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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGH & SHRI G. MANJUNATHA
आदेश /O R D E R
PER G. MANJUNATHA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against the order passed by the learned Principal Commissioner of Income Tax, Madurai-1, dated 12.09.2020 and pertains to assessment year 2015-16.
:-2-: ITA. No: 87/Chny/2022 2. At the outset, we find that there is a delay of 537 days in appeal filed by the assessee. During the course of hearing, when defect was brought to the notice of the learned AR present, he has submitted that delay in filing of appeal is mainly due to lockdown imposed by the Govt. on account of spread of Covid-19 infections and in view of the Hon’ble Supreme Court suomotu Writ Petition No.3 of 2020, if the period of delay is covered within the period specified in the order of the Apex Court, then same needs to be condoned in view of specific problem faced by the public on account of Covid-19 pandemic.
The learned DR, on the other hand, fairly agreed that delay may be condoned in the interest of justice.
Having heard both sides and considered reasons given by the learned AR, we find that the Hon’ble Supreme Court in suomotu Writ Petition No.3 of 2020, has extended limitation applicable to all proceedings in respect of Courts and Tribunals across the country on account of spread of Covid-19 infections w.e.f. 15.03.2020, till further orders and said general exemption has been extended from time to time. We further
:-3-: ITA. No: 87/Chny/2022 noted that delay noticed by the Registry pertains to the period of general exemption provided by the Hon'ble Supreme Court extending limitation period applicable for all proceedings before Courts and Tribunals and thus, considering facts and circumstances of the case and also in the interest of natural justice, we condone delay in filing appeal filed by the assessee.
The brief facts of the case are that, the assessee, HUF has filed its return of income for the assessment year 2015-16 on 08.06.2016, admitting a total income of Rs. 9,10,280/-. The case was selected for scrutiny under CASS to examine sales turnover/receipts has been correctly offered for tax and whether deduction claimed on account of interest expenditure is admissible. The assessment has been completed u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) on 05.12.2017 and the AO accepted income declared by the assessee without any addition towards sales receipts/turnover and interest expenditure.
The case has been subsequently taken up for a revision proceeding by the PCIT, Madurai-1 and issued show cause notice u/s. 263 of the Act, dated 27.02.2020 and called upon
:-4-: ITA. No: 87/Chny/2022 the assessee to explain as to why the assessment order passed by the AO u/s. 143(3) dated 05.12.2017 shall not be revised for the reasons stated in their show cause notice. In the said show cause notice, the PCIT was of the opinion that, although the assessee has claimed secured loan and unsecured loan in excess of loans and advances and paid huge interest, the AO failed to verify allowability of interest expenditure which render the assessment order to be erroneous and prejudicial to the interests of the revenue. In response to the show cause notice, the assessee submitted that the sole reason for the Assessing Officer to take up for scrutiny assessment is to verify deductibility of interest expenditure and during the course of assessment proceedings, the AO called for necessary evidences and verified interest debited into profit and loss account and also allowed claim of the assessee. Therefore, the PCIT cannot assume jurisdiction and revise the assessment order on the very same issue. The PCIT, after considering relevant submissions of the assessee and also taken note of certain judicial precedence, opined that the assessment order passed by the AO dated 05.12.2017, is erroneous in so far as it is prejudicial to the interests of the revenue, because the AO has failed to carry out required
:-5-: ITA. No: 87/Chny/2022 enquiries, he ought to have been carried out in the given facts and circumstances of the case, and thus, rejected arguments of the assessee and set aside assessment order passed by the AO u/s. 143(3) of the Act, dated 05.12.2017.
The Ld. Counsel for the assessee, referring to assessment order dated 05.12.2017, and consequent notice u/s. 143(2) of the Act, dated 12.07.2017, submitted that sole purpose for taking the case for scrutiny proceedings is to verify interest expenditure debited into profit and loss account. During the course of assessment proceedings, the AO has called for necessary evidences with regard to interest expenditure and also discussed the issue in the assessment order in para 3 before accepting the claim of the assessee. Therefore, on the very same issue, the PCIT cannot assume jurisdiction and set aside the assessment order.
The ld. DR, on the other hand supporting order of the PCIT, submitted that no doubt the case has been taken up for scrutiny to verify deduction claimed on account of interest expenses. However, fact remains that the AO could not carry out required enquiries he ought to have been carried in the given facts and circumstances of the case. Therefore, the :-6-: ITA. No: 87/Chny/2022 PCIT, has rightly set aside the assessment order in exercise to his powers conferred u/s. 263 of the Act, and their order should be upheld.
We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The provisions of section 263 empowers the PCIT to assume jurisdiction and set aside the assessment order passed by the AO u/s. 143(3) of the Act, if the PCIT satisfies that the assessment order passed by the AO is erroneous and prejudicial to the interests of the revenue. In order to exercise powers conferred u/s. 263 of the Act, the PCIT must satisfy that twin conditions embedded u/s. 263 of the Act, must be satisfied. In other words, the PCIT can assume jurisdiction u/s. 263 of the Act, only in a case where the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interests of the revenue. Unless, twin conditions embedded therein are satisfied, then there is no scope for the PCIT to assume jurisdiction and set aside the assessment order.
:-7-: ITA. No: 87/Chny/2022 10. In this legal background if you examine facts of the present case, one has to understand, the sole basis for the AO to take up the case for scrutiny assessment is to verify deduction claimed on account of interest expenses. During the course of assessment proceedings, the AO has called for necessary details including financial statement of the assessee and also explanation from the assessee on the issue of deduction claimed towards interest expenditure and after thoroughly examining the details filed by the assessee, accepted the claim of the assessee without any adverse comments on deductability of interest expenses claimed in the profit and loss account. In our considered view, when the AO has caused necessary enquiries on an issue and accepted the explanation furnished by the assessee, then there is no scope for the PCIT to set aside the assessment order on the very same issue by holding that the enquiries carried out by the AO was insufficient or inadequate. The law has settled by now by the decisions of the various courts including the decision of Hon’ble Supreme Court in the case of Malabar Industries Co. Ltd vs CIT (2000) 243 ITR 83 SC, is that, unless the PCIT satisfies himself that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interests of the :-8-: ITA. No: 87/Chny/2022 revenue, then there is no scope for the PCIT to set aside the assessment order. In this case, from the facts available on record, we find that the issue on which the PCIT exercise his powers conferred u/s. 263 of the Act has been subject matter of verification from the Assessing Officer during assessment proceedings. Therefore, we are of the considered view, that, exercise of powers by the PCIT u/s. 263 of the Act on the issue of interest expenditure is fails. Thus, we are of the considered view that the PCIT has completely erred in setting aside the assessment order passed by the AO u/s. 143(3) of the Act, dated 05.12.2017 and thus, we quash order passed by the PCIT u/s. 263 of the Act.