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Facts
The assessee filed its return of income for AY 2018-19, which was selected for limited scrutiny. The Assessing Officer (AO) passed an assessment order on 08.04.2021. The Principal Commissioner of Income Tax (PCIT) initiated proceedings under section 263 of the Income Tax Act, 1961, alleging the AO's order was erroneous and prejudicial to the revenue. The PCIT's order set aside the assessment order and directed it to be made afresh.
Held
The Tribunal noted that the PCIT initiated proceedings under section 263 based on two issues: disallowance of deduction under section 80IA and the penal nature of delay in delivery charges. The Tribunal found that the AO had considered the relevant facts and evidence, and his view was plausible. The Tribunal held that the PCIT cannot substitute the AO's view with his own understanding, nor can the scope of limited scrutiny be expanded under section 263. The Tribunal concluded that the PCIT's order was not sustainable.
Key Issues
Whether the PCIT's order u/s 263, revising the assessment order, was justified as erroneous and prejudicial to revenue, or if the AO's original assessment was based on due consideration of facts.
Sections Cited
143(3), 143(3A), 143(3B), 263, 801A, 37(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,”B” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA No. 224/JP/2024
she passed an order on 03.01.2024 set aside the assessment made in the case of the assessee company to be made a fresh based on the two issue observed.
The assessee is in appeal before the tribunal challenging that finding of the ld. PCIT vide order u/s. 263 of the Act. The bench noted that ld. DR did not accept the fact that the case of the assessee was selected for limited scrutiny therefore, it is imperative to reproduce herein below the content of the issue for selection of the case of the assessee for scrutiny:
“Dear Taxpayer,
आपके �वारा �नधा�रण वष� 2018-19 के �लए �दनांक. 19/10/2018 को पावती सं. 339318851191018 के तहत आयकर �ववरणी दा�खल करने के �लए आपको ध�यवाद ।
Thank you for filing your return of income for Assessment Year 2018-19 vide Ack, no. 339318851191018 on 19/10/2018.
2. �ववर�णका को तैयार करने म� आपके �यान एवं प�र�म को �वीकार करते हुए, कुछ मु�ो पर और �प�ट�करण क� आव�यकता है. िजनके कारण आपक� आय �ववर�णका को संवी�ा (जांच) के �लए चुना गया है, ये मु�े �ारंभ म� �न�नानुसार है:
While acknowledging the care and diligence you have taken in preparing the return, there are certain issues which need further clarification, for which your return has been selected for scrutiny and such issues initially are as under: Issues
S.No. Issues i. Addition in an earlier AY confirmed in appeal or has become final on recurring issue of law or fact.
3. उपरो�त को �यान म� रखते हुए उ�ले�खत मु�ो के उ�तर आप संबं�धत द�तावेजो (य�द कोई हो) स�हत अधोह�ता�र� को 'ई-काय�वाह�' सु�वधा म� अपने ई-फाइ�लंग वेबसाइट खाते के ज�रए (www.incometaxindiaefiling.gov.in) अपनी सु�वधानुसार, �दनांक 23/09/2019 तक या उससे पहले इले��ॉ�नक मा�यम से ��तुत कर द�।
In view of the above, you may submit your response with supporting documents (if any) on the Above mentioned issues to the undersigned electronically in ‘e-Proceedings’ facility through your account in e-Filing website (www.incometaxindiaefiling.gov.in) at your convenience on or before 23/09/2019.”
As it is evident from the above notice issued the case was selected to verify “Addition in an earlier AY confirmed in appeal or has become final on recurring issue of law or fact.” Thus, there is no contrary finding of the ld.
AO or that of the PCIT that the said aspect was not verified. But the ld. PCIT noted that the assessee’s claim of deduction though verified by the ld. AO for which the assessee filed the submission on 04.02.2021. The ld. AO cannot direct the ld. AO to reconsider that claim based upon her understanding of the law. Thus, as regards the issue of deduction u/s. 80IA is concerned the same has been verified and was based on the submission was considered at the figure claimed by the assessee and the view of the assessee is also one of the plausible view which has been taken by the ld. AO. Thus, on this aspect of the issue we do not confirm the findings of the ld. PCIT.
As regards the other issue of claim of the assessee for an amount of Rs. 38,09,558/- for delay in delivery expense. All the details is already placed on record. Even the there was no scope of verifying that aspect of the matter in the scrutiny assessment and the ld. PCIT cannot expand scope of assessment under section 263 of the Act. On this issue our Hon’ble apex court in the case of Malabar Industrial Co. Ltd. Vs CIT the court held that “Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of revenue, for example when an ITO adopted one of the courses permissible in law and it has resulted loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not of the revenue unless the view taken by the ITO is unsustainable in law.”
