2014 (7) TMI 551 - AT - Income Tax

Jurisdiction u/s 263 of the Act - Claim of deduction u/s 80IA of the Act Held that - CIT has wrongly considered the assessment order as erroneous and prejudicial to the interests of the revenue - assessee had filed revised return making higher claim, the AO has not considered it and has passed the order allowing the original claim only - The apprehension of the CIT that non-consideration of revised return at the time of assessment is a mistake cannot be accepted as the so-called mistake has not been rectified, so far - the order of CIT setting aside the assessment cannot be upheld - AO has to re-do assessment after considering the claims made in the revised return of income by the assessee which means, the order of CIT may lead to a situation where it can be a prejudicial order to the interests of revenue, but not the original assessment order which was revised thus, the order of the AO cannot be considered as erroneous and prejudicial to the interests of revenue thus, the order of the CIT as twin conditions for invoking jurisdiction u/s 263 have not been complied with and restore the order of AO Decided in favour of Assessee.

Summary

Issues:
1. Whether the order of the Commissioner of Income Tax under section 263 of the I.T. Act was correct.
2. Consideration of the revised return of income filed by the assessee for claiming enhanced deduction u/s.80IA.
3. Validity of the assessment order passed under section 143(3) by the Assessing Officer.
4. Jurisdiction of the CIT under section 263 of the I.T. Act.

Analysis:

Issue 1:
The appeal was against the order of the Commissioner of Income Tax passed under section 263 of the I.T. Act. The assessee contested that the order of the CIT was not correct as the order of the A.O. was neither erroneous nor prejudicial to the interests of Revenue.

Issue 2:
The scrutiny assessment under section 143(3) was completed, and the A.O. had considered the original return of income filed by the assessee but failed to consider the revised return filed later for claiming enhanced deduction u/s.80IA. The CIT considered this non-consideration as a mistake and set aside the assessment order for re-evaluation.

Issue 3:
The contention was raised that the order passed by the A.O. was not erroneous as admitted by the CIT, and the assessment could only become erroneous if rectified. The Tribunal observed that the A.O. had not rectified the order, and therefore, the original assessment order was not erroneous or prejudicial to the interests of revenue.

Issue 4:
The Tribunal held that the CIT wrongly considered the assessment order as erroneous and prejudicial. The Tribunal found that the A.O. had not considered the revised return, but the order itself was not erroneous. The Tribunal set aside the order of the CIT as the twin conditions for invoking jurisdiction under section 263 were not met, and restored the order of the A.O. The appeal of the assessee was allowed.

In conclusion, the Tribunal found that the original assessment order was not erroneous or prejudicial, as the A.O. had not rectified the order despite the revised return filed by the assessee. The Tribunal set aside the CIT's order and restored the A.O.'s assessment, allowing the appeal of the assessee.