RKBK FISCAL SERVICES PVT. LTD.,KOLKATA vs. D.C.I.T,C.C-XXX, KOLKATA., KOLKATA

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ITA 441/KOL/2013Status: DisposedITAT Kolkata27 November 2015AY 2008-093 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the CIT's order under Section 263 was invalid because it failed to record the mandatory finding that the AO's order was erroneous and prejudicial to the interest of the revenue. Therefore, the CIT's order was quashed.

What were the facts?

The assessee's appeal arose from an order passed by the CIT under Section 263 of the Income Tax Act. The CIT had set aside the AO's assessment order and directed a disallowance of expenditure related to exempt income as per Rule 8D.

What were the issues?

Whether the CIT's order under Section 263 was valid without recording that the AO's order was erroneous and prejudicial to the revenue.

Which sections of the Income-tax Act were involved?

Section 263,Section 14A

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Income Tax Appellate Tribunal, KOLKATA BENCH “C” KOLKATA

Before: Shri Mahavir Singh & Shri Waseem Ahmed

आदेश /O R D E R

PER Waseem Ahmed, Accountant Member:-

1.

This appeal by the assessee is arising out of order of Commissioner of Income Tax, Kolkata-III in appeal No.CIT-III/dc(Hq)-3/Kol/263/2012-13/6727- 29 dated 30.01.2013. Assessment was framed by ACIT, Circle-7, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 16.07.2010 for assessment year 2008-09. Assessee raised the following grounds:- “1. That under the facts and circumstances of the case the learned CIT was unjustified in passing order u/s. 263 of the income Tax Act, 1961 as the order passed by the AO was neither erroneous nor prejudicial to the interest of the revenue and the same should be quashed.

RKBK Fiscal Services Pvt. Ltd. v. DCIT-CC-XXX/Kol. Page 2 2. That without prejudice to the above – a. That since the AO was satisfied with the corrections of the claim of expenditure made by the assessee the same being as per Rule 8D(1) the was no necessity of making disallowance under Rule 8D(2). b. The learned CIT erred in the setting aside the assessment of the AO and directing him to compute disallowance of expenditure relating to earning of exempt income as per provisions of Rule 8D although the AO had disallowed expenses u/s. 14A of the I.T. Act after being satisfied with the correctness of claim of expenditure made by the assessee.”

2.

At the outset, it was brought to our notice by Ld. AR of assessee that the Ld. CIT has passed the order u/s 263 of the Act without recording that the order passed by AO is erroneous in so far as it is prejudicial to the interests of Revenue. Accordingly the Ld. AR claimed that the order passed by the AO is neither erroneous nor prejudicial to the interest of revenue and prayed for quashing the said order. The issue of the case is that the Ld. CIT passed order after disallowing the expenditure relating to earning of exempted income as per provisions of Sec. 14A of the Act. However, we find from the order of Ld. CIT that Ld. CIT has nowhere recorded in his order u/s 263 of the Act that order passed by Assessing Officer is erroneous in so far as it is prejudicial to the interest of Revenue. The power of revision conferred on the Commissioner is often invoked under section 263 of the Income-tax Act on the ground that the order of the lower authority subordinate to the Commissioner is erroneous and hence, prejudicial to the interest of the Revenue.

3.

The finding of Ld. CIT is totally missing from his order that the order passed by Assessing Officer is erroneous and prejudicial to the interest of Revenue which is a mandatory requirement. It has been held in the case of CIT Vs. R.K. Metal Works 112 ITR 445 (P & H) that it is necessary to disclose such basis that the order passed by the AO is erroneous and prejudicial to the RKBK Fiscal Services Pvt. Ltd. v. DCIT-CC-XXX/Kol. Page 3 interest of the Revenue. In view of above, we are inclined to quash the order made by Ld. CIT u/s 263 of the Act which is ultra vires and not as per the provision of law.

4.

Since the order passed u/s. 263 of the Act has been quashed then the remaining issue of the assessee’s appeal does not require any adjudication.

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