2023 (7) TMI 224 - ITAT DELHI

Revision u/s 263 by CIT - VAT liability was not considered for disallowance u/s 43B - HELD THAT:- The powers u/s 263 can be exercised if the order sought to be revised is erroneous inasmuch as prejudicial to the interests of the Revenue. Hence twin conditions are required to be satisfied – one being that order should be erroneous and second, such order should be prejudicial to the interests of the Revenue.

The basis of exercising the power by the learned Pr. CIT is that the AO failed to verify the correctness of the disallowance made in the tax audit report. During the course of hearing the learned counsel for the assessee has pointed that the learned Pr. CIT failed to consider the fact that no disallowance could be made in the case of VAT as the amount was duly deposited before the due date of filing of the return of income.

EPF contribution - as pointed out that the assessee itself had made disallowance, hence no prejudice was caused to the Revenue. DR could not rebut the submissions of the assessee regarding VAT, paid in the government account before the due date of filing of the return of income u/s 139(1) of the Act and also the disallowance made by the assessee itself in respect of EPF.

It was not a fit case for exercising powers u/s 263 as the learned Pr. CIT did not verify the correct facts from the records before embarking upon the issuance of notice u/s 263 of the Act and initiating the proceedings. We, therefore, set aside the impugned order and restore the original assessment order passed by the AO. Decided in favour of assessee.