Loading judgment…
Facts
The assessee appealed an order passed by the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, for the assessment year 2022-23. The assessee challenged the PCIT's jurisdiction to invoke revisionary powers.
Held
The Tribunal held that the PCIT's assumption of jurisdiction under Section 263 was erroneous, particularly as appeals on the same issues were pending before the CIT(A). The Tribunal also noted that the AO had conducted necessary enquiries before passing the original assessment order.
Key Issues
Whether the PCIT had the valid jurisdiction to invoke Section 263 powers when an appeal on the same issue was pending before the CIT(A)? Whether the original assessment order was erroneous and prejudicial to the interest of the revenue, especially when the AO had conducted inquiries?
Sections Cited
263, 143(3), 54F, 54, 142(1)
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI ABY T VARKEY & SHRI AMITABH SHUKLA
(प्रत्यर्थी/Respondent) (अपीलार्थी/Appellant) अपीलार्थी की ओर से/ Assessee by : Shri S.P.Chidambaram, Advocate, प्रत्यर्थी की ओर से /Revenue by : Shri Shivanand K Kalakeri,, CIT सुनवाई की तारीख/Date of Hearing : 09.04.2025 घोषणा की तारीख /Date of Pronouncement : 02.05.2025 आदेश / O R D E R PER AMITABH SHUKLA, A.M :
This appeal is filed by the Assessee against the order bearing DIN & Order No.ITBA / REV / F / REV5 / 2024-25 / 1068981917(1) dated 23.09.2024 of the Learned Principal Commissioner of Income Tax [herein after “PCIT(A)] for the assessment years 2022-23. 2.0 The appellant assessee has assailed the above order passed u/s 263 of the act, both on legal grounds as well as on the merits of the case. As the legal ground is seminal to the very revisionary authority of the Ld. PCIT and concerns availability of a valid jurisdiction, we choose to adjudicate the same first. Ground of appeal no.1 is general in nature and hence dismissed as being infructuous. 3.0 Through the grounds of appeal no.2, the assessee has challenged the availability of a valid jurisdiction with the Ld. PCIT to invoke his revisionary authority u/s 263 of the act. The Ld. Counsel for the assessee submitted that in its case order u/s 143(3) dated 26.03.2024 was passed by the Ld.AO determining at Rs.42,71,23,49,960/-. It was submitted that later notice u/s. 263 dated 03.05.2024 was issued by the Ld. PCIT in respect of following four issues:- i. Tax treatment of IPS in the form of refund of output SGST ii. Tax treatment of RoDTEP incentives. iii. Royalty payments made by the Appellant iv. Provision for warranty As regards item no. 3 and 4 above, the assessee submitted that consequent to its submissions, the Ld. PCIT was satisfied and hence the two items were dropped. The assessee however contended that notice u/s 263 and the consequent order dated 23.09.2024 holding the order u/s 143(3) dated 26.03.2024 as erroneous in as much as it was prejudicial to the interest of Revenue in respect of i) Tax treatment of IPS in the form of refund of output SGST and ii) Tax treatment of RoDTEP incentives was also bad in law.
Page - 2 - of 7 3.1 The Ld. Counsel for the assessee submitted that as far as the issue of Tax treatment of IPS in the form of refund of output SGST, the Ld. AO in his order u/s 143(3) dated 26.03.2024 had made an addition of Rs.183,38,41,720/-. The impugned addition was contested by the assessee before the Ld. CIT(A) through an appeal filed on 24.04.2024 vide acknowledgement No. 186317740240424. Necessary evidence in this regard has been placed through its paper book. It is the case of the assessee that the impugned appeal u/s 251 was pending final adjudication on 03.05.2024 when the notice u/s 263 was issued. It has been argued that as per the present statutory stipulations, no revisionary authority can be exercised by a PCIT u/s 263 on an issue, while an appeal u/s 251 is pending before the Ld. CIT(A) on the same issue. The assessee placed reliance upon decision of Hon’ble Jurisdictional High Court in the case of Renuka Philips as well as a catena of judgements delivered by Hon’ble Allahabad High Court and this tribunal, ITAT- Mumbai, ITAT-Rajkot on this point. 3.2 The Ld. DR would like to make us believe in the correctness of the order of Ld.PCIT u/s 263. 3.3 We have heard rival submissions in the light of material available on records. We have noted with respectful deference that Hon’ble Madras High Court in the case of Renuka Philips(2019) 101 taxman.com 119 has held as under:-
Page - 3 - of 7 “…. Therefore, in the process of considering as to what relief the assessee is entitled to, the Assessing Officer held that the assessee is entitled to claim deduction under Section 54F of the Act and assigned certain reasons for that. Therefore, the larger issue was pending before the Commissioner of Appeals, and in such circumstances, the Commissioner could not exercise power under Section 263 of the Act on account of the statutory bar. Therefore, on this ground also, the assumption of jurisdiction under Section 263 of the Act was wholly erroneous.
