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2022 (12) TMI 1276 - AT - Income TaxRevision u/s 263 by CIT - assessee company has not made any submission to substantiate that it had submitted complete details pertaining to the expenses charged to the P L account under the head other advertisement and sales promotion expenses - HELD THAT - A perusal of the assessment order clearly shows that the AO during the course of assessment proceedings had called for the details of advertisement and sales promotion expenses. As held in various decisions that for invoking jurisdiction u/s 263 of the I.T. Act, the twin conditions namely, (a) the order is erroneous and (b) the order is prejudicial to the interest of the Revenue must be satisfied. However, in the instant case, the order may be prejudicial to the interest of the Revenue, but it cannot be said to be erroneous since the AO after conducting necessary inquiries by calling for information and having gone through the details furnished by the assessee has taken a possible view. Merely because the learned PCIT does not agree with the view taken by the Assessing Officer, the order cannot be said to be erroneous or not a possible one. Under these circumstances, since one of the twin conditions i.e. the order is not erroneous is not satisfied, therefore, we hold that the learned PCIT is not justified in invoking jurisdiction u/s 263 - Accordingly, the order of the PCIT passed u/s 263 of the I.T. Act is set aside and the grounds raised by the assessee are allowed.
Issues Involved:
1. Validity of invoking provisions under Section 263 of the Income-tax Act, 1961. 2. Examination of advertisement and sales promotion expenses by the Assessing Officer (AO). 3. Determination of whether the AO's order was erroneous and prejudicial to the interest of the revenue. Issue-wise Detailed Analysis: 1. Validity of invoking provisions under Section 263 of the Income-tax Act, 1961: The Principal Commissioner of Income Tax (PCIT) invoked Section 263, asserting that the AO did not examine the "other advertisement and sales promotion expenses" of Rs. 57,75,196/-. The PCIT argued that this oversight rendered the AO's order erroneous and prejudicial to the interest of the revenue. The assessee contended that the AO had conducted a detailed inquiry into the advertisement and sales promotion expenses totaling Rs. 15,37,40,000/-, and had disallowed certain expenses after verification. The Tribunal found that the AO had indeed called for and examined the details of the expenses, and thus, the order could not be deemed erroneous merely because the PCIT had a different opinion. 2. Examination of advertisement and sales promotion expenses by the AO: The AO had issued notices under Sections 143(2) and 142(1), and the assessee provided detailed responses, including a breakdown of the advertisement and sales promotion expenses. The AO disallowed Rs. 17,10,283/- for product samples and Rs. 94,07,535/- on an ad-hoc basis, considering them capital in nature. The Tribunal noted that the AO had reviewed the details provided by the assessee and made specific disallowances, indicating that a thorough inquiry was conducted. 3. Determination of whether the AO's order was erroneous and prejudicial to the interest of the revenue: The Tribunal referred to various judicial precedents, emphasizing that an order cannot be considered erroneous if the AO has conducted an inquiry, even if the inquiry was deemed inadequate by the PCIT. The Tribunal highlighted that the AO had made detailed inquiries and disallowed certain expenses based on the information provided. It was held that the AO's order was not erroneous, as the AO had adopted one of the permissible courses in law. The Tribunal concluded that the PCIT was not justified in invoking Section 263, as the twin conditions of the order being erroneous and prejudicial to the revenue were not satisfied. Conclusion: The Tribunal set aside the PCIT's order under Section 263, ruling that the AO had conducted a detailed inquiry and made specific disallowances based on the information provided by the assessee. The AO's order was not erroneous, and the PCIT's invocation of Section 263 was deemed unjustified. The appeal filed by the assessee was allowed.
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