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Facts
The assessee filed an appeal against the PCIT's order dated 25.03.2021, passed under Section 263, contending it was bad in law and beyond the statutory time limit. The original assessment order was passed on 28.12.2017. The assessee also argued the order was illegal as it was passed against a non-existent entity and challenged the disallowance of interest on inter-corporate deposits.
Held
The Tribunal found that the PCIT's order under Section 263 was passed on 25.03.2021, while the assessment order was on 28.12.2017. Applying the two-year limitation period specified in Section 263(2), the Tribunal held that the PCIT's order was barred by limitation.
Key Issues
Whether the order passed by the PCIT under Section 263 was within the statutory period of limitation as prescribed by Section 263(2) of the Income Tax Act.
Sections Cited
Section 263, Section 143(3), Section 92CA, Section 144A, Section 119, Section 120, Section 129
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘H’, NEW DELHI
Before: Dr. B. R. R. Kumar, Sh. Sudhir Kumar
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the assessee against the order of ld. PCIT, Delhi-7 dated 25.03.2021.
2. Following grounds have been raised by the assessee:
“1. On the facts and circumstances of the case, the order passed by the learned Principal Commissioner of Income Tax, Delhi-07 (Pr. CIT) under Section 263 of the Act is bad, both in the eye of law and on facts.
On the facts and circumstances of the case, the order passed by the learned Pr. CIT is bad in law as the same has been passed beyond the statutory time limit prescribed under the Income Tax Act.
On the facts and circumstances of the case, the order passed by the learned Principal Commissioner of Income Tax, Delhi-07 (Pr. CIT) under Section 263 of the Act is illegal and void ab initio as the same has been passed in the name of the Shams Professional Pvt. Ltd. non-existent entity which has already been amalgamated with M/s Ashvins Agri Products Pvt. Limited.
4. On the facts and circumstances of the case, the learned Pr. CIT has erred both on facts and in law in passing the order without providing reasonable opportunity of being heard to the assessee in clear violation of principle of natural justice.
5. On the facts and circumstances of the case, the order passed by the learned Pr. CIT cancelling the assessment order passed by the A.O. is untenable in the absence of order of the A.O being erroneous as well as prejudicial to the interest of the Revenue.
On the facts and circumstances of the case, the learned Pr. CIT has erred both on facts and in law in invoking section 263 on the issues which were beyond the reason for which case of the assessee was selected for limited scrutiny for the original assessment proceedings under section 143(3) of the Act.
On the facts and circumstances of the case, the learned Pr. CIT has erred both on facts and in law in ignoring the contention of the assessee that issue of interest on unsecured loans does not fall within the subject matter of assessment before the AO and accordingly the same is out of the jurisdiction of the PCIT under section 263 of the Income Tax Act.
On the facts and circumstances of the case, the learned Pr. CIT has erred both on facts and in law in ignoring the judicial precedents wherein it has been held that revisionary powers under section 263 cannot be exercised on the matters which are not covered by the limited scrutiny assessment.
On the facts and circumstances of the case, the learned Pr. CIT has erred both on facts and in law in invoking revisionary power under Section 263 of the Act despite the fact that even after thorough examination, no specific findings have been given on the issue how the order is erroneous and prejudicial to the interest of Revenue. 10. (i) Without prejudice to the above, learned PCIT has erred in directing the AO to disallow the interest of Rs. 6,48,28,275/- on inter corporate deposits given as interest free advances to PUN Undertakings Network Private Limited. (ii) That the abovesaid directions have been given ignoring the contention of the assessee that these advances have given for the business purposes and hence the interest claimed by the assessee is an allowable expenditure under the Income Tax Act Shams Professional Pvt. Ltd. (iii) That the above action of the learned Pr. CIT is in total disregard to the submissions and explanations along with the evidences brought on record by the assessee in this regard.” 3. In this case, the Assessment order has been passed on 28.12.2017 and the ld. PCIT passed order u/s 263 on 25.03.2021. The provisions of Section 263 with regard to the limitation are as under:
Revision of orders prejudicial to revenue. 263. (1) The 99[Principal Chief Commissioner or Chief Commissioner or Principal Commissioner] or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer 1[or the Transfer Pricing Officer, as the case may be,] is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, 2[including,— (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) an order modifying the order under section 92CA; or (iii) an order cancelling the order under section 92CA and directing a fresh order under the said section]. Explanation 1.—For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,— (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer 1[or the Transfer Pricing Officer, as the case may be,] shall include— (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer 3[or the Transfer Pricing Officer, as the case may be,] conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director Shams Professional Pvt. Ltd. General or Director General or Principal Commissioner or Commissioner authorised by the Board in this behalf under section 120; [(iii) an order under section 92CA by the Transfer Pricing Officer;] (b) record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer 3[or the Transfer Pricing Officer, as the case may be,] had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Principal Commissioner or Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer 3[or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner,— (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. [Explanation 3.—For the purposes of this section, "Transfer Pricing Officer" shall have the same meaning as assigned to it in the Explanation to section 92CA.] (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.
Shams Professional Pvt. Ltd. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, the High Court or the Supreme Court. Explanation.—In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded.”
Hence, keeping in view, the provisions of Section 263(2), we have no hesitation to hold that the order of ld. PCIT is barred by limitation.
In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 29/08/2024.