2021 (7) TMI 1200 - AT - Income Tax

Revision u/s 263 - deduction claimed u/s 80IA - reopening of assessment occurred in the case of assessee - period of limitation prescribed for revision proceedings - HELD THAT - A reading of the original assessment order would reveal that the issue relating to deduction claimed under section 80IA was a subject matter therein. In fact, the draft assessment order passed by the assessing officer on the issue of deduction claimed under section 80IA of the Act was disputed before learned DRP and after passing of the final assessment order, the issue relating to claim of deduction under section 80IA of the Act is now pending in appeal before the Tribunal. Therefore, any attempt by the assessing officer to deal with such issue in re-assessment proceedings would have amounted to review of the original assessment order, which is impermissible. Thus, assessment order passed under section 143(3) r.w.s. 147 of the Act cannot be considered as erroneous and prejudicial to the interest of revenue to subject it to proceeding under section 263 of the Act. If, at all, any order of the subordinate authority which could have been considered as erroneous and prejudicial to the interest of revenue in allowing assessee s claim of deduction under section 80IA of the Act, either due to lack of enquiry or otherwise, is the original assessment order passed under section 143(3) r.w.s. 144C of the Act and not the re-assessment order. Therefore, the period of limitation prescribed under section 263(2) of the Act would run from the original assessment order. Being conscious of the fact that the original assessment order could not be revised under section 263 of the Act due to bar of limitation, as provided under sub section (2) of section 263 of the Act, learned PCIT, as it appears, has proceeded to revise the assessment order passed under section 143(3) r.w.s. 147 of the Act to get over the hurdle of limitation. This, in our view, is impermissible. Thus we hold that the impugned order of learned PCIT revising the order passed under section 143(3) r.w.s. 147 of the Act is unsustainable. Accordingly, we quash it. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the order passed under section 263 of the Income-tax Act, 1961.
2. Whether the assessment order under section 143(3) r.w.s. 147 was erroneous and prejudicial to the interest of revenue.
3. Scope of reassessment under section 147 of the Act.

Issue-wise Detailed Analysis:

1. Validity of the Order Passed Under Section 263 of the Income-tax Act, 1961:
The appeal was filed by the assessee challenging the order dated 28-01-2010 passed by the Principal Commissioner of Income Tax-2 (PCIT) under section 263 of the Income-tax Act, 1961 for the assessment year 2010-11. The PCIT revised the assessment order passed under section 143(3) r.w.s. 147, claiming it was erroneous and prejudicial to the interest of revenue because the assessing officer did not examine and disallow the excess deduction claimed under section 80IA. The PCIT directed the assessing officer to correctly compute the deduction under section 80IA after examining the eligibility of individual units.

2. Whether the Assessment Order Under Section 143(3) r.w.s. 147 was Erroneous and Prejudicial to the Interest of Revenue:
The assessee argued that the reassessment under section 147 was specifically for disallowing the expenditure of ?68,62,780/- on furniture and tools, and the assessing officer could not have examined other issues, including the deduction under section 80IA. The PCIT's contention that the reassessment order was erroneous and prejudicial to the interest of revenue was based on the failure of the assessing officer to examine the deduction claimed under section 80IA, which was already a subject matter of the original assessment and pending appeal.

3. Scope of Reassessment Under Section 147 of the Act:
The Tribunal examined whether the reassessment order under section 143(3) r.w.s. 147 could be revised under section 263. It was noted that the reassessment was initiated for a specific reason (disallowance of ?68,62,780/-), and the issue of deduction under section 80IA was not part of the reasons for reopening nor did it come to the notice of the assessing officer during reassessment. The Tribunal cited the third proviso to section 147, which restricts the assessing officer from reassessing income that is the subject matter of any appeal, reference, or revision. The Tribunal concluded that the reassessment order could not be considered erroneous and prejudicial to the interest of revenue for not considering the deduction under section 80IA, as it was outside the scope of reassessment.

Conclusion:
The Tribunal held that the PCIT's order revising the reassessment order under section 143(3) r.w.s. 147 was unsustainable. The reassessment was specifically for disallowing the expenditure on furniture and tools, and the issue of deduction under section 80IA was already a subject matter of the original assessment and pending appeal. The Tribunal quashed the PCIT's order under section 263, allowing the assessee's appeal. The judgment emphasized that the reassessment proceedings under section 147 are limited to assessing the escaped income and any other income that comes to the notice of the assessing officer during such proceedings, not issues already covered in the original assessment.