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2023 (12) TMI 203 - AT - Income TaxRevision u/s 263 - as per CIT foreign payments made directly by the Indian Project Owners to Head Office, and the nature/scope of offshore services were not examined either by the TPO or by the AO during the assessment proceedings - HELD THAT:- The foreign payments made directly by the Indian Project Owners to Head Office, and the nature/scope of offshore services were not examined either by the TPO or by the AO during the assessment proceedings. TPO, accepted the domestic payments made by the Indian Project Owners to Project Offices to be at arm’s length and thereafter, on 30/05/2021 the AO passed Assessment Order u/s 143(3) of the Act accepting the retuned income as assessed income. It is clear that after initial query, no further follow-up query or information was sought by the Assessing Officer. In our view, the AO should have enquired into both the payments made to Project Offices as well as the Head Office. On perusal of notice issued by the Assessing Officer and reply filed by the Appellant, it is clear that only the issue pertaining to domestic payments made by the Indian Project Owners to the Project Offices were examined by the Assessing Officer and by the TPO. According to Explanation 2 to Section 263 of the Act assessment order is deemed to be erroneous in so far as prejudicial to the interest of the Revenue in case in the opinion of CIT such assessment order has been passed allowing any relief without enquiring into the claim. When the material on record reflects that the assessment proceedings were concluded without enquiry/investigation into the scope of services provided by the Head Office, apportionment of payments between Project Office and Head Office as per contract, and the consequent payments made by the Indian Project Owners directly to the Head Office, the question of inferring with these issues would have been examined by the Assessing Officer/TPO during the assessment proceedings does not arise. Therefore, the judicial precedents relied by both the sides relating to computation/allowance/disallowance of deduction do not apply to the facts of the present case. In the present case, the relief under the provisions of tax treaty has been granted to the Appellant without inquiring into the nature and scope of offshore services. AO has also failed to make necessary enquiry/verification regarding the income attributable to the Project offices in India. In our view, the CIT had jurisdiction to exercise power of revision u/s 263 of the Act since AO had failed to carry out necessary enquiry and verification warranted in the facts and circumstances of the present case triggering provisions of Explanation 2 to Section 263 - Thus, we concur with the CIT that the Assessment Order, dated 30/05/2021, passed under section 143(3) of the Act was erroneous insofar as prejudicial to the interest of Revenue, and therefore, we hold that the CIT was justified in setting aside the same. Assessee appeal dismissed.
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