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2016 (10) TMI 696

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..... of it we are of the view that in the present case Ld. CIT was not justified in resorting to revisionary powers u/s. 263 of the Act, we therefore set aside the order of CIT cancelling the order dated 28/03/2013 passed u/s. 143(3) of the Act. Thus, the grounds of the Assessee are allowed. - I.T.A. No.1461/Ahd/2015 - - - Dated:- 31-8-2016 - SHRI RAJPAL YADAV, JUDICIAL MEMBER And SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER For The Appellant : Shri N.B. Shah, AR For The Respondent : Shri James Kurian, Sr.DR ORDER PER SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER : This appeal by the Assessee is directed against the order of the Principal Commissioner of Income Tax-1, Ahmedabad dated 31/03/2015 for the Assessment Year (AY) 2010-11 passed u/s.263 of the Act. 2. The relevant facts as culled out from the materials on record are as under:- 2.1. Assessee is a company stated to be engaged in the business of trading in pharmaceutical products on wholesale basis. Assessee filed its return of income for AY 2010-11 on 30/09/2010 declaring total income of ₹ 7,66,12,650/-. The case was finalized u/s.143(3) vide order dated 28/03/2013 and the total income was determine .....

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..... der on the premises of assumption, presumption, surmises and conjectures that since the appellant assessee has claimed credit for TDS amounting to ₹ 3,16,99,286/- the corresponding income relating to such TDS should be ₹ 31,69,92,860/- against which the appellant has disclosed receipts of ₹ 29,19,49,163/- and thus the appellant assessee has understated its income to the extent of ₹ 2,50,43,697/-. The learned Principal Commissioner of Income Tax-1, Ahmedabad has erred in law and on facts of the case in passing the impugned order without appreciating the fact that while making the payments to the appellant assessee towards the professional fees, the deductor company has also made TDS from the service tax charged by the appellant on the invoices of the deductor company and that the service tax so collected by the appellant is not revenue receipt or income chargeable to tax in the hands of the appellant company and therefore the same is not includible in the income of the appellant company. Thus, in reality, there is no understatement of income of ₹ 2,50,43,697/- as alleged in the impugned order. The learned Principal Commissioner of Income Tax .....

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..... t arises only when the assessee fails to pay the demand raised as per the assessment order within the stipulated time. There is no provision in the Income Tax Act for charging interest u/s. 220(2) before the demand has fallen due for payment. Therefore, there is no error in the assessment order u/s. 143(3) dated 28/03/2013 in so far as the issue of charging the interest u/s. 220(2) is concerned. c) The learned Principal Commissioner of Income Tax-1, Ahmedabad has erred in law and on facts of the case in passing the impugned order for not charging the interest u/s. 220(2) in the assessment order itself in utter disregard to the fact that as a result of the appellate order passed by the CIT(A) dated 20/02/2015, the entire demand raised as per the assessment order has been reduced to nil. It is therefore prayed that the impugned order may please be cancelled. 3. a) The learned Principal Commissioner of Income Tax-1, Ahmedabad has erred in law and on facts of the case in passing the impugned order holding that the assessment order was made without appreciating the provisions of law correctly and the income of the assessee was assessed after allowing in admissible deductions .....

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..... .1. Before us, ld.AR submitted that in the present case the prerequisite conditions specified u/s.263 of the Act were not satisfied and therefore the proceedings u/s.263 lacks jurisdiction and are bad in law. He further submitted that the initiation of revisionary proceedings has been initiated at the instance of audit party objections. He further submitted that the assessment order has been passed after proper verification of the facts and the evidences produced by the AO and there is no loss of Revenue to the exchequer as alleged by ld.CIT in the order passed u/s.263 of the Act. He further submitted that before passing the order u/s.143(3), the AO had issued detailed notice and questionnaire and called for the details and the assessee had also replied to the queries raised in questionnaire and after verifying the contention of the assessee, the income was accepted by the AO. On the merits, ld.AR reiterated the submissions made before the ld.CIT and further submitted that with respect to the service income, the assessee was charging service tax @10.3% on the bills raised by it. The assessee was also raising debit notes for reimbursement of expenses. The recipient of the services w .....

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..... nces of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. 4.2. The reading of the above provisions makes it very clear that the power of suo motu revision u/s 263(1) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision u/s 263, namely (i) the order is erroneous (ii) by virtue of being erroneous prejudice has been caused to the interests of the Revenue. 4.3. In the present case, it is seen that Section 263 has been invoked by ld.CIT on two grounds namely assessee had not offered the income corresponding to the claim of TDS made by Assessee and AO had not charged interest u/s.220(2) of the Act. 4.4. In the present case, we find that during the course of assessment proceedings AO had raised a specific query wherein the assessee was asked to furnish the details of income from all operations alongwith the necessary evidences. The query was replied by the assessee . It is seen that on receipt of reply from Assessee, no adjustment to .....

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..... l to the interest of the Revenue. But that by itself will not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, namely, the order is erroneous, is absent. Similarly if an order is erroneous but not prejudicial to the interest of the Revenue, then also the power of suo motu revision cannot be exercised. Any and every erroneous order cannot be subject-matter of revision because the second requirement also must be fulfilled. 4.7. We also find that Hon ble Apex Court in the case of CIT vs. Max India Ltd. 295 ITR 282 (SC) had held that where two views are possible and ITO has taken one view which ld. CIT does not agree the order of A.O cannot be treated as erroneous order prejudicial to the interest of Revenue unless the view taken by the A.O is unsustainable in law. 4.8 Before us, Revenue has not brought any material on record to demonstrate that the view taken by the A.O was an impermissible view, or was contrary to law or was upon wrong application of legal principles which required initiating the exercising of revisionary powers u/s. 263 of the Act. In view of the aforesaid facts and in the light of the decisions cited her .....

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