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2023 (12) TMI 394 - AT - Income TaxRevision u/s 263 - whether assessment order was just erroneous and not prejudicial to the interest of the Revenue ? - As per CIT AO has failed to carry out any enquiry or examination regarding the issue of interest paid on TDS and the applicability of deemed rent on the unsold flats - HELD THAT - AO has not conducted any enquiry or verification regarding the disallowance of interest paid on TDS and the applicability of deemed rent on unsold flats. The argument of the AR cannot be accepted because the very fact that there was no enquiry conducted by the AO as per explanation 2(a) to sec. 263, such an assessment order is deemed to be erroneous so as to be prejudicial to the interest of the Revenue. Once that is so, the question does not arise whether the order of assessment was just erroneous and not prejudicial to the interest of the Revenue or just prejudicial to the interest of the Revenue but not erroneous.This interplay application of the provision becomes irrelevant when the said deeming provision is applied. Also if the AO had conducted enquiry regarding the disputed issues, then the argument of the ld.AR would have carried some weight as to whether the assessment order was just erroneous and not prejudicial to the interest of the Revenue. In such scenario also, the issue of satisfaction by the PCIT would have been relevant, but in the instant case when in the threshold itself, the AO has failed to do his duty in conducting and verifying the issues involved, then in such situation, explanation 2(a) to sec. 263 as clearly stated as a deeming provision that such an assessment order passed shall be deemed to be erroneous insofar as it is prejudicial to the interest of the Revenue shall apply. Decided against assessee.
Issues involved:
The judgment involves the revisionary jurisdiction exercised by the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act, 1961 regarding the assessment order for the assessment year 2018-19. Revisionary Jurisdiction - Interest on TDS: The PCIT observed that the assessee had claimed expenses for interest on TDS but did not add it back while computing total income, and the Assessing Officer (AO) did not disallow it in the assessment order. The PCIT found that the AO failed to conduct any verification or inquiry on this issue, leading to a lack of application of mind on the part of the AO. The PCIT held that the assessment order was erroneous and prejudicial to the interest of the Revenue due to the non-consideration of disallowance of interest on TDS. Revisionary Jurisdiction - Deemed Rental Income: The PCIT noted that the assessee had unsold flats held as stock-in-trade, which were not considered for deemed rental income during the assessment proceedings. The PCIT found that the AO did not carry out any inquiry regarding the taxability of deemed rental income on this issue. The PCIT concluded that the AO's failure to conduct verification/enquiry on this matter showed a lack of application of mind, rendering the assessment order erroneous and prejudicial to the interest of the Revenue. Arguments and Decision: During the hearing, the assessee argued that the PCIT did not arrive at any satisfaction regarding the arguments presented during the proceedings under section 263. The assessee contended that the revisionary jurisdiction could not be invoked without such satisfaction. However, the Tribunal upheld the order of the PCIT under section 263, stating that the AO's failure to conduct any inquiry or verification on the disputed issues rendered the assessment order erroneous and prejudicial to the interest of the Revenue. The Tribunal emphasized the deeming provision under explanation 2 to section 263, which considers an order erroneous if passed without necessary inquiries or verifications. The Tribunal dismissed the appeal raised by the assessee, affirming the PCIT's decision. Conclusion: The Tribunal upheld the PCIT's order under section 263, emphasizing the importance of conducting necessary inquiries and verifications in assessment proceedings. The Tribunal found no infirmity with the PCIT's decision and dismissed the appeal of the assessee.
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