2019 (1) TMI 2010 - AT - Income Tax

Revision u/s 263 - As per CIT assessee was allowed deduction u/s 35AD by the AO without proper verification whether orders passed u/s 143(3) are erroneous in so far as it is prejudicial to the interest of the Revenue? - HELD THAT - It is settled law that to revise an assessment order, the CIT should be satisfied that the order of the A.O. is erroneous in so far as it is prejudicial to the interest of the Revenue. We find that during the proceedings u/s 263 of the Act, the assessee has filed all the details before the CIT, but he has failed to consider the same. Without bringing on record as to how the non-consideration of the claim u/s 35AD has caused prejudice to the interest of revenue, he has remitted the matter to the file of the A.O with a direction to re-do the assessment after examining the claim u/s 35AD in detail. Therefore, according to us, the CIT has failed to fulfil the twin conditions u/s 263 of the Act for making the revision. The Hon ble Madras High Court in the case of CIT vs. G.R. Tangamaligai 2002 (10) TMI 73 - MADRAS HIGH COURT has held that in the absence of any finding that there is loss of revenue, interference u/s 263 is not justified. Hon ble Delhi High Court in the case of ITO vs. D.G. Housing Projects Ltd 2012 (3) TMI 227 - DELHI HIGH COURT has held that the Commissioner cannot remand the matter to the Assessing Officer to decide whether the finding recorded are erroneous without a finding that the order is erroneous and how that is so. Commissioner has not examined and decided as to how the order is prejudicial to the interest of revenue but has directed the Assessing Officer to decide the aspect, which is not permissible. Decided in favour of assessee.

Summary

Issues:
Appeal against revision order u/s 263 of the Income Tax Act, 1961 for assessment year 2012-13.

Analysis:
1. Jurisdiction of CIT under section 263: The CIT initiated proceedings under section 263 based on an audit objection, alleging that the AO allowed deduction u/s 35AD without proper verification. The CIT directed the AO to re-do the assessment. The Assessee argued that the AO had applied his mind during assessment proceedings and allowed the deduction after proper consideration. The Assessee provided relevant material to substantiate the claim. The Tribunal noted that the CIT failed to show how the assessment order prejudiced revenue, thus not meeting the twin conditions of section 263.

2. Prejudice to Revenue: The Tribunal cited various decisions emphasizing that for a revision under section 263, it must be established that the order caused prejudice to revenue. The Tribunal found that the CIT did not demonstrate how the non-consideration of the deduction claim u/s 35AD prejudiced revenue. The Tribunal referred to cases where the absence of loss of revenue justified non-interference under section 263.

3. Legal Precedents: The Tribunal relied on legal precedents to support its decision. It cited cases where proper enquiry by the AO during scrutiny assessment proceedings, even if not reflected in the order, precluded revision under section 263. The Tribunal highlighted that the CIT's direction to the AO to decide an aspect without establishing the order's error or prejudice to revenue was impermissible.

4. Conclusion: The Tribunal concluded that the revision order under section 263 was not legally sustainable. The Assessee's appeal was allowed, setting aside the CIT's revision order. The Tribunal emphasized the importance of demonstrating prejudice to revenue for invoking section 263 and highlighted the necessity of fulfilling the twin conditions for revision.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the arguments presented, the legal precedents cited, and the Tribunal's final decision in the matter.