2023 (3) TMI 989 - HC - Income Tax

Revision u/s 263 by CIT - setting off of derivative loss against business income - Tribunal has allowed the appeal filed by the assessee solely on the ground that certain records were placed before Tribunal which were examined by the Tribunal and in the opinion of the Tribunal that those documents clearly show that the issue was discussed by the AO and he was satisfied with the reply given by the assessee - HELD THAT - Tribunal has come to the conclusion that there is no justification on the part of the PCIT to exercise his revisional jurisdiction u/s 263 of the Act. On perusal of the order passed by the PCIT it is seen that the assessee did not appear before the PCIT though they were granted opportunity of personal hearing on two occasions. Thus, the record which was examined by the learned Tribunal was not placed before the PCIT for consideration so as to take a decision on merits. We find that the Tribunal has not given a specific finding as to how there is no bar under the Income Tax Act for setting off of derivative loss against business income in the facts and circumstances of the case. Therefore, we are of the view that the matter has to be freshly decided by the PCIT and, therefore, we are inclined to remand the matter back to the PCIT for fresh consideration. Appeal filed by the revenue is allowed and the order passed by the Tribunal as well as the PCIT are set aside and the matter is remanded to the PCIT for fresh consideration, who shall take note of the documents. The assessee is directed to appear before the PCIT on the dates to be fixed for personal hearing and place the paper book which was placed before the learned Tribunal and after considering all the documents and hearing the assessee, a fresh decision shall be taken in accordance with law.

Summary

Issues:
The appeal filed by the revenue under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal for the assessment year 2017-18.

Issue 1:
The first substantial question of law raised was whether the Tribunal erred in not considering Explanation-2 to Section 263(1) of the Income Tax Act, which could amount to a violation of the law.

Issue 2:
The second substantial question of law raised was whether the Tribunal erred in not taking into account relevant case laws and provisions empowering the Principal Commissioner of Income Tax (PCIT) to exercise revision jurisdiction under Section 263, especially when the assessment order was deemed prejudicial to the revenue's interest.

Issue 3:
The third substantial question of law raised was whether the Tribunal erred in accepting the assessee's submission regarding the set-off of derivative loss against business income, despite the provisions of Section 73(1) specifying restrictions on such set-offs.

Judgment Details:
The High Court heard the appeal and noted that the Tribunal had allowed the appeal filed by the assessee on the basis that certain records showed the Assessing Officer had discussed the issue and was satisfied with the response given by the assessee. The Tribunal concluded that the PCIT had no jurisdiction under Section 263. However, the Court observed that the Tribunal did not specifically address the issue of setting off derivative loss against business income as claimed by the assessee. Therefore, the Court decided to remand the matter back to the PCIT for fresh consideration, directing the assessee to appear before the PCIT with relevant documents for a fresh decision in accordance with the law.

Conclusion:
The appeal filed by the revenue was allowed, the orders of the Tribunal and the PCIT were set aside, and the matter was remanded to the PCIT for fresh consideration. The substantial questions of law were left open for future determination, and the connected application for stay was closed as a result of the judgment.