an issue not forming part of the original reassessment reasons.

The assessee clarified that only Rs. 65 lakh was received as a loan, fully disclosed in its books, and substantiated with proper documentation. The PCIT did not record any adverse findings on this evidence.

Issue Raised: Whether, under the particular facts and circumstances of the case, the PCIT had rightfully exercised revision jurisdiction under section 263 of the Act.

ITAT Held: The ITAT accepted the assessee’s contention that once a reassessment is completed on specific recorded reasons, no Section 263 revision can be invoked on new issues not forming part of that reopening, especially when the original reassessment reason was fully addressed. The Tribunal also noted that even on merits, the loan was duly explained, and any alleged omission, if at all, pertained to the original return processing under Section 143(1), which was time-barred for revision.

Therefore, the Hon’ble tribunal quashed the revision order and allowed the appeal.

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