TMI Blog2019 (2) TMI 1462X X X X Extracts X X X X X X X X Extracts X X X X ..... it to deposit tax up to the date of filing of return of income. Various Courts have held that such amendment to provision is retrospective in nature. The assessee also filed necessary details to prove that it has paid the TDS on or before due date of filing return of income. Similarly, the assessee has explained the issue of excess deduction u/s 43(6) so as to make it clear that there is no loss of revenue as it has given proper treatment in its books of account and statement of total income. AR further made it clear that this issue had not been questioned by the then CIT-1, Mumbai in the first found of proceedings u/s 263 and hence, under similar set of facts, the issue cannot be questioned once again by the PCIT. - Decided in favour of assessee. - ITA No 3561Mum/2018 - - - Dated:- 21-12-2018 - Shri G Manjunatha (Accountant Member) And Shri Ravish Sood (Judicial Member) For the Appellant : Shri Mdhur Agarwal For the Respondent : Shri HN Singh ORDER PER G MANJUNATHA, AM : This appeal filed by the assessee is directed against the order of the Principal CIT-1, Mumbai dated 28-03-2018 u/s 263 of the I.T. Act, 1961 for the assessment year 2008-09. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss account. The learned Prin. CIT failed to appreciate that the Appellant had already sito-moto disallowed the amount of fixed assets written off amounting to ₹ 1,34,52,148 and other fixed assets of ₹ 53,447 in its computation of income under normal provisions of the Act. 4. Disallowance under section 40(a)(ia) of ₹ 24,13,850 4.1. On the facts and in the circumstances of the case and in law, the learned Prin. CIT has erred in directing the AO to examine the allowability of expenses in terms of section 40(a)(ia) of the Act on the premise that the expenses had been wrongly allowed while computing the income 4.2. Without prejudice to the above, the learned Prin. CIT failed to appreciate that the amendment made to section 40(a)(ia) of the Act by Finance Act, 2010 relaxing the time limit to deposit tax upto the date of filing of return is to be construed as having retrospective effect and accordingly, no disallowance could be made. 5. Excess deduction under section 43(6) of ₹ 1,21,80,653 5.1. On the facts and in the circumstances of the case and in law, the learned Prin. CIT has erred in directing the AO to examine the allowability of deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 263 have been examined and held that no observations or finding has come to light that warranted addition or disallowance and as such, no adverse inference was considered necessary on those issues. 3. The Principal Commissioner of Income-tax-1, Mumbai issued a show cause notice u/s 263 and asked as to why the assessment order passed by the AO u/s 143(3) r.w.s. 263 dated 29-02-2016 shall not be revised for the reasons stated in his notice. The Principal CIT proposed to revise the assessment order on the ground that the AO has failed to examine certain issues as per the findings of internal audit party which made the order passed by the AO dated 29-02-2016 erroneous insofar as it is prejudicial to the interest of the revenue. The Principal CIT again questioned six issues, as per which, the AO has failed to examine liability of contingent nature, capital expenditure debited to P L Account / fixed assets written off, no disallowance u/s 40(a)(ia) even though there is a delay in remittance of TDS within the prescribed date, excess claim of deduction u/s 43(6) and wrong working of book profit u/s 115JB. The PCIT further observed that the AO ought to have carried out required enqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though the issue has been subject matter of show cause notice issued u/s 263, therefore, on same set of facts, the Ld.PCIT has erred in directing the AO to once again re-examine the issue. The Ld.AR further submitted that in order to invoke the provisions of section 263, twin conditions prescribed under the said provision are required to be satisfied, i.e. the order of the AO sought to be revised is erroneous and it is prejudicial to the interest of the revenue. Thus, u/s 263, the order must be both erroneous and prejudicial to the interest of the revenue. If at all order is erroneous, but there is no loss to the revenue or if the order is not erroneous, but there is loss to revenue, then section 263 cannot be invoked. In support of his contention, he relied upon the decision of Hon ble Supreme Court in the case of Malabar Industrial Co Ltd vs CIT (2000) 243 ITR 83 (SC). 