2023 (3) TMI 1545 - AT - Income Tax

Revision u/s 263 - errors in the assessment-order passed by AO - allowability of prior period expenses Belated payment of provident funds u/s 36(1)(va) Provision for payment of gratuity Payments inadmissible u/s 43B and Provision for bad and doubtful debts. HELD THAT - We find that in the present case the revision-action had been taken by Ld. PCIT on the basis of a proposal mooted by lower-authorities and not on the basis of his own examination and consideration of the record. Therefore the present case is directly governed by decision of Alfa Laval Lund AB 2021 (11) TMI 327 - ITAT PUNE in which revision action in such a manner was held to be illegal and quashed. As five items of disallowance mentioned by PCIT at least four items were such which did not require any disallowance and still PCIT has alleged in his show-cause notice. Thus it is quite manifest that the Ld. PCIT has given approval as a mere formality merely on the basis of proposal of lower authorities and without examination/consideration of records. Clearly therefore the revision-action undertaken in the present case is not in accordance with the requirement/mandate of section 263. Therefore we are inclined to quash such revision-order and restore the original assessment-order. Assessee appeal allowed.

Summary

Issues:
Challenge to revision-order passed under section 263 of the Income-tax Act, 1961 based on jurisdictional grounds and alleged errors in disallowances made by the Principal Commissioner of Income Tax (PCIT).

Analysis:
The Appellate Tribunal heard the appeal filed by the assessee against the revision-order passed by the PCIT under section 263. The PCIT found the assessment-order passed by the Assessing Officer (AO) to be erroneous and prejudicial to the interest of revenue due to certain disallowances not made by the AO. The PCIT set aside the assessment-order and directed a re-assessment.

The assessee contended that the revision-action was based on a proposal from lower authorities and not on the PCIT's own examination of records, which was against the mandate of section 263. The Tribunal referred to a decision by the ITAT, Pune Bench, where a similar revision was held illegal and quashed. The Tribunal found that the PCIT's approval was merely a formality without proper examination or consideration of records, leading to a lack of compliance with the requirements of section 263.

The assessee further argued that out of the five disallowances mentioned by the PCIT, four did not warrant disallowance upon examination of relevant documents. The Tribunal agreed with the assessee's contentions and concluded that the revision-action in the present case did not meet the statutory requirements of section 263. Consequently, the Tribunal quashed the revision-order and restored the original assessment-order, allowing the appeal of the assessee.

In summary, the Tribunal held that the revision-order was invalid due to jurisdictional deficiencies and errors in the disallowances made by the PCIT, leading to the restoration of the original assessment-order.