[Income Tax] No Substantial Question Of Law Arises If Perversity Cannot Be Shown In Order Passed By Tribunal: Allahabad High Court

Section 260A of the Income Tax Act, 1961 provides for an appeal to be filed before the High Court against the decision of an Appellate Tribunal.

Case Background

The assessee's case was selected for scrutiny by the Computer-Assisted Scrutiny Selection for the Assessment Year 2017-18. Thereafter, the Assessing Officer issued notices under Section 142(1) of the Act, along with multiple questionnaires.

The assessee replied to all the notices and the A.O. after examining the record, drew no adverse inference and accepted the income returns for the Year 2017-18. However, the Principal Commissioner of Income Tax held that the order passed by the A.O. in the case of the assessee was erroneous and prejudicial to the interest of the revenue. Thus, the P.C.I.T. issued notices under Section 263 of the Act.

The assessee replied to the notices. However, the P.C.I.T. set aside the order passed by the A.O. and directed that he conducts a specific inquiry on the indicated issues. Aggrieved, the petitioner appealed before the Tribunal, which held that the A.O. had complied with all regulations before passing the order under Section 143(3), and allowed his appeal. In response, the P.C.I.T. filed the Income Tax Appeal before the High Court.

Appellant-Department contended that the A.O. had passed orders without inquiries or verification and thus the present situation stood covered under Explanation 2 to Section 263(1) of the Act, giving rise to a substantial question of law. It was argued that provisions of the Act had not been duly considered by the Tribunal and that certain documents were placed before it, that were not a part of the record; implying that either the assessee had not bothered to put them on record or the A.O. had been negligent in his duties.

Explanation 2 to Section 263(1) of the Income Tax Act specifies that conditions that empower a Principal Commissioner or Commissioner of Income Tax to hold an order passed by the Assessing Officer to be erroneous and prejudicial to the interests of the revenue.

Per contra, respondent-assesee contended that the assessment order under Section 143(3) of the Act was passed after complying with all the relevant rules and regulations. It was contended that the order passed by the appellant under Section 263, claiming that no proper inquires were done by the A.O. was not justified, and that no substantial question of law arose.

High Court Verdict

The Court held that the Tribunal had passed its order after considering the material on record and examining the returns of the assessee, itself. Thus, it could not be said that the impugned order suffered from any infirmities or illegalities.

“Once the Tribunal on thorough scrutiny of the record has come to the conclusion that the reasons recorded by the PCIT base on Explanation 2 to Section 263 pertaining to failure of the AO in making inquiries or verification was without any basis and contrary to the record and has allowed the appeal on finding that the order passed by the PCIT was without jurisdiction, in relation to which learned counsel for the appellants failed to point out any perversity, we do not find that the facts of the present case give rise to any substantial question of law as suggested by counsel for the appellants,” held Chief Justice Arun Bhansali and Justice Vikas Budhwar.

Accordingly, the appeal was dismissed.

Case Title: The Pr. Commissioner of Income Tax, Aaykar Bhawab, Noida and Anr. v. M/s Sampark Management Consultancy LLP [INCOME TAX APPEAL