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2024 (5) TMI 948 - AT - Income TaxRevision u/s 263 by CIT - case of the assessee was taken up for Limited Scrutiny u/s 143(3) - payments made to the specified person - percentage disallowance on account of salary payments - inadeqaute v/s no inquiry HELD THAT - It is not the case that the AO had passed the order without conducting inquiries into the issue under consideration and specific details regarding salary to specified persons and allowability of the same was duly asked for and have been submitted by the assessee, which after due verification have been allowed by AO. The entire material and also the order passed for AY 2017-18 was duly available with AO. Also the observation made by Ld. PCIT regarding the salary expenses is based merely on inference drawn for AY 2017-18, which was under totally different situation and also that except AY 2017-18 no other assessment year bears any disallowance in this regard, where assessments were re-opened pursuant to survey proceedings carried out in AY 2017-18. Therefore, a disallowance made in just one year, that too on incorrect footing cannot be made basis for doubting the claim made in current year and duly allowed by AO after due verification. This in our considered opinion renders the revision proceedings invoked by ld. PCIT beyond jurisdiction and against the legal principals laid down through various judicial pronouncements. Thus we found merit in the contention of ld. AR, therefore we quash the order passed by ld. PCIT under section 263 of the Act - Appeal of the assessee is allowed.
Issues Involved:
1. Validity of the revision order u/s 263 of the Income Tax Act, 1961. 2. Examination of salary payments to specified persons. 3. Eligibility for exemption u/s 11 and 12 of the Income Tax Act, 1961. 4. Examination of the order passed by the AO u/s 143(3) of the Act. Summary: 1. Validity of the Revision Order u/s 263: The assessee challenged the revision order passed by the ld. PCIT (Central), Jaipur dated 01-08-2023 for the assessment year 2018-19, arguing that the order passed by the AO u/s 143(3) was detailed and well-considered, and thus, the revisionary action u/s 263 was bad in law. The Tribunal found that the AO had conducted adequate inquiries and verification during the assessment proceedings, and the order was not erroneous or prejudicial to the interest of the revenue. Therefore, the Tribunal quashed the revisionary order passed by the ld. PCIT. 2. Examination of Salary Payments to Specified Persons: The ld. PCIT held that the AO's order was erroneous as it did not disallow excessive salary payments to specified persons based on the previous assessment year's findings. The assessee argued that the salaries paid were reasonable and justified based on the services rendered by the specified persons. The Tribunal noted that the AO had examined the details of the salaries paid and found them to be reasonable. The Tribunal held that the AO's decision was based on one of the possible views and could not be deemed erroneous merely because the ld. PCIT disagreed with it. 3. Eligibility for Exemption u/s 11 and 12: The ld. PCIT argued that the assessee trust had violated provisions of section 13(1)(c) and 13(1)(d) of the Act, and thus, the exemption u/s 11 and 12 should be withdrawn. The assessee contended that the AO had duly examined the eligibility for exemption and found no violations. The Tribunal observed that the AO had considered all relevant details and concluded that the assessee was eligible for the exemption. The Tribunal held that the AO's order was not erroneous or prejudicial to the interest of the revenue. 4. Examination of the Order Passed by the AO u/s 143(3): The ld. PCIT set aside the AO's order and directed a fresh assessment on the grounds that the AO had not properly examined the salary payments and eligibility for exemption. The Tribunal found that the AO had conducted a thorough examination and had taken a plausible view. The Tribunal held that the revisionary jurisdiction u/s 263 could not be invoked merely because the ld. PCIT had a different opinion. The Tribunal quashed the order passed by the ld. PCIT and allowed the appeal of the assessee. Conclusion: The Tribunal quashed the revisionary order passed by the ld. PCIT u/s 263 of the Income Tax Act, 1961, as the AO's order was neither erroneous nor prejudicial to the interest of the revenue. The appeal of the assessee was allowed.
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