2015 (2) TMI 578 - AT - Income Tax

Revision u/s 263 - examining the correctness of the assessee s claim of deduction u/s 80IC - Held that - Distinction must be kept in mind by the CIT while exercising jurisdiction u/s 263 of the Act between the cases of no inquiry and the cases of lack of inquiry and in the absence of findings that the order is erroneous and prejudicial to the interest of revenue the exercise of the jurisdiction u/s 263 of the Act is not sustainable. We further observed that the order of the AO may be or may not be wrong but CIT cannot direct consideration of this ground of the lack of inquiry but only when the order is erroneous and prejudicial to the interest of revenue the CIT can quash the asstt. order and direct the AO to reframe the assessment u/s 263 of the Act. We are inclined to hold that the order cannot be passed by the CIT u/s 263 of the Act to ask the AO to decide whether the assessment order was erroneous or not . The CIT must after recording reasons hold that the order is erroneous then only assessment order can be quashed and the AO may be directed to pass the asstt. order in pursuant to order of CIT u/s 263 of the Act. Coming the factual matrix in the present case, from careful perusal of the impugned order we clearly observe that the CIT has stressed on the mismatch and discrepancy in the form No.10CCB and Form No. 3CD. Replying to the notice u/s 263 of the Act the assessee submitted auditors report pertaining to 2008-09 and asstt. year 2009-10 which make it clear that the discrepancy and mismatch arose due to typographical and clerical mistake as the assessee company claimed u/s chapter VI-A amounting to ₹ 14,17,940/- in asstt. year 2008-09 and this figure remained unchanged in the text auditor report and report for the asstt. year 2009-10 which is clear form annexure 5 and annexure 6 of the appeal CIT rejected our above explanation threshold without assigning any reason and the CIT wrongly hold that the assessment order was erroneous and prejudicial to the interest of revenue. We further hold that CIT was grossly erred and not justified in remitting the matter to the file of the AO for fresh consideration and adjudication as this is out of ambit of powers of CIT u/s 263 of the Act. Respectfully following the decision of Hon ble Jurisdictional High Court of Delhi in the case of ITO vs. DG Housing Project Ltd. (2012 (3) TMI 227 - DELHI HIGH COURT ) we reach to the conclusion that the order passed u/s 263 of the Act is bad on facts and in law therefore the same deserve to be quashed and we quash the same. - Decided in favour of assessee.

Summary

Issues involved:
1. Validity of order passed under section 263 of the Income Tax Act, 1961.

Detailed Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (CIT) canceling the assessment order passed under section 143(3) of the Income Tax Act, 1961, for the assessment year 2009-10. The CIT held that the assessment order was erroneous and prejudicial to the interest of revenue, specifically related to the deduction claimed under section 80IC of the Act. The assessee contended that the CIT erred in law and facts by canceling the order and not providing a proper opportunity of being heard. The assessee argued that the AO had allowed the deduction in previous assessment years, and the CIT failed to consider the explanation provided by the assessee regarding the discrepancy in deduction figures.

The assessee's counsel highlighted that the CIT's decision was based on a mismatch in deduction figures claimed in different forms, without considering the clarification provided by the assessee. The Departmental Representative (DR) argued that the assessment order was erroneous due to a significant discrepancy in the deduction claimed. The DR contended that the CIT rightly invoked section 263 of the Act to remit the matter back to the AO for reevaluation of the deduction claim under section 80IC.

After careful consideration and perusal of the submissions and evidence, the Tribunal observed that the assessee had submitted a reasonable explanation for the discrepancy in deduction figures, attributing it to a clerical mistake. The Tribunal noted that the CIT had ignored the assessee's explanation without valid reasons. Referring to relevant case law, the Tribunal emphasized that the CIT must establish that the order of the AO is erroneous before remitting the matter for fresh consideration.

The Tribunal concluded that the CIT had erred in law by not establishing the erroneous nature of the assessment order before directing a fresh adjudication. Citing the decision of the Jurisdictional High Court, the Tribunal held that the order passed under section 263 of the Act was incorrect both on facts and in law. Consequently, the Tribunal allowed the assessee's appeal, quashing the order passed by the CIT under section 263.

In summary, the Tribunal's detailed analysis focused on the validity of the CIT's order under section 263 of the Income Tax Act, emphasizing the necessity for the CIT to establish the erroneous nature of the assessment order before directing further action. The Tribunal found that the CIT had failed to provide justified reasons for rejecting the assessee's explanation and remitting the matter for fresh consideration, leading to the quashing of the CIT's order.