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2021 (9) TMI 514 - AT - Income TaxRevision u/s 263 by CIT - Whether order of AO is erroneous insofar as it is prejudicial to the interests of the revenue? - HELD THAT - For instituting a valid proceeding under Section 263 of the Act, there should be a valid legal proceeding before the Assessing Officer. Once the assessment order was quashed on the ground that it was passed after limitation provided in the Act for passing such order, then it is to be construed that no assessment order is available on which learned Commissioner could form an opinion as to whether any error is available in such order or not. Section 263 of the Act specifically contemplates that there should be an error either in the proceedings or in the assessment order which has caused prejudice to the interests of the Revenue. Now, in the present appeals, the assessment orders have already been cancelled meaning thereby it has extinguished, and therefore, no subsequent further proceedings can be initiated Commissioner has committed an error by holding that since the Revenue wants to keep the issue alive, it is necessary to pass such order . Therefore, in view of the above discussions, the impugned orders are not sustainable in these assessment years. Accordingly, we quash the assessment orders in all these three assessment years and allow the appeals of the assessee.
Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act, 1961. 2. Validity of assessment orders under Section 153A of the Income Tax Act. 3. Non-completion of project and eligibility for deduction under Section 80IB(10). 4. Alleged violations of conditions under Section 80IB(10) (e) and (f). 5. Computation of book profit under Section 115JB. Detailed Analysis: 1. Jurisdiction under Section 263 of the Income Tax Act, 1961: The assessee challenged the invocation of jurisdiction under Section 263 by the Principal Commissioner of Income Tax (PCIT). The PCIT directed the Assessing Officer (AO) to pass a fresh assessment order. The assessee argued that the assessment orders for the relevant years had already been quashed by the ITAT on the grounds of being time-barred. The Tribunal noted that for proceedings under Section 263 to be valid, there must be an existing valid assessment order. Since the assessment orders were quashed, there were no valid proceedings upon which the PCIT could base his jurisdiction under Section 263. The Tribunal concluded that the PCIT’s orders were not sustainable and quashed them. 2. Validity of assessment orders under Section 153A of the Income Tax Act: The assessee contended that the assessment orders under Section 153A were invalid as they were not passed within the stipulated time. The ITAT had previously quashed these assessment orders for being time-barred. The Tribunal reiterated that without a valid assessment order, subsequent proceedings, including those under Section 263, could not be initiated. The Tribunal emphasized that the quashing of the assessment orders meant that no valid legal proceedings were pending before the AO, rendering the PCIT’s actions under Section 263 invalid. 3. Non-completion of project and eligibility for deduction under Section 80IB(10): The PCIT had initiated proceedings under Section 263 on the grounds that the assessee had claimed deductions under Section 80IB(10) for a project that was not completed by the stipulated date. The PCIT cited a letter from the Sr. Town Planner indicating that only part of the project had received BU permission, thus violating the conditions of Section 80IB(10). However, the Tribunal noted that since the assessment orders were already quashed, the basis for the PCIT’s action did not exist. The Tribunal did not delve into the merits of the deduction claim, as the primary issue was the validity of the assessment orders. 4. Alleged violations of conditions under Section 80IB(10) (e) and (f): The PCIT also pointed out alleged violations of conditions under Section 80IB(10) related to block bookings and advances received for multiple flats by the same individuals or related parties. The Tribunal observed that these issues were part of the quashed assessment orders and could not be revisited under Section 263. The Tribunal highlighted that the PCIT’s reliance on these alleged violations was misplaced since the underlying assessment orders were invalid. 5. Computation of book profit under Section 115JB: The PCIT noted discrepancies in the computation of book profit under Section 115JB, specifically the failure to add back interest on income tax while determining book profit. The Tribunal acknowledged this point but reiterated that without a valid assessment order, the PCIT could not invoke Section 263 to address these discrepancies. The Tribunal emphasized that the quashing of the assessment orders precluded any further proceedings under Section 263. Conclusion: The Tribunal concluded that the PCIT’s orders under Section 263 were not sustainable due to the quashing of the underlying assessment orders. The Tribunal quashed the PCIT’s orders and allowed the assessee’s appeals for all three assessment years. The Tribunal emphasized that the absence of a valid assessment order invalidated subsequent proceedings under Section 263.
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