In ITA No. 278/Del/2021 – ITAT - Absence of Assessing Officer’s explicit expression of satisfaction in assessment order, not a basis for Principal Commissioner of Income Tax to assume jurisdiction under Section 263 of Income Tax Act: ITAT (Delhi)
Members Shamim Yahya (Accountant) & Astha Chandra (Judicial) [23-05-2023]

Read Order: Manohar Lal Sarraf and Sons Pvt. Ltd v. Pr. CIT Ghaziabad

Chahat Varma

New Delhi, May 24, 2023: In a recent decision, the Delhi bench of the Income Tax Appellate Tribunal has ruled that the mere absence of explicit expression of satisfaction by the Assessing Officer (AO) in the assessment order, as discussed in the case of CIT vs. Reliance Communication Ltd. [LQ/BomHC/2016/748], does not provide a basis for the Principal Commissioner of Income Tax (Pr. CIT) to assume jurisdiction under section 263 of the Income Tax Act.

Factual matrix of the case was that according to the Pr. CIT, Manohar Lal Sarraf and Sons Pvt. Ltd. (assessee) had incorrectly claimed the cost of acquisition while calculating the capital gain arising from the sale of the properties. Before the Pr. CIT, it was explained by the assessee that the sum of Rs. 22,84,561/- was paid to Municipal Corporation of Delhi. These charges were claimed towards cost of acquisition as it was one-time charges paid for realising the enduring benefit arising out of the properties. Therefore, the expenditure was capital in nature and was capitalised in the books of account in the year in which it was incurred. During assessment proceedings, the same explanation was submitted before the AO, who after considering all the details had come to the conclusion that the assessee had correctly computed and declared the capital gain at Rs. 83,79,360/-. The Pr. CIT passed an order under section 263 of the Act on the ground that the order passed by the AO was found to be erroneous and prejudicial to the interest of Revenue. 

The two-member bench of Shamim Yahya (Accountant) and Astha Chandra (Judicial) noted that the assessment order passed by the AO was valid, as the AO had examined all the records, evidences, supporting documents and books of account and passed the assessment order only after due diligence and after making necessary examination and after application of mind.

The bench opined that a concise order does not imply the absence of enquiry or an erroneous assessment and held that the assumption of jurisdiction by the Pr. CIT under section 263 of the Act was not in accordance with the law.