2022 (8) TMI 1362 - AT - Income Tax

Revision u/s 263 by CIT - issue already resolved and closed by an order for full and final settlement under Direct Tax Vivad Se Vishwas Scheme 2020 in Form No.5 issued by the Revenue Department - disallowance of expenses relatable to exempt income by invoking the provisions of s. 14A of the Act r/w Rule 8D(2) - HELD THAT - As gone through the revision order as well as the assessment order and find that the PCIT has nowhere gone into the details of expenses or given a finding how the assessment order is erroneous so far as the prejudicial to the Revenue. Even there is no whisper about the facts how the A.O has not made proper disallowance of expenses relatable to exempt income while invoking the provisions of s. 14A of the Act r/w Rule 8D(2) of the Rules. We have extracted the findings of PCIT and there is no whisper or no discussion at all as to how and which expenses are relatable to exempt income . See GOPALAKRISHNAN RAJKUMAR GOPALAKRISHNAN RAVIM case 2022 (5) TMI 1388 - MADRAS HIGH COURT as held taxpayers whose appeals were pending at any level were entitled to avail benefit of the scheme. Therefore there is no justification in proceeding further with the impugned proceedings initiated by the first respondent under Section 263. The Hon ble High Court in this case has categorically held that on the very same issue the PCIT has no power to initiate proceedings u/s. 263 of the Act. Thus we are of the view that the PCIT has exceeded his jurisdiction in assuming jurisdiction u/s. 263 of the Act in the present case. Decided in favour of assessee.

Summary

Issues:
Appeal against revision order under Section 263 of the Income Tax Act, 1961.

Analysis:
1. The appeal challenges the revision order by the Principal Commissioner of Income Tax, Chennai-3 under Section 263 of the Income Tax Act, 1961, concerning an assessment for the Assessment Year 2017-18. The appellant asserts that the issue in question was already resolved and closed under the Direct Tax Vivad Se Vishwas Scheme, 2020, through Form No. 5 issued by the Revenue Department on 23.04.2021.

2. The appellant argues that the PCIT erred in not considering the provisions of Section 5(3) of the VSVS Act 2020, which states that orders passed under the Act shall be conclusive, and no matter covered by such order shall be reopened in any other proceeding. Additionally, the appellant highlights that an appeal was filed before the CIT(A) against the impugned order, further supporting the contention that the issue was already addressed and closed.

3. The Tribunal reviewed the facts and contentions presented by both parties. The Assessing Officer had disallowed expenses related to exempt income under Section 14A of the Act, and the PCIT set aside the assessment order for a correct re-computation of the disallowance under Rule 8D of the Rules. However, the PCIT's order lacked detailed findings on the erroneous aspects of the assessment or how the expenses were related to exempt income.

4. The Tribunal referred to a High Court case where it was held that once a matter is settled under the VSVS Act, proceedings under Section 263 of the Income Tax Act cannot be initiated on the same issue. Similarly, the Calcutta High Court emphasized that once an authority accepts a declaration under the scheme, it cannot revisit or revise that decision, as it would defeat the purpose of encouraging disclosures of undisclosed income.

5. Considering the above precedents and the lack of detailed findings in the PCIT's order, the Tribunal concluded that the PCIT exceeded jurisdiction in initiating proceedings under Section 263. Consequently, the revision order was quashed, and the appeal of the assessee was allowed.

In conclusion, the Tribunal's decision highlighted the importance of finality in settlements under the VSVS Act and emphasized that authorities cannot revisit accepted declarations or initiate revisionary proceedings on resolved matters. The judgment serves as a reminder of the limitations on the powers of authorities in such cases.