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Facts
The Revenue has appealed against three orders concerning assessment years 2008-09, 2010-11, and 2011-12. These appeals arise from revision orders passed under section 263 of the Income-tax Act, 1961, which were subsequently quashed by the Income-tax Appellate Tribunal (ITAT). The ITAT found that the Assessing Officer had adopted a possible view, and the revisionary power under section 263 was not legally sustainable.
Held
The Tribunal held that the revisionary order passed by the Principal Commissioner of Income-tax (PCIT) under section 263 was not legally sustainable because it did not find the Assessing Officer's order to be erroneous and prejudicial to the interest of the revenue. Consequently, the assessment orders passed to give effect to the revisionary order could not survive. The learned CIT(A) correctly followed the ITAT's finding and declared the assessment order unsustainable in law.
Key Issues
Whether the revision order passed under Section 263 was sustainable when the Assessing Officer had taken a possible view and the order was not found to be erroneous and prejudicial to the revenue.
Sections Cited
263
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Income Tax Appellate Tribunal, MUMBAI BENCH “D” MUMBAI
Before: SHRI OM PRAKASH KANT & MS. KAVITHA RAJAGOPAL
issue in dispute is involved and therefore same were heard together issue in dispute is involved and therefore same were heard together issue in dispute is involved and therefore same were heard together and disposed off by way of this consolidated order for convenience. and disposed off by way of this consolidated order for convenience. and disposed off by way of this consolidated order for convenience.
In all these appeal, th In all these appeal, the assessment order in question e assessment order in question have been passed pursuant pursuant to the revision order u/s 263 of the Income order u/s 263 of the Income- passed by the Principal tax Act, 1961 (in short ‘the Act’) tax Act, 1961 (in short ‘the Act’) passed by the Principal Commissioner of Income Commissioner of Income-tax ( in short the PCIT). The Income . The Income-tax in separate orders has Appellate Tribunal ( in short ‘the ITAT’) ( in short ‘the ITAT’) in separate orders has quashed the revision order passed by the Ld. P ion order passed by the Ld. PCIT. Accordingly CIT. Accordingly before us, the Ld. counsel for the assessee submitted that when all before us, the Ld. counsel for the assessee submitted that when all before us, the Ld. counsel for the assessee submitted that when all the revision order passed by the Ld. PCIT u/s 263 the three years, the revision order passed by the Ld. PCIT u/s 263 the revision order passed by the Ld. PCIT u/s 263 has been quashed, the consequent assessment order the consequent assessment order the consequent assessment orders passed by the Assessing Officer to give effect to the direction of the Ld. PCIT the Assessing Officer to give effect to the direction of the Ld. PCIT the Assessing Officer to give effect to the direction of the Ld. PCIT cannot survive. The relevant finding of the ITAT passed in survive. The relevant finding of the ITAT passed in survive. The relevant finding of the ITAT passed in ITA No. 3665/Mum/2014 for assessment year 2008 3665/Mum/2014 for assessment year 2008-09 is reproduced as 09 is reproduced as under:
“21. Thus once it is held that the Assessing Office 21. Thus once it is held that the Assessing Officer has adopted one of r has adopted one of the two possible view with which learned CIT does not agree, the same the two possible view with which learned CIT does not agree, the same the two possible view with which learned CIT does not agree, the same does not give learned CIT(A) jurisdiction to exercise revisionary power does not give learned CIT(A) jurisdiction to exercise revisionary power does not give learned CIT(A) jurisdiction to exercise revisionary power u/s. 263 of the Act. Moreover, as we have already held above that by u/s. 263 of the Act. Moreover, as we have already held above that by u/s. 263 of the Act. Moreover, as we have already held above that by asking the Assessing Off asking the Assessing Officer to make further examination without any icer to make further examination without any finding about the order being erroneous and prejudicial to the interest of finding about the order being erroneous and prejudicial to the interest of finding about the order being erroneous and prejudicial to the interest of revenue the learned CIT(A) has clearly erred and hence his order is not revenue the learned CIT(A) has clearly erred and hence his order is not revenue the learned CIT(A) has clearly erred and hence his order is not sustainable. Explanation (2) added to section 263 of the Act can sustainable. Explanation (2) added to section 263 of the Act can sustainable. Explanation (2) added to section 263 of the Act cannot come to the rescue of revenue as the same is not applicable for the come to the rescue of revenue as the same is not applicable for the come to the rescue of revenue as the same is not applicable for the current assessment year. current assessment year.
