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2023 (2) TMI 509 - AT - Income TaxRevision u/s 263 by CIT - Undisclosed sundry debtors - HELD THAT - The simple reason for such embargo is that there should not be contradictory orders at the level of identical authorities. CIT(Appeals) has co-terminus power of the ld. AO. In case it noticed any irregularity or illegality in an assessment order that can be taken care by the ld. 1st Appellate Authority by exercising his power for enhancement of income. Therefore, on such items, no supervision at the end of the ld. Commissioner under section 263 is contemplated in the Scheme of the Act. Addition of Rs.1,02,00,000/- is already subject matter of appeal before the ld. CIT(Appeals) and the ld. CIT(Appeals) would always look forward whether it required to be charged to tax under section 115BBE @ 60% or at normal rate. It is yet to be determined how much addition stands and what is the source of such addition to the income of the assessee. Therefore, all these subject matter can easily be looked into by the ld. 1s t Appellate Authority. The ld. CIT under section 263 has no jurisdiction on such a claim. TCS credit - It is to be appreciated that this aspect has been considered by the ld. Assessing Officer before allowing the credit. There is no apparent error in the order of the ld. Assessing Officer on this point. Therefore, we are of the view that ld. Commissioner has erred in invoking jurisdiction under section 263 of the Income Tax Act. Assessee appeal allowed.
Issues Involved:
1. Legitimacy of invoking Section 263 of the Income Tax Act by the Principal Commissioner of Income Tax (PCIT). 2. Examination of the addition of Rs. 1,02,60,638/- as undisclosed investments. 3. Appropriateness of credit for Tax Collected at Source (TCS). Detailed Analysis: 1. Legitimacy of Invoking Section 263: The primary issue is whether the Principal Commissioner of Income Tax (PCIT) erred in invoking Section 263 of the Income Tax Act. The assessee argued that the PCIT ignored clause (c) of sub-section (i) of Section 263, which precludes the Commissioner from taking action on matters already under appeal before the CIT(Appeals). The Tribunal noted that Section 263 grants the Commissioner the power to revise any order passed by the Assessing Officer if it is erroneous and prejudicial to the interests of the Revenue. However, this power is limited by clause (c) of sub-section (i) of Section 263, which restricts the Commissioner from revising matters that are already the subject of an appeal. The Tribunal found that the addition of Rs. 1,02,60,638/- was already under appeal before the CIT(Appeals), and thus, the PCIT had no jurisdiction to invoke Section 263 on this matter. 2. Examination of Addition of Rs. 1,02,60,638/- as Undisclosed Investments: The Assessing Officer had added Rs. 1,02,60,638/- to the assessee's income as undisclosed investments, based on discrepancies between sundry debtors reported to the bank and those in the audit report. The PCIT set aside the assessment order and directed the Assessing Officer to reframe it. The Tribunal examined the principles for invoking Section 263, including the necessity for the order to be both erroneous and prejudicial to the Revenue. It was noted that the CIT(Appeals) has co-terminus powers with the Assessing Officer and can address any irregularities. Since the addition was already under appeal, the Tribunal concluded that the PCIT's action under Section 263 was not justified. 3. Appropriateness of Credit for TCS: The second issue pertained to the credit for Tax Collected at Source (TCS). The assessee claimed TCS credit of Rs. 20,46,801/-, which the Assessing Officer allowed after verifying the accounts. The PCIT questioned this allowance, but the assessee provided detailed explanations, including the nature of the business and the joint venture arrangement. The Tribunal found that the Assessing Officer had duly considered this aspect before allowing the TCS credit, and there was no apparent error in the order. Therefore, the Tribunal held that the PCIT erred in invoking Section 263 on this point as well. Conclusion: The Tribunal concluded that the PCIT had no jurisdiction to invoke Section 263 in this case, as the matters in question were already under appeal before the CIT(Appeals). The appeal of the assessee was allowed, and the order passed under Section 263 was quashed. The Tribunal emphasized that the Assessing Officer's order was neither erroneous nor prejudicial to the interests of the Revenue, and the PCIT's invocation of Section 263 was unwarranted. The appeal was pronounced in favor of the assessee on January 13, 2023.
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