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2019 (8) TMI 1418 - HC - Income TaxRevision u/s 263 - non consideration of the provisions of Section 40(a)(i-a) in respect of land development expenses - non compliance ofT.D.S. provisions - HELD THAT - The Tribunal rightly arrived at the finding that all the material in regard to land development expenses was before the AO who had required the assessee to produce all the documents in relation to the same and after inquiring about the details of contract and the contract executed by assessee, the bill submitted and payment schedule made, the AO accepted the books of account and only disallowed ₹ 1,20,000/- and added to the income of the assessee, which was also set aside by order of the CIT(A), while exercising the power u/s 263 CIT did not have any material for invoking the said provision and it merely did the same on suspicion and presumption. As, Clause (c) of Explanation 1 to Section 263 provides that when an appeal is pending before the CIT(A), the exercise of jurisdiction u/s 263 CIT is barred. Thus, in the present case, the CIT wrongly exercised jurisdiction u/s 263 by remanding back the matter to assessing authority on 25.3.2013, while the appeal was decided by CIT (A) on 5.6.2013. Thus, the order passed by the ITAT does not suffer from any irregularity and needs no interference. As far as the word record appearing in Clause (b) of Explanation-1 to Section 263 is concerned, it means the record available at the time of examination by the CIT and not any material or record available subsequent to his examination or exercise of power u/s 263. Thus, any order passed by the AO in the assessment proceedings after the remand by the CIT cannot be looked upon and the argument made by the counsel for the revenue for relying upon the fresh assessment order made on 7.3.2004 u/s 263/143(3) cannot be accepted in view of the above provision of law. In the present case, the Tribunal had recorded specific finding of fact that the assessing authority had examined each and every aspect of the case on which the remand order hinges, as such the remand order was not sustainable in the eyes of law. The revenue has failed to make any case for interference in the order of the ITAT, as the CIT had proceeded to remand the matter back to the assessing authority while the appeal of the assessee was pending u/s 250 and the power of exercise u/s 263 was barred by Clause (c) to Explanation 1 of Section 263. Further, the remand order by the CIT was based merely on suspicion and presumption - Decided in favour of assessee.
Issues Involved:
1. Whether the ITAT passed a perverse order in setting aside the order under Section 263. 2. Interpretation of provisions of Section 263 by ITAT. 3. Whether ITAT curbed the power of the CIT under Section 263. 4. Deletion of the order under Section 263 regarding development expenses. 5. Deletion of the order under Section 263 regarding agricultural income. 6. Difference between Gross Receipts as per 26AS and Gross Receipts declared by the assessee. Detailed Analysis: 1. Whether the ITAT passed a perverse order in setting aside the order under Section 263: The ITAT set aside the order passed by the Commissioner of Income Tax (CIT) under Section 263 of the Income Tax Act, 1961, which was challenged by the revenue. The High Court observed that the ITAT correctly noted that the Assessing Officer (A.O.) had conducted a thorough inquiry and considered all relevant documents before passing the assessment order. The A.O. had required the assessee to furnish all necessary documents, which were duly provided and examined. Therefore, the ITAT's decision to set aside the CIT's order was not perverse. 2. Interpretation of provisions of Section 263 by ITAT: The ITAT interpreted Section 263, which allows the Commissioner to revise an order if it is erroneous and prejudicial to the interests of the revenue. The High Court upheld the ITAT's view that mere non-discussion or non-mention of queries and answers in the assessment order does not imply that the A.O. did not apply his mind. The ITAT relied on the Supreme Court's judgment in Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax, which states that an order is erroneous if it involves an incorrect assumption of facts or incorrect application of law. 3. Whether ITAT curbed the power of the CIT under Section 263: The High Court agreed with the ITAT that the CIT cannot invoke Section 263 merely on suspicion or presumption. The CIT must have concrete material to prove that the order is erroneous and prejudicial to the revenue. The ITAT correctly limited its scope to decide whether the CIT's exercise of power was in consonance with Section 263, citing the judgment in Malabar Industrial Co. Ltd. 4. Deletion of the order under Section 263 regarding development expenses: The High Court noted that the A.O. had considered all the books of account and relevant documents related to development expenses before passing the assessment order. The CIT's remand order was based on suspicion and lacked concrete evidence. The ITAT rightly set aside the CIT's order, as the A.O. had already conducted a proper inquiry and made a reasoned decision. 5. Deletion of the order under Section 263 regarding agricultural income: The High Court observed that the CIT wrongly invoked Section 263 regarding agricultural income, as the A.O. had already examined the issue and accepted the assessee's explanation. The ITAT correctly deleted the CIT's order, as there was no material evidence to prove that the A.O.'s order was erroneous and prejudicial to the revenue. 6. Difference between Gross Receipts as per 26AS and Gross Receipts declared by the assessee: The High Court found that the A.O. had considered the difference between Gross Receipts as per 26AS and the Gross Receipts declared by the assessee. The assessee had provided a reconciliation statement, which was examined by the A.O. The ITAT rightly held that the CIT's invocation of Section 263 was not justified, as the A.O. had already addressed the issue. Conclusion: The High Court dismissed the appeal filed by the revenue, upholding the ITAT's decision to set aside the CIT's order under Section 263. The Court concluded that the CIT's remand order was based on suspicion and lacked concrete evidence. The ITAT's interpretation of Section 263 was correct, and the A.O. had conducted a thorough inquiry before passing the assessment order. The appeal was devoid of merit and was dismissed, answering the question of law in favor of the assessee.
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