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2020 (2) TMI 93 - AT - Income TaxRevision u/s 263 - sec. 33AB deduction admissibility - HELD THAT - PCIT has erred in law and on facts in holding the impugned assessment as erroneous causing prejudice to the interest of Revenue on the ground which nowhere formed subject-matter of the CASS scrutiny as it is evident from the case records. We reiterate the learned co-ordinate bench s detained reasoning hereinabove that the sec. 263 revision proceedings ought not to have been set into motion for expanding the jurisdiction of the AO to examine the issues beyond the scope of limited scrutiny. We therefore reverse the PCIT s action assuming sec. 263 revision jurisdiction in these facts and circumstances. We find that the relevant clause in Tea Development Accounts, Scheme, 2007 (pages 1 to 45 of the paper book) contain clause No.9 regarding withdrawal or utilization of the amounts deposited thereunder. The assessee s statement of necessary particulars in part-ii alongwithi Form No.3AC Auditor report sec. 33AB(2) indicates that it had withdrawn ₹44,58,300/-, ₹96,54,000/- as on 26.04.2013, 24.05.2013 and 05.05.2013 for green tea factory material alongwith plant and equipment of former two and irrigation; respectively. These crucial facts as well as the corresponding purpose in the Tea Development Accounts Scheme, 2007 have gone unrebutted from the Revenue side during the course of hearing. In this factual backdrop of that even if we agree with the PCIT s stand that the Assessing Officer had not carried out necessary enquiries about the purpose of the assessee withdrawals amounting of ₹165,36,500/- from the Tea Development Accounts Scheme, 2007, no prejudice has been caused to interest of the Revenue since the amounts pertain to the specified purpose under the scheme only. We make it clear that hon'ble apex court s landmark judgment in Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax 1991 (10) TMI 26 - KERALA HIGH COURT has settled the law long back that twin conditions of an assessment being erroneous as well as causing prejudice to the interest of the Revenue have to be simultaneously satisfied before the Commissioner of Income tax or Principal Commissioner of Income Tax; as the case may be, seeks to invoke sec. 263 Revenue proceedings. We therefore hold that the PCIT s revision directions under challenge are not sustainable in law. - Decided in favour of assessee.
Issues Involved:
1. Invocation of Section 263 revision jurisdiction by the Principal Commissioner of Income Tax (PCIT). 2. Verification of the utilization of funds withdrawn from the Tea Development Accounts Scheme, 2007. 3. Limited scrutiny selection under CASS and its implications. 4. Opportunity of hearing provided to the assessee. 5. Validity of PCIT's directions and their compliance with legal precedents. Issue-wise Detailed Analysis: 1. Invocation of Section 263 Revision Jurisdiction by the PCIT: The PCIT invoked Section 263 revision jurisdiction, treating the regular assessment as erroneous and prejudicial to the interest of Revenue. The PCIT issued a show cause notice highlighting discrepancies in the assessee's claims under Section 33AB and the determination of agricultural income. Although the PCIT later dropped these issues, he held that the Assessing Officer (AO) did not verify the utilization of ?1,65,36,500/- deposited under the Tea Development Accounts Scheme, 2007, rendering the assessment order erroneous and prejudicial to the interest of Revenue. 2. Verification of the Utilization of Funds Withdrawn from the Tea Development Accounts Scheme, 2007: The PCIT observed that the AO failed to verify whether the withdrawn amount was utilized in accordance with the provisions of Section 33AB. The PCIT emphasized that the AO is duty-bound to scrutinize every piece of information and conduct necessary inquiries to assess the correct income. The PCIT cited various judicial precedents to support the view that failure to make proper inquiries renders an assessment order erroneous and prejudicial to the interest of Revenue. 3. Limited Scrutiny Selection under CASS and Its Implications: The assessee argued that the scrutiny assessment was a limited scrutiny selection under CASS, focusing on specific issues such as large expenditure claims and mismatches in sales turnover. The assessee contended that the PCIT's reason for assuming Section 263 revision jurisdiction went beyond the scope of the limited scrutiny. The tribunal referred to its previous decisions, concluding that the PCIT erred in expanding the jurisdiction of the AO beyond the limited scrutiny scope. 4. Opportunity of Hearing Provided to the Assessee: The assessee argued that the PCIT did not afford an opportunity of hearing regarding the sole surviving issue of factual verification of the utilization of funds. However, the tribunal found no merit in this argument, noting that the PCIT's show cause notice had consistently raised the issue of Section 33AB deduction, and the assessee was well aware of the comprehensive issue. 5. Validity of PCIT's Directions and Their Compliance with Legal Precedents: The tribunal examined the PCIT's directions and found that the assessee had provided necessary particulars and auditor's certificates indicating compliance with Section 33AB. The tribunal concluded that even if the AO had not carried out necessary inquiries, no prejudice was caused to the interest of Revenue, as the withdrawals pertained to specified purposes under the scheme. The tribunal referred to the Supreme Court's judgment in Malabar Industrial Co. Ltd. vs. CIT, emphasizing that both conditions of an assessment being erroneous and prejudicial to Revenue must be satisfied for invoking Section 263. The tribunal held that the PCIT's revision directions were not sustainable in law and restored the regular assessment. Conclusion: The assessee's appeal was allowed, and the tribunal reversed the PCIT's action of assuming Section 263 revision jurisdiction. The regular assessment dated 18.10.2016 was restored, and the tribunal emphasized that the PCIT's directions were not in compliance with legal precedents and the scope of limited scrutiny under CASS.
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