2022 (4) TMI 490 - AT - Income Tax

Revision u/s 263 - return was selected for Limited Scrutiny exclusively for verification of claim of weighted deduction u/s 35(1)(ii) - inadequate or lack of enquiry - HELD THAT - We find from the narration of facts, the ld . AO had indeed carried out requisite enquiries on the issue of deduction u/s 35(1)(ii) of the Act. Once an assessment is framed after conducting enquiries as detailed supra, then the order passed by the ld AO cannot be subject matter of revision u/s 263 - The law is now very well settled that the revision jurisdiction u/s 263 of the Act could be invoked by the ld. PCIT only in the event of lack of enquiry‟ by the ld AO and not on account of inadequate enquiry‟. Reliance in this regard is placed on the decision in the case of CIT vs Sunbeam Auto Ltd 2009 (9) TMI 633 - DELHI HIGH COURT . We deem it fit and appropriate to hold that the ld. PCIT could not have validly invoked revision jurisdiction u/s 263 of the Act and hence the order passed u/s 263 of the Act by him is hereby quashed. Accordingly, the grounds raised by the assessee are allowed.

Summary

Issues Involved:

1. Justification of invoking revisionary jurisdiction under section 263 of the Income Tax Act by the Principal Commissioner of Income Tax (PCIT).

Issue-wise Detailed Analysis:

1. Justification of invoking revisionary jurisdiction under section 263 of the Income Tax Act by the Principal Commissioner of Income Tax (PCIT):

The core issue in this appeal is whether the PCIT was justified in invoking revisionary jurisdiction under section 263 of the Income Tax Act in the given circumstances. The assessee filed the return of income for the assessment year 2016-17, claiming a weighted deduction under section 35(1)(ii) of the Act for a donation made to a scientific research trust. The Assessing Officer (AO) conducted a "Limited Scrutiny" to verify this claim, during which the assessee provided all relevant documents, including the donation receipt and bank statements.

The AO, after verifying these documents and receiving confirmation from the Donee Trust, accepted the claim and completed the assessment. However, subsequent to this, the Central Board of Direct Taxes (CBDT) issued an advisory indicating that the Donee Trust's approval under section 35(1)(ii) had expired on 31.03.2006, and it had been issuing forged certificates.

This advisory led the PCIT to invoke revisionary jurisdiction under section 263, arguing that the AO had not conducted sufficient enquiries and had accepted the evidences without further verification. The PCIT set aside the AO's order, directing a fresh assessment.

The Tribunal, however, found that the AO had indeed conducted requisite enquiries and had no reason to suspect the validity of the Donee Trust's approval at the time of assessment. The Tribunal noted that the AO's belief in the perpetual validity of the Donee Trust's approval was based on the Taxation Laws (Amendment) Act, 2006, which indicated that no renewal was necessary for such approvals.

The Tribunal emphasized that for invoking section 263, the PCIT must demonstrate that the AO's order was both erroneous and prejudicial to the interests of the revenue. The Tribunal cited the Supreme Court's decision in Malabar Industrial Co. Ltd (243 ITR 83) to support this requirement. Additionally, the Tribunal pointed out that the PCIT relied on the CBDT advisory issued after the assessment was completed, which cannot be used to retrospectively judge the AO's actions.

The Tribunal also referenced the Calcutta High Court's decision in Ganga Properties vs ITO (118 ITR 447), which held that the Commissioner could only consider the record available at the time of the original assessment, not subsequent materials. Moreover, the Tribunal referred to the Delhi High Court's ruling in CIT vs Sunbeam Auto Ltd (332 ITR 167), which distinguished between "lack of enquiry" and "inadequate enquiry," stating that section 263 could only be invoked in cases of the former.

Finally, the Tribunal cited the Bombay High Court's decision in CIT vs Development Credit Bank Ltd (323 ITR 206), which underscored that the Commissioner could not invoke section 263 merely because they disagreed with the AO's conclusions if the AO had conducted due enquiries.

In conclusion, the Tribunal held that the PCIT could not validly invoke revisionary jurisdiction under section 263 in this case, as the AO had conducted appropriate enquiries based on the information available at the time. Consequently, the Tribunal quashed the PCIT's order and allowed the assessee's appeal.