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2019 (4) TMI 1777 - AT - Income TaxRevision u/s 263 - Addition u/s 40A(3) - HELD THAT:- As per the provisions of section 263 of the Act, the CIT / PCIT on exerciser jurisdiction u/s 263 of the Act, if he consider that the order passed by the Assessing officer is erroneous in so far as it is prejudicial to the interest of Revenue. It has been held time and again by various Courts of law including the Hon'ble Apex Court of the country that for exercise of jurisdiction u/s 263 of the Act, the twin conditions must be satisfied i.e. (i) the order passed by the Assessing officer is erroneous, and; (ii) it must be prejudicial to the interest of Revenue. If any of the twin conditions is absent, the Commissioner cannot exercise jurisdiction u/s 263 of the Act. The order passed by the Assessing officer since cannot be said to be erroneous, hence, the Ld. PCIT was not authorised to invoke his powers u/s 263 of the Act and cancel the assessment order. Therefore, the order passed by the Ld. PCIT is quashed on this score alone. Even on merits, assessee has invited our attention to the trading account of the assessee for the year ended on 31.3.2012 i.e. for the assessment year under consideration to show that the assessee during the year did not make any sales. That all the payments / expenditure during the year was part of the closing stock (work in progress). That since there was no sales made during the year, hence, there was no question of booking any expenditure against any profit or loss against any sales. That since the assessee has not claimed any expenditure during the year, hence, there was no question of disallowance of any expenditure under the provisions of section 40A(3) of the I.T. Act. Since the assessee did not claim any expenditure during the year, no disallowance of expenditure can be made even under the provisions of section 40A(3) of the Act. Therefore, the order passed by the Assessing officer even on merit cannot be said to be prejudicial to the interest of Revenue. In view of the above discussion, the order passed by the Ld. PCIT u/s 263 is not sustainable in the eyes of law and the same is accordingly quashed. Appeal of the assessee is hereby allowed.
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