2018 (6) TMI 1464 - AT - Income Tax

Revision u/s 263 - disallowance u/s 35(1)(ii) - Held that - It is not the case of the Pr. CIT that when the contribution of ₹ 20,00,000/- was made by the assessee to M/s. SHGPH, it was not recognized u/s 35(1)(ii) so legally the AO s action to allow weighted deduction u/s 35(1)(ii) of the Act cannot be held to be erroneous. A.O s order dated 29.06.2016 cannot be termed as erroneous and therefore, the assumption of revisional jurisdiction of the Pr. CIT itself does not satisfy condition precedent to invoke the jurisdiction u/s 263 of the Act fails. The subsequent developments i.e. CBDT Notification rescinding the recognition for M/s. SHGPH on 15.09.2016 cannot be a ground to hold that A.O s order on 29.06.2016 is erroneous in the light of the Explanation in section 35(1)(ii). Therefore, in any case the assumption of revisional jurisdiction of the ld. Pr. CIT itself does not satisfy condition precedent to invoke the jurisdiction u/s 263 - decided in favour of assessee.

Summary

Issues: Jurisdiction of Principal CIT under section 263 of the Income Tax Act, 1961.

The judgment involves an appeal by an individual Assessee against the order of the Principal Commissioner of Income Tax-15, Kolkata under section 263 of the Income Tax Act, 1961 for Assessment Year 2014-2015. The Assessee had made a donation to an institution and claimed weighted deduction under section 35(1)(ii) of the Act. The Principal CIT issued a notice to the Assessee stating that the assessment order allowing the deduction was erroneous and prejudicial to the interest of the Revenue. The Assessee challenged the Principal CIT's jurisdiction to invoke revisional powers under section 263. The Tribunal analyzed whether the conditions necessary for the Principal CIT to exercise revisional jurisdiction were met, citing the Malabar Industries case which requires the order to be both erroneous and prejudicial to the Revenue's interest.

The Tribunal examined the facts and legal provisions to determine if the Assessing Officer's order was erroneous and prejudicial to the Revenue. The Assessee's donation to the institution was based on the institution's approval under section 35(1)(ii) of the Act, as per the Gazette Notification. The subsequent withdrawal of the institution's approval by the Central Govt. did not impact the validity of the Assessee's claim due to the Explanation in section 35(1)(ii) inserted by the Taxation Laws (Amendment) Act, 2006. This Explanation clarified that withdrawal of approval post-payment does not affect the deduction entitlement. The Tribunal concluded that the Assessing Officer's order allowing the deduction was valid, and the subsequent developments, including the withdrawal of approval, did not render the order erroneous. Therefore, the Principal CIT's assumption of revisional jurisdiction under section 263 was deemed invalid, and the Tribunal canceled the impugned order of the Principal CIT.

In summary, the judgment dealt with the jurisdiction of the Principal CIT under section 263 of the Income Tax Act, 1961 concerning an Assessee's claim for weighted deduction under section 35(1)(ii). The Tribunal analyzed the legality of the Principal CIT's notice, assessed the validity of the Assessing Officer's order, and applied legal precedents to determine that the Assessee's claim was valid despite subsequent developments. The Tribunal allowed the Assessee's appeal, emphasizing that the Principal CIT's assumption of revisional jurisdiction was unfounded based on the legal provisions and factual circumstances.