2018 (7) TMI 2339 - ITAT MUMBAI

Revision u/s 263 - Scope of phrase “prejudicial to the interest of the Revenue” u/s. 263 - No or inadequate enquiry - HELD THAT:- AO has mentioned declaration total loss and book loss u/s 115JB in its return filed on 29/09/2011, which was processed u/s 143(1). Later on the case of the assessee was selected for scrutiny under CASS, therefore, statutory notice under section 143(2) and thereafter notice u/s 142(1) along with questionnaire were issued to the assessee. The assessee attended the proceedings from time to time and furnished the necessary details and the same were examined and placed on record. AO has also mentioned the nature of activities done by the assessee and has also mentioned disallowance of interest income on FD from Banks and interest on advances given to the contractor assessment order, it has been mentioned that the details furnished by the assessee, during scrutiny proceedings were verified and found that the assessee reduced as sum from WIP and the sources of income etc.

AO has also made discussion with respect to various interest income which were transferred to WIP and the assessee was asked to provide justification as to why the same should not be considered as income. The assessee was also asked to provide the working of 80IA of the Act and revised working of deduction u/s 80IA considering the eligibility of interest income and deduction. Subsequently, the assessee was show cause as to why the income from other sources of SEZ unit should not be disallowed for working of profit of SEZ unit and taxed separately. Discussion has also been made about rent from building and lease premium of land located at SEZ and held that it was income from other sources, not eligible for deduction under section 80IAB - Discussion has also been made with respect to disallowance u/s 14A r.w. Rule- 8D of the Rules and thereafter calculation has been made.

The assessment was framed after examination/verification of facts and on application of mind, therefore, the contention of the Revenue that due verification was not made is not substantiated from facts.

To sum up the issue, admittedly, an incorrect assumption of fact or an incorrect application of law would satisfy the requirement of order being erroneous u/s. 263 of the Act. The phrase “prejudicial to the interest of the Revenue” u/s. 263 of the Act, has to be read in conjunction with the expression “erroneous” order by the Assessing Officer. Every loss of Revenue as a consequence of assessment order cannot be termed as prejudicial to the interest of Revenue, meaning thereby, “prejudice” must be prejudice to the Revenue administration.

We set aside the order of the ld. Principal Commissioner invoking of revisional jurisdiction u/s 263 of the Act, being not within the parameters of the law, as the assessment was framed by the AO after considering necessary details filed by the assessee and on examination of the same. It is not the case that the assessment was framed in a hasty manner or without considering the factual matrix/necessary details. The jurisdiction u/s 263 of the Act could not be assumed merely stating that adequate enquiry was not made by the AO - Appeal of the assessee is allowed.