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2022 (3) TMI 471 - AT - Income TaxRevision u/s 263 by CIT - Period of limitation - Reopening of assessment against assessee concluded - HELD THAT:- As first order u/s 143 (3) of the act was passed by AO on 25th of March 2015. Subsequently the case was reopened and reassessment order u/s 143 (3) read with Section 147 of the act was passed on 31 December 2018. Therefore, apparently if the learned PCIT would like to revise the order passed u/s 143 (3) of the act which was passed on 25th of March 2015, the time limit set under the provisions of Section 263 (2) of the act would expire on 31st of March 2017. If the principal Commissioner of income tax points that order passed u/s 143 (3) read with Section 147 of the act passed on 31 December 2018 is erroneous, then the order u/s 263 could have been passed up to 31st of March 2021. In the present case the order u/s 263 of the act was passed on 31st of March 2021. Therefore, apparently the issues that have been covered in order passed u/s 143 (3) of the act but are not part of reopened proceedings, cannot be subject to revision u/s 263 of the income tax act by this order. As we have already stated that the time limit for revising the issues involved in the original assessment order has already expired on 31/3/2017, therefore the revision on the above issues namely (1) the consideration of loss on repossessed vehicle is bad debts and not in the business loss, (2) disallowance of unpaid leave encashment u/s 43B (f) of the act is beyond the powers of the ld PCIT u/s 263 of the act. Therefore without looking into the merits of the case, we hold that the order of the learned PCIT is not sustainable on the above 2 issues. Revisional powers u/s 263 with respect to the deduction claimed u/s 36 (1) (viii) - whether the correct lease rental income has been reduced by the assessee and ld AO in computing the income from long-term finance or not - Gross lease rental income and Arrears of lease Income should have been reduced for working out the long-term finance income. The expenditure of interest should not have been reduced from gross lease income. AO has not at all verified the above adjustment made while arriving at lease income. Therefore it is apparent that the AO has not made necessary enquiries with respect to the computation of deduction u/s 36 (1) (viii) of the act with respect to what amount of lease rent should be reduced from the long-term finance income of the assessee to arrived at deduction u/s 36 (1) (viii) of the act. This inquiry is just and proper, and should have been made by the ld AO. With respect to the inclusion of interest on income tax refund considered both by the assessee as well as by the learned assessing officer as part of long-term finance income of the assessee, the assessee itself agreed that there is an error and it should not have been included in the long-term finance income of the assessee. Therefore on both these issues AO has failed to make any enquiries to examine whether the correct lease rental income as well as interest on income tax refund should have been included in the long-term finance income of the assessee for working out deduction u/s 36 (1) (viii) of the act. Hence, on both these issues, we do not find any infirmity in the order of the learned principal Commissioner of income tax in invoking jurisdiction u/s 263 of the income tax act. Accordingly the action of the learned principal Commissioner of income tax u/s 263 of the act is confirmed to that extent only. Computation of the long-term finance income of the assessee for working out deduction u/s 36 (1) (viii) - CIT has revised the order of the learned assessing officer holding it to be erroneous as the learned assessing officer has failed to apply his mind with respect to the computation of the long-term finance income qua reduction of lease rental income as well as interest income from income tax refund. Even otherwise there is no decision of the learned CIT – A on these issues, therefore it cannot be said that the learned Commissioner of Income Tax (Appeals) has ‘considered and decided’ the issue of whether the lease rental income and interest income on income tax refund is part of the long-term finance income of the assessee or not. Therefore, this argument of the learned authorised representative stands rejected. In the result we hold that the learned principal Commissioner of income tax is correct in setting aside the assessment order passed u/s 143 (3) rws 147 of the Act dated 31-12-2018 by passing an order u/s 263 of the income tax act with respect to the deduction claimed u/s 36 (1) (viii) of the act for excluding the correct amount of lease rental income and interest income on income tax refund for working out long-term finance income of the assessee. With respect to the issue of repossessed vehicles to be treated as bad debts and non-disallowance of unpaid leave encashment, as already held above the order of the learned principal Commissioner of income tax is not sustainable in law. Therefore on these two issues the order of the learned principal Commissioner of income tax is quashed. - Decided in favour of assessee in part.
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