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TMI Blog2024 (3) TMI 1153X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer u/s 143(3) of the Act on 07.12.2019 was neither erroneous nor prejudicial to the interest of the Revenue and that the provisions of s.263 of the Act have been invoked without complying with the conditions stated in the said section. 3. On the facts and circumstances of the case and in law, the Learned Principal Commissioner of Income Tax, Noida erred in passing the revisional order dated 27.03.2022 under section 263 of the act after returning the finding that no material with regard to the "subjected issue" was on assessment record without appreciating the fact that all the requisite material was filed before the Learned Assessing officer (rather the material is already as a part of assessment record at the e-portal of Income tax website) after due deliberation he had passed the assessment order u/s 143(3) of the act. 4. On the facts and circumstances of the case and in law, the Learned Principal Commissioner of Income Tax, Noida erred in passing the revisional order dated 27.03.2022 under section 263 of the act only on the basis of surmises, conjecture and whims that either the material is not filed by the appellant in the assessment proceedings or Learned AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son there is in fact increase in the taxable profit on account of ICDS and not reduction in profit; ii) out of total accrued income of Rs. 8,93,38,723/- from dividend from shares and mutual funds, Rs. 8,89,01,128/- was received from mutual funds which is not within the purview of section 115BBDA and is exempt u/s 10(35) of the Act; iii) large increase in unsecured loans from Rs. 1,37,40,124/- to Rs. 3,90,67,223/- is attributable to increase in the amount of loans obtained by the firm from its partner; and iv) the assessee claimed refund against the excess advance tax deposited by it. 5.2 Accordingly, the Ld. AO did not draw any adverse inference on the aforesaid issues mentioned in CASS reasons; accepted the income returned and completed the assessment on 07.12.2019 u/s 143(3) of the Act. 6. The Ld. PCIT examined the case records of the assessee. To him it appeared that impugned assessment order is erroneous and prejudicial to the interest of revenue. He, therefore invoked his powers u/s 263 of the Act and issued show-cause notice/hearing dated 08.02.2022 to the assessee pointing out certain discrepancies to which the assessee filed detailed reply on 15.02.2022 (reproduced in par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is manifest from the assessment order that the assessee's case was picked up for scrutiny under CASS for four specific reasons, namely, reduction in profit, excess claim of exemption of dividend income, large increase in unsecured loans during the year and large refund claimed out of advance tax. During the course of assessment proceedings, the Ld. AO issued six notices u/s 142(1) of the Act dated 13.09.2019, 0310.2019, 10.10.2019, 17.10.2019, 14.11.2019 and 02.12.2019 along with questionnaire in each notice to which assessee submitted reply dated 10.10.2019, 15.10.2019, 25.10.2019, 08.11.2019, 21.11.2019 and 03.12.2019. Copies thereof are placed at pages 9- 315 of the Paper Book. In para 2 of the assessment order, the Ld. AO says that he issued the above notices along with questionnaire to examine and verify the correctness or otherwise of the reasons for which the assessee's case was selected for scrutiny. Clarification and justification was sought from the assessee. The Ld. AO admitted that the assessee complied and filed necessary details along with the documentary evidence which he examined. Thereafter he proceeded to discuss each reason assigned for selection of the case for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o an erroneous order of the ITO, the Revenue 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 with conjunction with an erroneous order passed by the ITO. Every loss of Revenue as a consequence of the order of the ITO cannot be treated as prejudicial to the interests of Revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of Revenue or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of Revenue unless the view taken by the ITO is unsustainable in law". 12. The Hon'ble Supreme Court reiterated the above observation in CIT vs. Greenworld Corporation (2009) 181 Taxman 111 (SC) / (2009) 314 ITR 81 (SC). The Hon'ble Apex court observed as under:- "Section 263 provides for a revisional power. It has its own limitations. An order can be interfered with suo-moto by the said authority not only when an order passed by the Assessing Officer is erroneous but also when it is prejudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l to the interest of revenue because, in the opinion of the Ld. PCIT no exemption on account of dividend income could be claimed / allowed but the Ld. AO accepted the claim of the assessee regarding exempt income of Rs. 8,93,38,723/- on account of dividend. 16.1 One of the reasons inter alia for selection of assessee's case for scrutiny under CASS was "excess claim of exemption of dividend income". During the assessment proceedings the Ld. AO issued notice dated 02.12.2019 u/s 142(1) of the Act requiring the assessee to give details of dividend income received by the assessee with narration. Also reconcile the same with DDT paid on them (copy at page 22 of the Paper Book). Reply of the assessee dated 03.12.2019 pursuant to the said notice is placed at pages 310-311 of the Paper Book. For ready reference it is reproduced below:- "Excess Claim of exemption of Dividend Income The Assessee Firm had made investments in various equity shares and units of mutual funds which yield Dividend Income during the year. The summery of such dividend Income is as under: Particulars Amount (Rs.) Dividend on Equity Shares 4,37,595 Dividend on units of Mutual Funds 8.89,01,128 Total Div ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. In response to show-cause notice dated 08.02.2022 on the issue of acceptance of assessee's claim of exemption of dividend income received during the year, the assessee in its submission filed before the Ld. PCIT on 15.02.2022 drew the attention of the Ld. PCIT to the Note No. 9 of the financial statement (page 85 of the Paper Book) and pointed out that the assessee has duly disclosed the segregation of income/revenue earned by it from its business activities which comprised of dividend income of Rs. 8,93,39,723/- forming part of income from dealing in shares and securities. With the help of "Schedule-E1" of the return (page 49 of the Paper Book) the assessee demonstrated that it has duly disclosed the dividend income which it claimed as exempt u/s 10(35) of the Act as revealed from computation of income appearing at page 75 of Paper Book. 18. The reason for total credit of Rs. 10,18,34,536/- to the P & L Account was explained to the Ld. PCIT as the amount representing sale of services and other income without including dividend income because while computing income of Rs. 10,18,34,536/- the assessee added back NET income from dealing in shares and securities duly consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inference therefor. 21. It is now well established that an incorrect assumption of fact and an incorrect application of law will satisfy the requirement of assessment order being erroneous. In the assessee's case it would be obvious that the Ld. AO has neither assumed facts incorrectly nor there is incorrect application of law. On the contrary, he applied his mind. In our opinion, therefore the impugned order of the Ld. AO is not erroneous. If that be so, the question of it being prejudicial to the interest of Revenue will hardly arise in the given facts and law related to them. 22. The deeming provision contained in Explanation 2 to section 263(1) inserted w.e.f. 01.06.2015 referred to by the Ld. PCIT is inapplicable to the assessee's case in view of admitted submission of details, e.g. income from dealing in shares and securities (NET); sale and purchase of shares and securities along with proof of transaction ledger/trading account, DEMAT account; Form -10DB and evidence of dividend income in the form of Dividend Advice issued by Taurus Mutual Fund and JM Financial Mutual Fund before the Ld. AO/PCIT in reply to questionnaires dated 13.09.2019, 03.10.2019, 17.10.2019 and 02.12 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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