Panchmahal Steel Ltd. vs. PCIT

Parties Involved

Facts Summary

The assessee, Panchmahal Steel Ltd., filed its return of income for the assessment years 2010-11 and 2011-12, declaring a loss. The return was selected for scrutiny, leading to an assessment order under Section 143(3) of the Income Tax Act. The Assessing Officer discovered a show cause notice from the Central Excise Directorate indicating that the assessee had claimed Cenvat credit of Rs. 4,37,07,420/-, which was disallowed. The officer identified that the assessee had reported bogus purchases, prompting the reopening of the case with a notice under Section 148. An assessment order issued on December 28, 2017, resulted in the addition of Rs. 27,53,17,729/- for bogus purchases. Upon reviewing the records, the Principal Commissioner of Income Tax observed that the assessment order was erroneous as it failed to account for the total claimed amount of Rs. 27,98,24,733/-, which included the previously mentioned amounts along with a VAT element of Rs. 45,07,004/-. Consequently, a notice under Section 263 was issued on February 16, 2021, citing the erroneous nature of the assessment and requiring the assessee to show-cause why the order should not be set aside for a fresh assessment. The assessee responded with a voluminous submission claiming that the proposed additions made were unfounded. The assessee argued that the assessee had not claimed VAT as an expense in their Profit & Loss account. However, Principal CIT observed that the assessee's accounting practices implied that VAT …

Legal Issues

• 1. Whether the order passed under Section 263 of the Act is bad in law and liable to be quashed.
• 2. Whether the Principal Commissioner of Income Tax wrongly assumed jurisdiction under Section 263 of the Act.

Judgment Outcome

Decided in favour of Assessee.

Precedents Relied Upon

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