More so, because we have held that the Assessing Officer’s view is 22. More so, because we have held that the Assessing Officer’s view is 22. More so, because we have held that the Assessing Officer’s view is a possible view. On the touchstone of Hon'ble Bombay High Court a possible view. On the touchstone of Hon'ble Bombay High Court a possible view. On the touchstone of Hon'ble Bombay High Court decision in the case of decision in the case of State Bank of India (supra), the issue having State Bank of India (supra), the issue having been detailed in the computation of income and case law referred been detailed in the computation of income and case law referred been detailed in the computation of income and case law referred therein and the Assessing Officer having accepted that, it cannot be therein and the Assessing Officer having accepted that, it cannot be therein and the Assessing Officer having accepted that, it cannot be said that the Assessing Officer has not applied his mind in that issue. said that the Assessing Officer has not applied his mind in that issue. said that the Assessing Officer has not applied his mind in that issue. Thus in the background of the aforesaid discussion and precedent, we s in the background of the aforesaid discussion and precedent, we s in the background of the aforesaid discussion and precedent, we
Deutsche Investments India Pvt. Ltd. Deutsche Investments India Pvt. Ltd. 3 to 3504/MUM/2024 to 3504/MUM/2024 are of the considered opinion that learned CIT could not have legally are of the considered opinion that learned CIT could not have legally are of the considered opinion that learned CIT could not have legally assumed jurisdiction u/s. 263 of the Act to ask the Assessing Officer to assumed jurisdiction u/s. 263 of the Act to ask the Assessing Officer to assumed jurisdiction u/s. 263 of the Act to ask the Assessing Officer to make a denovo examination by making further exa make a denovo examination by making further examination without mination without finding order being erroneous as well as prejudicial to the interest of finding order being erroneous as well as prejudicial to the interest of finding order being erroneous as well as prejudicial to the interest of revenue. We further note that learned Counsel of the assessee has revenue. We further note that learned Counsel of the assessee has revenue. We further note that learned Counsel of the assessee has given case laws for the proposition that the method adopted by given case laws for the proposition that the method adopted by given case laws for the proposition that the method adopted by assessee for claiming deduction for br assessee for claiming deduction for broken period expenses and mark oken period expenses and mark to market loss is having judicial acceptance. These were also before to market loss is having judicial acceptance. These were also before to market loss is having judicial acceptance. These were also before learned CIT(A), who has not cogently dislodged the reliance placed on learned CIT(A), who has not cogently dislodged the reliance placed on learned CIT(A), who has not cogently dislodged the reliance placed on the case law.