The bench also noted that the assessee demonstrated that the view taken by the ld. AO is not erroneous or prejudicial and the claim of the assessee is within the four corners of the law. Not only that, but assessment order has also been passed in this case by NeAC where there are as much as four units i.e. Assessment unit, Verification unit, Technical unit and Review unit and the assessment has been completed after calling for the details on the criteria of selection of the case and merely the ld. AO has not mentioned in details the examination conducted by him does not make the assessment order as prejudicial and erroneous. Our jurisdictional high court while dealing with the case of CIT Vs. Ganpat Ram Bishnoi 152 TAXMAN 242 (RAJ.) held that ;
Undoubtedly, the jurisdiction under section 263 is wide and is meant to ensure that due revenue ought to reach the public treasury and if it does not reach on account of some mistake of law or fact committed by the Assessing Officer, the CIT can cancel that order and require the concerned Assessing Officer to pass a fresh order in accordance with law after holding a detailed enquiry. But when enquiry in fact has been conducted and the Assessing Officer has reached a particular conclusion, though reference to such enquiries has not been made in the order of the assessment, but the same is apparent from the record of the proceedings, in the present case, without anything to say how and why the enquiry conducted by the Assessing Officer was not in accordance with law, the invocation of jurisdiction by the CIT was unsustainable. As the exercise of jurisdiction by the CIT is founded on no material, it was liable to be set aside.
Fatehpuria Transformers and Switchgears Pvt. Ltd. vs. PCIT Jurisdiction under section 263 cannot be invoked for making short enquiries or to go into the process of assessment again and again merely on the basis that more enquiry ought to have been conducted to find something.
The finding of the Tribunal that the ITO had passed assessment order after relevant enquiries and considering the aspects of the matter required by the CIT to be considered by him is a finding of fact and on the basis of which, the jurisdiction assumed by the CIT being non-existent must be held to be not sustainable. Consequently, the appeal fails and is hereby dismissed.
Thus, the prerequisite for exercising the jurisdiction by the learned Principal CIT under section 263 of the Act is that the order of the AO is established to be erroneous in so far as it is prejudicial to the interest of the Revenue. The ld. PCIT has to be satisfied of twin conditions, namely (i) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If any one of them is absent i.e., if the assessment order is not erroneous but it is prejudicial to the Revenue, provision of section 263 cannot be invoked. This provision cannot be invoked to correct each, and every type of mistake or error committed by the AO; it is only when an order is erroneous as also prejudicial to Revenue's interest, than the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase 'prejudicial to the interest of the Revenue has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue as a consequence of the Revenue. It is pertinent to mention that if the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two views are possible and AO has taken one view with which the Pr. CIT does not agree, it cannot be treated as an erroneous order and it is prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law. In this process even the AO has no power to review his own. In this regard, we draw strength from the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co.
Ltd. vs. CIT (2000) 109 Taxman 66(SC) wherein it was held that:
"A bare reading of section 263(1) makes it clear that the pre-requisite to exercise of jurisdiction by the Commissioner suomotu under it, is that the order of the ITO is erroneous insofar as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent if the order of the ITO is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to section 263(1)." "The phrase 'prejudicial to the interests of the revenue' has to 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 Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopts one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. of the pre-requisite before invoking S. 263 and the allegation of the Ld.
PCIT is that there has been incorrect assumption of fact and law by the Assessing Officer. However, despite our deep and careful consideration of the material on record and the findings recorded in the order under challenge, we do not find any incorrectness and incompleteness in the appreciation of facts made by ld. AO. Thus, considering the discussion so recorded here in above we are of the considered view that the ld. PCIT cannot substitute the view taken by the ld. AO as per his understanding of facts of the case and the scope of limited scrutiny cannot be expanded while exercising the power u/s. 263 of the Act. In view of the above, and after considering the facts in totality, we hold that the order passed u/s 263 of the Act is not sustainable. Accordingly, we quash the same.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 29/08/2024.
Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 29/08/2024 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Fatehpuria Transformers and Switchgears Pvt. Ltd., Kalwar Road. izR;FkhZ@ The Respondent- PCIT, Jaipur-1 2. 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत xkMZ QkbZy@ Guard File (ITA No. 224/JP/2024) 6. vkns'kkuqlkj@ By order,
सहायक पंजीकार@Aेेज. त्महपेजतंत