6. The Ld.PCIT, after considering relevant submissions of the assessee held that the order passed by the AO u/s 143(3) r.w.s. 263 is erroneous insofar as it is prejudicial to the interest of the revenue as the AO has failed to carry out necessary enquiries, which he ought to have carried out in accordance with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Co. Lid. Vs. CIT; Kerala (243ITR 83) has held that If due to an erroneous order of the Income Tax Officer, the revenue is losing tax lawfully payable by a person, if will certainly be prejudicial to the interests of the revenue. Hence the said order of the AO is set aside u/s. 263 of the Income Tax Act, 1961 to be done afresh de novo. The AO will pass an order in accordance with the statutory' provisions as well as case laws applicable to the claims made by the assessee. The AO shall give the assessee sufficient opportunity of hearing before passing his order. 7. The Ld.AR for the assessee submitted that the Ld. CIT(A), on the facts and in the circumstances of the case erred in assuming jurisdiction u/s 263 of the Act, to revise assessment order passed u/s 143(3) r.w.s. 263 of the Incometax Act, 1961. The Ld.AR further submitted that the PCIT failed to appreciate that the assessment order passed by the AO was pursuant to the direction of the then CIT-1, Mumbai and the AO, on the basis of directions of the then CIT-1, Mumbai, has categorically observed in his order dated 29-02-2016 that no adverse inference were called for in respect of four issues. The Ld.AR furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arty in respect of six issues discussed by the Ld.PCIT in his proceedings. Therefore, the PCIT was very well within his jurisdiction to revise assessment order passed u/s 143(3) r.w.s. 263 of the Income-tax Act, 1961. 9. We have heard both the parties, perused the material available on record and gone through the orders of authorities below. The PCIT revised assessment order passed u/s 143(3) r.w.s. 263 basically on six issues. The PCIT has narrated the issues discussed in his order in the show cause notice dated 23-03-2018, as per which the internal audit party has raised certain objections insofar as deductibility of liability of contingent nature, capital expenditure debited to P L Account, non disallowance of certain expenditure u/s 40(a)(ia), excess claim of deductyion u/s 43(6) being write off of asset as per I.T. Act and wrong working of book profit u/s 115JB of the I.T. Act, 1961. We find that all these issues were subject matter of 263 proceedings by the then CIT-1, Mumbai. The then CIT-1, Mumbai, vide his order dated 11-03-2015 passed u/s 263 of the Act, has issued certain directions to the AO in respect of six issues. The AO, vide his order dated 29-02-2016 has dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AO, on the basis of direction issued by the CIT, has taken up the proceedings and on being satisfied with the explanation furnished by the assessee, has accepted four issues by stating that no observations or finding has come to light that warranted an addition or disallowance as such, no adverse inference was considered necessary on the issues. Insofar as two issues, i.e. excise duty not paid and claim of reversal of provision, the AO has made addition in the order passed u/s 143(3) r.w.s. 263 dated 29-09-2016. Further, we are of the considered view that the PCIT was erred in invoking the jurisdiction conferred u/s 263 of the I.T. Act, 1961 under the guise of lack of enquiry or inadequate enquiry. Therefore, we are of the considered view that the issues questioned by the PCIT are not coming within the ambit of lack of enquiry or inadequate enquiry. 12. Insofar as remaining issues are concerned, the Ld. AR for the assessee has made out a case that the assessee has already suo moto disallowed liability of contingent nature in statement of total income for AY 2008-09 and also capital expenditure debited to P L Account has been disallowed in the statement of total income. As r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue. The phrase prejudicial to the interests of the revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Income-tax Officer is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue. Rampyari Devi Saraogi Vs. Commissioner of Income-tax [67 ITR 84] and in Smt. Tara Devi Aggarwal Vs. Commissioner of Income-tax, West ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equate enquiry, has held that merely for the reason that there is lack of enquiry, the CIT cannot assume jurisdiction u/s 263 when the AO has taken one possible view on being satisfied with the explanation furnished by the assessee. The relevant observations are as under:- 12. From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income-tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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