2024 (3) TMI 1208 - HC - Income Tax

Revision u/s 263 - case of the assessee was selected for scrutiny and the AO was passed u/s 143(3) by accepting the returned income - As per CIT internal Audit Party observed that during the assessment proceedings, no proper verification of the purchase of the new assets and depreciation claimed on the assets has been made by the AO - Tribunal held that the AO framed the assessment on limited scrutiny and not the complete scrutiny. However, on perusal of the certified copy of the Assessment Order, it appears that the case of the assessee was selected for complete scrutiny - HELD THAT - On perusal of the finding of facts arrived at by the Tribunal it is clear that the Tribunal after considering the issue of claiming the depreciation by the respondent-assessee as per the Act has come to the conclusion that the Assessment Order is neither erroneous nor prejudicial to the interest of Revenue. Tribunal has also observed that the CBDT Instruction No. 9 of 2007 dated 11.09.2007 relied upon by the PCIT would also not be applicable in the facts of the case as the same pertains to the issue of allowability of depreciation and brought forward losses/unabsorbed losses. However, in the case of the respondent-assessee there was no issue pertaining to the brought forward losses or unabsorbed depreciation. No substantial question of law.

Summary

Issues Involved:
The issues involved in this case are:
1. Whether the Appellate Tribunal was right in allowing the appeal for the assessee despite the AO not considering instruction No. 9/2007 dated 11.09.2007?
2. Whether the Appellate Tribunal was right in allowing the appeal for the assessee despite the assessment being for complete scrutiny and not limited scrutiny?
3. Whether the Appellate Tribunal was right in quashing the order u/s 263 of the Act even though the order was erroneous and prejudicial to the interest of Revenue?

Issue 1:
The assessee, a limited company, filed its income return for AY 2018-19, declaring total income. The Assessment Order was passed under Section 143(3) of the Income Tax Act, 1961, accepting the returned income. Subsequently, the Principal Commissioner of Income Tax initiated proceedings under Section 263, directing a de-novo assessment due to lack of proper verification of new asset purchase and claimed depreciation by the Assessing Officer.

Issue 2:
The Tribunal found that although the Assessing Officer conducted limited scrutiny, the case was selected for complete scrutiny. The Tribunal examined the depreciation issue and noted that the Assessing Officer had considered the matter based on available reports. The Tribunal concluded that the Assessing Officer's order was not erroneous or prejudicial to Revenue's interest, citing relevant legal precedents.

Issue 3:
Upon reviewing the Tribunal's findings, it was determined that the Assessment Order was not erroneous or prejudicial to Revenue's interest. The Tribunal found that the CBDT Instruction No. 9 of 2007, cited by the Principal Commissioner of Income Tax, did not apply to the case as there were no issues related to brought forward losses or unabsorbed depreciation for the assessee. Consequently, the appeal was dismissed based on the Tribunal's conclusions.

This judgment highlights the importance of proper scrutiny in assessments, adherence to legal instructions, and the necessity for Assessing Officers to consider all relevant aspects before making decisions that could impact Revenue's interests.