The case law of Raj Mandir Estate (supra) referred by learned 23. The case law of Raj Mandir Estate (supra) referred by learned 23. The case law of Raj Mandir Estate (supra) referred by learned Departmental Representative was with respect to bogus share capital ental Representative was with respect to bogus share capital ental Representative was with respect to bogus share capital and share premium allowed by the Assessing Officer without proper and share premium allowed by the Assessing Officer without proper and share premium allowed by the Assessing Officer without proper enquiry and in that context on the facts of that case Hon'ble Apex Court enquiry and in that context on the facts of that case Hon'ble Apex Court enquiry and in that context on the facts of that case Hon'ble Apex Court has observed that no prejudice will be caused to the ass has observed that no prejudice will be caused to the ass has observed that no prejudice will be caused to the assessee by re examination by the Assessing Officer. This case law is not applicable on examination by the Assessing Officer. This case law is not applicable on examination by the Assessing Officer. This case law is not applicable on the facts here. The case law from Hon'ble Delhi High Court in the case the facts here. The case law from Hon'ble Delhi High Court in the case the facts here. The case law from Hon'ble Delhi High Court in the case of Gee Vee Enterprises (99 ITR 375) is not applicable on the facts of this of Gee Vee Enterprises (99 ITR 375) is not applicable on the facts of this of Gee Vee Enterprises (99 ITR 375) is not applicable on the facts of this case. This case law was d case. This case law was duly referred to in Hon'ble Delhi High Court uly referred to in Hon'ble Delhi High Court decision in the case of ITO Vs. D.G. Housing Projects Ltd. (343 ITR 329) decision in the case of ITO Vs. D.G. Housing Projects Ltd. (343 ITR 329) decision in the case of ITO Vs. D.G. Housing Projects Ltd. (343 ITR 329) and Hon'ble High Court has observed as under : and Hon'ble High Court has observed as under :- “It is in this context that the Supreme Court in Malabar Industrial Co. “It is in this context that the Supreme Court in Malabar Industrial Co. “It is in this context that the Supreme Court in Malabar Industrial Co. Ltd. vs. Commission Ltd. vs. Commissioner of Income Tax, (2000) 243 ITR 83 (SC), had er of Income Tax, (2000) 243 ITR 83 (SC), had observed that the phrase “prejudicial to the interest of Revenue” has to observed that the phrase “prejudicial to the interest of Revenue” has to observed that the phrase “prejudicial to the interest of Revenue” has to be read in conjunction with an erroneous order passed by the Assessing be read in conjunction with an erroneous order passed by the Assessing be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of Revenue as a consequence of an order of the Officer. Every loss of Revenue as a consequence of an order of the Officer. Every loss of Revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of Assessing Officer cannot be treated as prejudicial to the interest of Assessing Officer cannot be treated as prejudicial to the interest of Revenue. Thus, when the Assessing Officer had adopted one of the Revenue. Thus, when the Assessing Officer had adopted one of the Revenue. Thus, when the Assessing Officer had adopted one of the courses permissible and available to him, and this has resulted in loss courses permissible and available to him, and this has resulted in loss courses permissible and available to him, and this has resulted in loss to Revenue; or two views were possible and the A to Revenue; or two views were possible and the Assessing Officer has ssessing Officer has taken one view with which the CIT may not agree; the said orders taken one view with which the CIT may not agree; the said orders taken one view with which the CIT may not agree; the said orders cannot be treated as an erroneous order prejudicial to the interest of cannot be treated as an erroneous order prejudicial to the interest of cannot be treated as an erroneous order prejudicial to the interest of Revenue unless the view taken by the Assessing Officer is Revenue unless the view taken by the Assessing Officer is Revenue unless the view taken by the Assessing Officer is unsustainable in law. In such matters, th unsustainable in law. In such matters, the CIT must give a finding that e CIT must give a finding that the view taken by the Assessing Officer is unsustainable in law and, the view taken by the Assessing Officer is unsustainable in law and, the view taken by the Assessing Officer is unsustainable in law and, therefore, the order is erroneous. He must also show that prejudice is therefore, the order is erroneous. He must also show that prejudice is therefore, the order is erroneous. He must also show that prejudice is caused to the interest of the Revenue.” caused to the interest of the Revenue.” The above case law duly supports the case of The above case law duly supports the case of the assessee. the assessee.
Since the issue has been decided by following Hon'ble Supreme 24. Since the issue has been decided by following Hon'ble Supreme 24. Since the issue has been decided by following Hon'ble Supreme Court & Hon'ble Bombay High Court decisions directly applicable, Hon'ble Bombay High Court decisions directly applicable, Hon'ble Bombay High Court decisions directly applicable, dealing with other dealing with other case laws referred by learned Departmental case laws referred by learned Departmental Representative is only of academic Representative is only of academic interest.
