2024 (4) TMI 139 - AT - Income Tax

Revision u/s 263 - PCIT found the order to be erroneous and prejudicial to the interest of Revenue on account of non-examination of the genuineness of the sundry creditors and allowing 80IC deductions - HELD THAT - Observations of PCIT that the assessment order was passed without due diligence is not well founded. Apparently, the AO had called for relevant information on regular basis and which were responded by the assessee. The reply, shows that the assessee had provided relevant information including audit report justifying the claim of deduction. We find no force in the contention of ld. DR that the AO may have examined the question of eligibility, but, not the quantum. The two aspects supplement each other. PCIT has concluded the fact of assessment order being passed without due diligence on the basis that although the assessee had furnished balance sheet, Profit Loss Account and Form No.10CCB, the AO had not enquired from the assessee to comply with the queries raised in this regard. Certainly, the assessment order is silent on some aspects, but, at the same time, the PCIT before whom the assessee had given a detailed explanation of the income from two units and how they were reported in the financials and other relevant evidences available in assessment record have not been examined to give a finding that what was the extent of claim of deduction of the assessee which was left out of the scrutiny of the AO. Merely making a bald allegation of assessing officer not carrying out investigations sufficiently or to say, to the satisfaction of the PCIT, cannot be basis to invoke the provisions of section 263 - Thus PCIT has fallen in error in concluding that the order of the ld.AO was erroneous so far as prejudicial to the interest of the Revenue. Decided in favour of assessee.

Summary

Issues Involved:
The appeal involves the assessment order passed u/s 143(3) of the Income Tax Act, 1961, the claim of deduction u/s 80IC, and the jurisdiction of the Principal Commissioner of Income Tax (PCIT) u/s 263 of the Act.

Assessment Order u/s 143(3):
The appellant, a partnership firm, challenged the order dated 24.03.2022 of the Principal Commissioner of Income Tax, Dehradun, which was passed u/s 143(3) of the Income Tax Act, 1961. The PCIT found that the AO had not conducted a thorough examination of the deductions claimed u/s 80IC by the appellant, leading to an excess deduction of Rs. 46,24,488. The PCIT concluded that the assessment order was erroneous and prejudicial to the interest of revenue under section 263 of the Act. However, the appellant contended that all issues were duly examined by the AO, and the order should not be revised u/s 263. The ITAT, after perusing the record, found that the AO had sought relevant information and explanations from the appellant regarding the deductions claimed u/s 80IC. The ITAT held that the AO had conducted due diligence by requesting necessary documents and explanations, and the PCIT's conclusion that the assessment order was passed without due diligence was unfounded. The ITAT allowed the appeal and set aside the impugned order.

Claim of Deduction u/s 80IC:
The PCIT observed that the AO had not properly examined the claim of deduction u/s 80IC made by the appellant, resulting in an excess deduction of Rs. 46,24,488. The appellant argued that all necessary details were available during the assessment proceedings, and the PCIT erred in finding the order erroneous and prejudicial to the revenue's interest. The ITAT noted that the appellant had responded to queries raised by the AO regarding the deductions claimed u/s 80IC, providing relevant information and audit reports to justify the claim. The ITAT found that the AO had called for information on a regular basis and that the appellant had responded appropriately. The ITAT concluded that the PCIT's assertion that the assessment order lacked due diligence was not well-founded, as the AO had examined the eligibility and quantum aspects of the deduction. Therefore, the ITAT allowed the appeal and set aside the PCIT's order.

Jurisdiction of PCIT u/s 263:
The PCIT exercised jurisdiction u/s 263 of the Income Tax Act, 1961, to revise the assessment order passed by the AO, citing errors in the examination of deductions claimed u/s 80IC. The appellant contested the PCIT's exercise of jurisdiction, arguing that all necessary information was available during the assessment proceedings, and the PCIT's conclusions were incorrect. The ITAT reviewed the proceedings and found that the AO had diligently sought information and explanations from the appellant regarding the deductions claimed. The ITAT held that the PCIT's determination that the assessment order was prejudicial to the revenue's interest was erroneous. Consequently, the ITAT allowed the appeal and set aside the PCIT's order, emphasizing that the AO had conducted a proper examination of the relevant issues.