2023 (4) TMI 565 - AT - Income Tax

Revision u/s 263 by CIT - Revision on the basis of audit objection - Applicability of provisions contained in clause (a) of explanation 2 below sub section of section 263 - HELD THAT - Admittedly, the proceedings were initiated u/s 263 of the Act on the basis of audit objection and consequent order passed u/s 263 of the Act is opposed to judgment of SOHANA WOOLLEN MILLS 2006 (9) TMI 157 - PUNJAB AND HARYANA HIGH COURT From the record, it is established that the Ld. PCIT has initiated the proceedings u/s 263 of the Act by invoking provisions contained in clause (a) of explanation 2 to sub section 1 of section 263 of the Act. In our view, the subject proceeding initiated by the Ld. PCIT u/s 263 of the Act, is illegal and bad in law, since the provisions contained in clause (a) of explanation 2 below to section of section 263 of the Act were introduced by Finance Act 2015 are not applicable retrospectively and therefore, clause (a) of explanation 2 to sub section 1 of section 263 is not applicable to Assessment Year (2011-12), under consideration. We hold that the order of the CIT passed u/s 263 is bad in law and as such it is quashed. Appeal of assessee allowed.

Issues Involved:
1. Legality of the order passed under Section 263 of the Income Tax Act.
2. Delay in filing the appeal and its condonation.
3. Validity of invoking provisions contained in clause (a) of explanation 2 below sub-section 1 of Section 263 of the Act for Assessment Year 2011-12.

Summary:

1. Legality of the Order Passed under Section 263:
The assessee contended that the Principal Commissioner of Income Tax (Pr. CIT) erred in law by passing the order under Section 263 of the Income Tax Act, 1961, as the original assessment order dated 10.12.2018 was neither erroneous nor prejudicial to the interest of revenue. The Pr. CIT set aside the assessment framed, directing the Assessing Officer (AO) to pass a fresh order after making necessary enquiries. The assessee argued that the proceedings under Section 263 were initiated based on an audit objection, which is not sufficient to hold the AO's order as erroneous or prejudicial to the interest of the revenue, citing the judgment of the Punjab and Haryana High Court in the case of "COMMISSIONER OF INCOME TAX vs. SOHANA WOOLLEN MILLS."

2. Delay in Filing the Appeal and Its Condonation:
There was a delay of 448 days in filing the appeal before the Tribunal. The delay was attributed to the wrong advice given by the Chartered Accountant (CA) that the appeal should be filed after the assessment order in compliance with the Section 263 order. The Tribunal, considering the affidavit and judicial precedents, held that the delay was neither intentional nor willful but due to sufficient reasons shown by the assessee. The Tribunal condoned the delay in the interest of justice.

3. Validity of Invoking Provisions Contained in Clause (a) of Explanation 2 Below Sub-section 1 of Section 263:
The Tribunal observed that the Pr. CIT invoked the provisions contained in clause (a) of explanation 2 below sub-section 1 of Section 263, which were introduced by the Finance Act 2015 and are not applicable to Assessment Year 2011-12. Therefore, the Tribunal held that the proceedings initiated under Section 263 based on these provisions are illegal and bad in law.

Conclusion:
The Tribunal quashed the order passed by the Pr. CIT under Section 263 of the Income Tax Act, 1961, deeming it illegal and bad in law. The appeal of the assessee was allowed.

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