2023 (10) TMI 835 - AT - Income Tax

Revision u/s 263 - CIT has opined that AO has also failed to verify assessee s claim of royalty expenses - HELD THAT - The principal of the law emanating that when two views are legally possible and AO adopts one view the Assessment Order cannot be said to be erroneous for the CIT to invoke jurisdiction u/s 263. In this case the AO has taken one of the possible Legal View. Hence, the Assessment Order is not erroneous and prejudicial to the interest of the revenue. In this case, the ld.Pr.CIT though has discussed in the order u/s. 263 of the Act, the Order of the ITAT for earlier years in the case of the assessee on the impugned issues, errored in taking a divergent view. CIT is a quasi- judicial authority, and hence the ld.Pr.CIT is duty bound to follow the Judicial Precedence. Merely, because the Department has filed an appeal before the Hon ble High Court does not give an authority to the ld.Pr.CIT to take a divergent view. See Union Of India And Others Vs Kamlakshi Finance Corporation 1991 (9) TMI 72 - SUPREME COURT Thus we are of the opinion that the order u/s 263 is not sustainable in law, hence it is set aside. Accordingly, grounds of appeal raised by the assessee are allowed.

Summary

Issues:
The appeal challenges the order of the Principal Commissioner of Income Tax under section 263 for the assessment year 2017-18.

Validity of initiation of revision proceedings:
The appellant argued that the revision proceedings under section 263 cannot be initiated unless the assessment order is both erroneous in law and prejudicial to the revenue's interests. The appellant contended that the issues of deduction for Royalty expenses and Legal and Professional Fees had already been settled in their favor by the ITAT for previous assessment years.

Jurisdiction under Section 263 of the Act:
The appellant further argued that the Assessing Officer had considered all relevant details during the assessment proceedings and Transfer Pricing Officer proceedings, making the order under section 263 invalid in law. The appellant cited various case laws to support their argument.

Findings and Analysis:
The ITAT noted that the ITAT had previously decided in favor of the appellant regarding the Royalty Expenses and Legal Professional Fees for the assessment years 2010-11 and 2011-12. The ITAT emphasized that for the order to be considered erroneous and prejudicial to the revenue, there must be no settled legal position in favor of the assessee, which was not the case here. The ITAT referenced legal precedents to support their conclusion that when two legal views are possible, the assessment order cannot be deemed erroneous for the purposes of section 263.

Conclusion:
The ITAT held that the order under section 263 was not sustainable in law and set it aside. The ITAT emphasized the importance of revenue officers being bound by appellate decisions and following judicial precedence. Therefore, the appeal of the assessee was allowed, and the order was pronounced in the open court on 25th July 2023.