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2018 (1) TMI 241 - AT - Income TaxRevision u/s 263 - Exemption u/s 10(2A) denial - Held that - We are of the view that where an enquiry is conducted by the AO and he is satisfied with a reply given on a query raised, then the CIT cannot intervene through revision for coming to a conclusion that the assessment order passed by the AO was erroneous and prejudicial to the interests of the Revenue for lack of or inadequate enquiry. The CIT in the impugned order has merely pointed out that the Assessee has claimed exemption u/s.10(2A) on a sum of ₹ 4,84,89,051 as his share of profits from the firm whereas the firm has declared total income of only ₹ 3,88,780/-. This aspect is clear from the records produced by the Assessee before the AO. The AO has mentioned in the order that all issues and documents were perused and discussed with the AR. The CIT on examination of the Assessment records has invoked his powers u/s.263 of the Act. He has not spelt out in the impugned order as to what was the kind of enquiry that the AO ought to have made and which he failed to make. In the decision of the Hon ble Bombay High Court in the case of CIT Vs. Gabriel (1993 (4) TMI 55 - BOMBAY High Court) has been laid down that the consideration of the Commissioner as to whether an order is erroneous insofar as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. The above decision is applicable to the facts of the present case. We therefore hold that orders u/s.263 of the Act cannot be sustained as the conditions for exercise of jurisdiction under the said provisions are absent in the present case. We therefore quash the impugned orders u/s.263 of the Act - Decided in favour of assessee.
Issues Involved:
1. Condonation of delay in filing appeals. 2. Validity of exemption claimed under Section 10(2A) of the Income Tax Act. 3. Jurisdiction of the Principal Commissioner of Income Tax (Pr.CIT) under Section 263 of the Income Tax Act. Detailed Analysis: Condonation of Delay in Filing Appeals: The appeals were filed with a delay of 93 days. The delay was attributed to the assessees' reliance on their Chartered Accountant, Shri Mukesh Khaitan, who failed to provide timely legal advice. The assessees later consulted a senior lawyer who advised them to file the appeals. The Tribunal, referencing the Supreme Court's decision in the case of Collector, Land Acquisition, Anantnag and Anr. Vs Mst. Katiji & Ors., held that the reasons provided constituted "reasonable and sufficient cause" and thus condoned the delay. Validity of Exemption Claimed Under Section 10(2A): The assessees, who became partners in M/s. Avantika Advisory Services LLP on 01.01.2013, claimed exemption under Section 10(2A) for their share of profits amounting to ?4,84,89,051/-. The Pr.CIT argued that the exemption should be limited to ?93,355/-, being 24% of the total income declared by the LLP. The Tribunal noted that Section 10(2A) exempts a partner's share in the "total income of the firm" and referred to the CBDT Circular No.8/2014, which clarified that the entire profit credited to the partners' accounts in the firm would be exempt from tax in the hands of the partners. The Tribunal concluded that the assessees' claim for exemption was in accordance with the law and that the AO's acceptance of this claim was a possible view. Jurisdiction of the Pr.CIT Under Section 263: The Pr.CIT invoked Section 263, asserting that the AO's order was erroneous and prejudicial to the interests of the revenue due to inadequate enquiry into the exemption claim. The Tribunal held that the AO had conducted an enquiry and was satisfied with the assessees' responses. It emphasized that an order cannot be termed erroneous merely because the Pr.CIT holds a different view. Citing the Supreme Court's decision in Malabar Industrial Co. Ltd. vs CIT, the Tribunal stated that when two views are possible, and the AO has adopted one permissible view, the Pr.CIT cannot invoke Section 263 merely because he disagrees with the AO's view. The Tribunal also noted procedural lapses in the Pr.CIT's approach, including the failure to provide the assessees an opportunity to respond to the new basis for the revision in the impugned order. Conclusion: The Tribunal quashed the orders under Section 263, holding that the conditions for exercising jurisdiction under this provision were not met. The appeals were allowed, and the Tribunal directed that the delay in filing the appeals be condoned.
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