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Issues involved: Revision of assessment u/s. 263, disallowance of expenditure u/s. 14A, jurisdiction of assessing authority post revision.
The appeal before the Appellate Tribunal ITAT Chennai pertained to the revision of assessment for the assessment year 2005-06 under section 263 of the Income Tax Act, 1961, where the Commissioner of Income Tax revised the assessment and directed certain actions, including disallowance of expenditure u/s. 14A. The assessing authority, in compliance with the CIT's directions, made the disallowance. However, the CIT(A) in the first appeal held that the assessing officer exceeded the scope of directions issued by the CIT and deleted the disallowances. The main contention of the Revenue was that post revision u/s. 263, the assessing authority's jurisdiction is not limited, contrary to the CIT(A)'s interpretation. In the appeal proceedings, the Revenue contended that once an assessment is revised u/s. 263, the assessing authority's jurisdiction is not restricted, and therefore, the CIT(A) erred in confining the assessing authority's powers within the CIT's directions. The Tribunal noted that in a revision matter, the assessing officer acts on behalf of the CIT and is bound by the directions issued. The assessing authority does not exercise independent jurisdiction but rather implements the CIT's directives. Consequently, the assessing officer cannot exceed the limits set by the CIT, and the CIT(A) was justified in deleting the disallowance made beyond the specified directions. Ultimately, the Appellate Tribunal dismissed the appeal filed by the Revenue, affirming the CIT(A)'s decision to delete the disallowance made by the assessing authority beyond the directions issued by the CIT during the revision of assessment. The Tribunal emphasized the delegated nature of the assessing authority's actions post revision u/s. 263 and upheld the principle that the assessing officer cannot surpass the limits prescribed by the CIT in such cases.
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