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2021 (2) TMI 1113 - HC - Income TaxRevision u/s 263 - disallowance under Section 40(a)(ia) - Tribunal hold that assumption of jurisdiction under Section 263 was correct - HELD THAT - From close scrutiny of Section 263 it is evident that twin conditions are required to be satisfied for exercise of revisional jurisdiction under Section 263 of the Act firstly, the order of the Assessing Officer is erroneous and secondly, that it is prejudicial to the interest of the revenue on account of error in the order of assessment. The aforesaid provision was considered by the Supreme Court in MALABAR INDUSTRIAL COMPANY VS. CIT 2000 (2) TMI 10 - SUPREME COURT and it was held that the phrase prejudicial to the interests of the revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer and every loss of revenue as a consequence of the order of the Assessing Officer cannot be treated as prejudicial to the interest of revenue. It was further held that where two views are possible and the Income Tax Officer has taken one view with which the Commissioner does not agree, the order passed by the Assessing Officer cannot be treated as erroneous order prejudicial to the interest of the revenue. it is the claim of the assessee that the assessee has not claimed the benefit of the disallowance under Section 40(a)(ia) of the Act for the Assessment Year in question ie., 2008-09 and the same was claimed in the previous Assessment Year ie., 2007-08. Therefore, in our opinion, the matter requires factual adjudication. The Tribunal has not adverted to the aforesaid aspect of the matter and has not considered the submission made by the assessee that the amount of ₹ 2,36,07,661/- was not a real amount but only the provision that was directly reversed. In view of the preceding analysis, the matter requires factual adjudication. We are inclined to remit the matter. Therefore, it is not necessary for us to answer the substantial questions of law framed in the appeal. The impugned order of tribunal is hereby quashed and the matter is remitted to the Tribunal for decision afresh in accordance with the observations made in this order.
Issues:
1. Jurisdiction under Section 263 of the Income Tax Act. 2. Disallowance under Section 40(a)(ia) of the Act. 3. Correctness of the order passed by the Assessing Officer. Analysis: Issue 1: Jurisdiction under Section 263 of the Income Tax Act The appeal was filed against the order passed by the Income Tax Appellate Tribunal, concerning the Assessment Year 2008-09. The Tribunal affirmed the order of the Commissioner of Income Tax (Appeals) who had exercised revisional jurisdiction under Section 263 of the Act. The key question was whether the AO's order was erroneous and prejudicial to the revenue. The Supreme Court precedent highlighted that mere loss of revenue does not make an order prejudicial. If the AO's view is a possible interpretation, it cannot be deemed erroneous. The High Court noted that the Tribunal had not considered the factual aspect of the case, leading to the remittance of the matter for fresh consideration. Issue 2: Disallowance under Section 40(a)(ia) of the Act The notice under Section 263 was issued due to a claim under Section 40(a)(ia) of the Act, where TDS was not deducted on a specific amount. The appellant argued that the claim was not made for the relevant Assessment Year and was incorrectly assumed by the Commissioner of Income Tax (Appeals). The High Court observed that the Tribunal did not address this argument and the factual aspect needed further examination, leading to the decision to remit the matter for fresh consideration. Issue 3: Correctness of the order passed by the Assessing Officer The Assessing Officer's order was challenged on grounds of not discussing the disallowance under Section 40(a)(ia) and allowing the same without proper consideration. The High Court emphasized the need for the AO's order to be both erroneous and prejudicial to the revenue for revision under Section 263. Since factual adjudication was necessary in this case, the High Court quashed the impugned order and remitted the matter back to the Tribunal for a fresh decision, allowing both parties to present their arguments. In conclusion, the High Court's judgment focused on the necessity of factual adjudication in determining the correctness of the AO's order and the jurisdiction under Section 263 of the Income Tax Act. The remittance of the matter for fresh consideration highlighted the importance of a thorough examination of facts before making a decision in tax matters.
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