We have already quashed the order of learned CIT(A) on the ground We have already quashed the order of learned CIT(A) on the ground We have already quashed the order of learned CIT(A) on the ground that assumption of jurisdiction on matters for denovo examination by assumption of jurisdiction on matters for denovo examination by assumption of jurisdiction on matters for denovo examination by the Assessing Officer is not legally sustainable, we are of the opinion Officer is not legally sustainable, we are of the opinion that adjudicating upon that adjudicating upon merits of the issues is only of academic interest nly of academic interest and we are not engaging into and we are not engaging into the same.”
Deutsche Investments India Pvt. Ltd. Deutsche Investments India Pvt. Ltd. 4 to 3504/MUM/2024 to 3504/MUM/2024 2.1 Following the above finding of the ITAT, the Ld. CIT(A) held the Following the above finding of the ITAT, the Ld. CIT(A) held the Following the above finding of the ITAT, the Ld. CIT(A) held the assessment order unsustainable in law observing as under: assessment order unsustainable in law observing as under: assessment order unsustainable in law observing as under:
4.2. Perusal of the above order reveals that the Hon’ble ITAT 4.2. Perusal of the above order reveals that the Hon’ble ITAT 4.2. Perusal of the above order reveals that the Hon’ble ITAT has quashed the order u/s 263 of the Act passed by CIT quashed the order u/s 263 of the Act passed by CIT-6, Mumbai on 6, Mumbai on 26.03.2014 with a detailed reason and therefore, the assessment order 26.03.2014 with a detailed reason and therefore, the assessment order 26.03.2014 with a detailed reason and therefore, the assessment order passed u/s 143(3) in pursuance of the order u/s 263 of the Act itself passed u/s 143(3) in pursuance of the order u/s 263 of the Act itself passed u/s 143(3) in pursuance of the order u/s 263 of the Act itself doesn’t survive. Hence, the present appeal again doesn’t survive. Hence, the present appeal against the order u/s 143(3) st the order u/s 143(3) r.w.s. 263 of the Act becomes infructuous and doesn’t require any r.w.s. 263 of the Act becomes infructuous and doesn’t require any r.w.s. 263 of the Act becomes infructuous and doesn’t require any specific adjudication. specific adjudication.
In all the three years, the Revenue also in its grounds has In all the three years, the Revenue also in its grounds has In all the three years, the Revenue also in its grounds has challenged the order of the Ld. CIT(A) merely for the reason that challenged the order of the Ld. CIT(A) merely for the reason that challenged the order of the Ld. CIT(A) merely for the reason that Income-tax Department has already preferred appeal against order partment has already preferred appeal against order partment has already preferred appeal against order of the ITAT quashing the of the ITAT quashing the revision order of the PCIT passed u/s 263 order of the PCIT passed u/s 263 of the Act. We don’t find any We don’t find any infirmity in the order of the Ld. CIT(A) infirmity in the order of the Ld. CIT(A) in following the order of the ITAT and holing the appeal as in following the order of the ITAT and holing the appeal as in following the order of the ITAT and holing the appeal as infructuous. The finding of the Ld. CIT(A) on the issue in dispute is tuous. The finding of the Ld. CIT(A) on the issue in dispute is tuous. The finding of the Ld. CIT(A) on the issue in dispute is accordingly upheld for assessment year 2008 accordingly upheld for assessment year 2008-09 09, 2010-11 and 2011-12. The grounds of the assessee in three appeals are The grounds of the assessee in three appeals are The grounds of the assessee in three appeals are accordingly allowed.
In the result, all the three appeals of the Reven In the result, all the three appeals of the Reven In the result, all the three appeals of the Revenue are dismissed.