2020 (10) TMI 1349 - AT - Income Tax

Revision u/s 263 - CIT proposing to revise the assessment order passed u/s 153A/143(3) of the Act on 30/03/2016, for the reason that, the assessee company had not justified, its claim of having incurred expenditure on account of (a) Business Development Expenses Business promotion expenses and that the AO in the assessment order had not called for the details of expenditure under these head of account to verify the genuineness and nature of the expenses - Legal argument that, order u/s 153A/143(3) of the Act, cannot be revised without cancelling the order of statutory approval given by the JCIT u/s 153D - HELD THAT - As relying on case SHRI CH KRISHNA MURTHY 2015 (3) TMI 359 - ITAT HYDERABAD ,SHRI SURENDRA L. HIRANANDANI 2018 (2) TMI 2025 - ITAT MUMBAI and DHARIWAL INDUSTRIES LIMITED 2017 (1) TMI 260 - ITAT PUNE we have no other alternative but to hold that the revision order passed u/s 263 of the Act by the ld. Pr. CIT is bad in law for the reason that the order of statutory approval passed u/s 153D of the Act, based on which the order u/s 153A r.w.s. 143(3) of the Act, dt. 30/03/2016, was passed, was not revised and is a valid and legal order. Even otherwise, in this case, we find that the ld. Pr. CIT, without making any enquiries on his own, in a mechanical manner has set aside the matter to the file of the Assessing Officer for fresh adjudication. Such general restoration of the matter to the file of the Assessing Officer, without the ld. Pr. CIT making any enquiry by himself or forming any opinion on the issue, is not permitted in law. This is not a case where there is no enquiry. As per the ld. Pr. CIT, this is a case of inadequate enquiry. See JL. MORRISON (INDIA) LTD. 2014 (6) TMI 154 - CALCUTTA HIGH COURT , CHROMA BUSINESS LIMITED. 2003 (10) TMI 256 - ITAT CALCUTTA-C and SUNBEAM AUTO LTD. 2009 (9) TMI 633 - DELHI HIGH COURT Thus we hold that the revision in question is bad in law. Hence, we quash the order passed u/s 263 - Decided in favour of assessee.

Summary

Issues Involved:

1. Validity of the revision order under Section 263 of the Income Tax Act, 1961.
2. Examination of business development and promotion expenses.
3. Requirement of revising the statutory approval under Section 153D for revising the assessment order.
4. Adequacy of the enquiry conducted by the Assessing Officer.

Issue-wise Detailed Analysis:

1. Validity of the Revision Order under Section 263 of the Income Tax Act, 1961:

The appeal challenged the order passed by the Pr. Commissioner of Income Tax (Pr. CIT) under Section 263 of the Income Tax Act, 1961, which proposed to revise the assessment order. The Pr. CIT argued that the assessment order was erroneous and prejudicial to the interests of the revenue because the Assessing Officer (AO) did not verify the genuineness and necessity of the claimed business development and promotion expenses. The Tribunal analyzed various case laws and held that for invoking jurisdiction under Section 263, the order must be both erroneous and prejudicial to the interests of the revenue. The Tribunal found that the AO had indeed examined the expenses during the original assessment proceedings and concluded that the expenses were genuine and incurred for business purposes. Consequently, the Tribunal ruled that the revision order under Section 263 was bad in law and quashed it.

2. Examination of Business Development and Promotion Expenses:

The Pr. CIT issued a show-cause notice proposing to revise the assessment order due to the alleged lack of verification of business development expenses amounting to Rs. 18,89,250 and business promotion expenses amounting to Rs. 36,06,750. The Tribunal noted that during the original assessment proceedings, the AO had issued a notice under Section 142(1) and called for details of these expenses. The assessee provided the required details, which were examined by the AO, who then allowed the expenses as genuine and incurred for business purposes. The Tribunal emphasized that the AO’s acceptance of the audited expenses as genuine further validated the claim. Therefore, the Tribunal found that the AO had conducted an adequate enquiry into these expenses.

3. Requirement of Revising the Statutory Approval under Section 153D for Revising the Assessment Order:

The Tribunal addressed the legal argument that the assessment order passed under Section 153A/143(3) could not be revised without canceling the statutory approval given by the Joint/Additional Commissioner of Income Tax under Section 153D. The Tribunal cited multiple case laws, including decisions from the Hyderabad, Mumbai, and Pune Benches of the ITAT, which consistently held that an assessment order passed with the approval under Section 153D could not be revised under Section 263 without revising the approval itself. The Tribunal concluded that since the statutory approval under Section 153D was not revised, the revision order under Section 263 was invalid.

4. Adequacy of the Enquiry Conducted by the Assessing Officer:

The Tribunal observed that the Pr. CIT had not conducted any enquiry of his own before setting aside the matter to the AO for fresh adjudication. The Tribunal referred to several judicial precedents which established that a mere inadequacy of enquiry by the AO does not justify a revision under Section 263 unless it is a case of no enquiry. The Tribunal found that the AO had indeed conducted an enquiry by calling for and examining the details of the expenses. The Tribunal emphasized that it is not permissible for the Pr. CIT to substitute his view for that of the AO regarding the extent of the enquiry. Consequently, the Tribunal held that the revision order was invalid as it was based on the incorrect assumption that the AO had not conducted an adequate enquiry.

Conclusion:

The Tribunal quashed the revision order passed by the Pr. CIT under Section 263, holding it to be bad in law. The Tribunal found that the AO had conducted a proper enquiry into the business development and promotion expenses, and the statutory approval under Section 153D had not been revised. The Tribunal allowed the appeal of the assessee, setting aside the revision order.