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2025 (3) TMI 1209 - AT - Income TaxRevision u/s 263 by CIT - Revision based merely based on the audit objections raised - Excess stock applying the provisions of section 69 read with section 115BBE - HELD THAT - The proceeding initiated in this case by ld. PCIT emanates from the recommendation of the ld. AO so as to take remedial action on the audit objection and there is no independent examination of the records by the ld. PCIT. As regards the judicial precedent on the issue of initiating the provision of section 263 merely based on the audit objection invalidate the jurisdiction of the PCIT various judicial precedents were cited including the latest decision 2024 (12) TMI 805 - ITAT JAIPUR as held since the ld. PCIT based on the borrowed information and has not established as to how the view taken by the ld. AO is not correct when the issue raised has already been form part of the proceeding before the ld. AO. Based on the discussion so recorded we are of the considered view that the proceeding initiated u/s. 263 is merely based on the audit objection PCIT is not agreement with the ld. AO and the observation on the stock in the audit reportalready filed by the assessee. Thus there is clear absence of his satisfaction and there is no independent view of the ld. PCIT even on merits. Thus we quash the order passed by ld. PCIT u/s 263 of the Act. On being consistent with the findings so recorded in the order referred to herein above we quash the order passed by ld. PCIT u/s 263 of the Act. At the time of hearing the appeal ld DR did not cite any contrary judgment and therefore having regard to the findings recorded by this co-ordinate bench in the case of Mahendra Kumar Sharma 2024 (12) TMI 805 - ITAT JAIPUR there is merit in the ground no. 1 raised by the assessee. Disallow ESI/PF for the month of February 2018 to March 2018 on account of delay in depositing the same based on the provision of section 36(1)(va) - The assessee-appellant submitted to the Assessing Officer had clarified that issue and AO after due verification of books of accounts other relevant records was satisfied that there was some mismatch in the figures of salary as per Audit Report and as per Income Tax Return as the same was merely a grouping error while filing the income tax return however overall salary remained same and he thus chose not to disallow. When the issue raised by the ld. PCIT is neither erroneous nor prejudicial to the interest of the revenue the same could not be subjected to revision merely based on the making the enquiry a fresh. Thus ground no. 2 raised by the assessee stands allowed. Variance in stock as found which was offered for tax as business income by the assessee-appellant - When there was proper application of mind on the part of the AO after having examined during the course of assessment proceedings it is not a case where necessary inquiries have not been carried out by the ld. AO. When two views are possible ld. AO after considering the submission accepted the view of the assessee-appellant and said approach does not automatically hold the assessment order erroneous or prejudicial to the interest of the revenue. AO accepted the plea that assessee appellant has no other income other than business income. As in Bajargan Traders 2017 (11) TMI 388 - RAJASTHAN HIGH COURT has held that the investment in the excess stock has to be brought to tax under the head business income and not under the head income from other sources. This view has also been taken in PCIT v. Dharti Estate 2024 (1) TMI 1197 - GUJARAT HIGH COURT Gayatri Devi 2023 (10) TMI 23 - ITAT JAIPUR Ravinder Kumar Bansal 2023 (12) TMI 716 - ITAT CHANDIGARH Vaidya Realities 2024 (1) TMI 970 - ITAT RAJKOT Thus ground no. 3 raised by the assessee-appellant has also merit. Disallow interest expenses u/s. 14A r.w.r. 8D - Amendment made by Finance Act 2022 whereby the Explanation was inserted is prospective in nature and would not apply retrospectively. In this regard reference may be made to decision of Avantha Realty Ltd. 2024 (6) TMI 987 - CALCUTTA HIGH COURT and Era Infrastructure Ltd 2022 (7) TMI 1093 - DELHI HIGH COURT which had taken note of the decision in the case of Cheminvest Ltd. 2015 (9) TMI 238 - DELHI HIGH COURT wherein it was held that amendment by the Finance Act 2022 of Section 14A of the Act by inserting a non-obstante clause and explanation was to take effect from 01.04.22 and cannot be presumed to have retrospective effect and therefore on facts the amendment cannot be applied to the assessment year under consideration. Based on these observations ground no. 4 raised by the assessee is also allowed. Disallow the claim of deduction u/s. 10AA made in the return of income so filed - AO verified the claim of the assessee after the survey and also made variation on account of price variation between the SEZ unit and that of the DTA unit - Amendment i.eExpl. 2(a) does not confer blind powers. It is held that despite there being an amendment enlarging the scope of the revisionary power of the ld. PCIT u/s 263 to some extent it cannot justify the invoking of the Expl. 2(a) in the facts of the present case. Before referring to that Explanation one has to understand what the true meaning of the Explanation in the context of application of mind by a quasi-judicial authority was. In Narayan Tatu Rane Vs. ITO 2016 (5) TMI 1162 - ITAT MUMBAI it was held that newly inserted Explanation 2(a) to Sec. 263 does not authorize or give unfettered powers to Commissioner to revise each and every order if in his (subjective) opinion same has been passed without making enquiries or verification which should have been made. Here AO had examined the issue of allowability of section 10AA in hands of the assessee. In the case of Parashuram Pottery Works Co. Ltd. 1976 (11) TMI 1 - SUPREME COURT held At the same time we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi judicial controversies as it must in other spheres of human activity . Assessee appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Invocation of Section 263 based on Audit Objections
Issue 2: Disallowance of PF/ESI Contributions
Issue 3: Treatment of Excess Stock under Section 69 r.w.s. 115BBE
Issue 4: Disallowance under Section 14A r.w.r. 8D
Issue 5: Deduction under Section 10AA
3. SIGNIFICANT HOLDINGS
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