As noticed above, the Assessing Officer while completing the re-assessment proceedings has assigned certain reasons for coming to a conclusion that the assessee is entitled for deduction under Section 54F and not under Section 54 of the Act. This reason assigned by the Assessing Officer has been found by us to show due application of mind. As observed, we cannot expect an Assessing Officer to write a judgment. In such circumstances, the view taken by the Commissioner in his order under Section 263 of the Act has to be termed as a change http://www.judis.nic.in of opinion, or in other words, the Assessing Officer adopted one of the two views possible and in such circumstances, it cannot be stated that the order is prejudicial to the interest of the Revenue as well as erroneous. For the purpose of exercise of jurisdiction under Section 263 of the Act, the twin tests are to be satisfied and even assuming, the re- assessment order is to be held as erroneous, it cannot be stated to be prejudicial to the interest of Revenue as every erroneous order cannot be subject matter of Revision under Section 263 of the Act. Further more, if the order passed by the Commissioner under Section 263 of the Act as confirmed by the Tribunal is allowed to stand, then the very purpose of the remand order against the original re-assessment proceedings would become a fait accompli.
Thus, for the above reasons we are fully satisfied that the assumption of jurisdiction by the Commissioner under Section 263 of the Act was wholly without jurisdiction as the twin tests have not been satisfied and consequently, the order dated 14.03.2012 as confirmed by the Tribunal by order dated 13.07.2012 calls for interference. http://www.judis.nic.in....” The above ratio laid down by Hon’ble Jurisdictional High Court is fully applicable in the present case as the facts are identical. The Ld.DR could not distinguish the facts of present case with those available in the case of Renuka Philips supra. We have also noted that Hon’ble Allahabad High court in the case VAM Resorts & Hotels Pvt Ltd as well as this tribunal in a catena of cases concluded that no exercise of revisionary authority can be done by a PCIT in respect of any issue qua which an Page - 4 - of 7 Ld.CIT(A). Accordingly, in respectful compliance to the order of Hon’ble Jurisdictional High Court in the case of Renuka Philips supra as well as of other Judicial Authorities, the assessee succeeds on the arguments that the PCIT did not had adequate revisionary authority to invoke provisions of section 263 in its case on the issue of Tax treatment of IPS in the form of refund of output SGST. 3.4 Another issue raised by the assessee challenging the legality of action u/s 263, is in respect of Tax treatment of RoDTEP incentives. The Ld. Counsel for the assessee submitted that it is trite law that no action u/s 263 can be taken in respect of a matter which has been enquired into and investigated by the Ld.AO during the course of original assessment proceedings. It has been submitted that clauses a & b of explanation-2 to section 263 postulates that an order shall be deemed to be erroneous in so far as it is prejudicial to the interest of Revenue if the same is passed without making enquiries or verification and or that a relief has been given without any investigations. The Ld. Counsel for the assessee has argued that in its case during the original assessment proceedings the Ld.AO and extensively enquired into the matter and thereafter drew his conclusions of no interference to be made to assessee’s taxable income. It has been submitted that it is not a case which falls into the mischief of clauses a & b of explanation-2 to section 263. The Ld. Counsel submitted that the Ld.AO had issued a notice
Page - 5 - of 7 05.10.2023 u/s 142(1) which was replied by the appellant through his submissions dated 20.10.2023 which included its reply on tax treatment of RoDTEP incentives. In support of its argument, the Ld.Counsel has filed a voluminous paper book containing necessary evidences and the same has been placed on records. The Ld. Counsel thus pleaded that the revisionary authority exercised by the Ld.PCIT on this count also suffered from incurable deficiencies. 3.5 The Ld. DR relied upon the order of lower authorities. 3.6 We have heard rival submissions in the light of material available on records. It is settled law that, clauses a & b of explanation-2 to section 263 postulate that an order can be declared as erroneous in so far as it is prejudicial to the interest of the Revenue only in the event of appropriate enquiries and verification not done by the Ld.AO. The facts available on records clearly allude that the Ld.AO had conducted requisite enquiries on the issue Tax treatment of RoDTEP incentives before concluding that no adjustment was required to be made. Under the circumstances, subsequent invocation of revisionary action u/s 263 by PCIT is unauthorized and unwarranted. Accordingly, we are of the considered view that the assessee succeeds qua the legal contest made by it through the ground of appeal no.2. Therefore, we allow ground of appeal no.2 raised by the assessee and quash the order u/s 263 passed by the PCIT dated 23.09.2024 whereby he had held that order u/s 143(3)
Page - 6 - of 7 26.03.2024 was erroneous in so far as it was prejudicial to the interest of the Revenue. The ground of appeal no.2 raised by the assessee is allowed. 4.0 As the assessee has succeeded qua the legal challenge raised vide its grounds of appeal no.2, the grounds of appeal nos. 3 to 5 have become academic in nature and hence kept open. 5.0 In the result, the appeal of the assessee is allowed.
Order pronounced on 2nd , May -2025 at Chennai. Sd/- Sd/- (एबी टी. वर्की) (अधमताभ शुक्ला) (ABY T VARKEY) (AMITABH SHUKLA) न्याधयक सदस्य / Judicial Member लेखा सदस्य /Accountant Member चेन्नई/Chennai, धदनांक/Dated: 2nd , May -2025. KB/- आदेश की प्रतितिति अग्रेतिि/Copy to: 1. अिीिार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकर आयुक्त/CIT - Chennai 4. तिभागीय प्रतितिति/DR 5. गार्ड फाईि/GF
Page - 7 - of 7