2021 (10) TMI 670 - AT - Income Tax

Revision u/s 263 by CIT - assessee had derived interest income on the fixed deposits made with the Karur Vysya Bank, Hyderabad followed by its claim of administrative expenditure, financial costs and depreciation etc. - PCIT holds that the said three heads of expenses are in the nature of pre-operative expenditure which could not be set-off against the assessee's foregoing interest income and AO's action allowing the assessee's claim in a very casual and mechanical manner deserves to be revised for want of proper enquiry rendering the impugned assessment as both erroneous as well as prejudicial to interest of the Revenue - HELD THAT - As assessee's administrative expenses are in the nature of compulsorily office expenditure which have been held eligible for intra-head set-off against income from other sources than u/s. 57(iii) by the Assessing Officer. The factual position is hardly different qua its latter two heads of financial costs; including that directly paid to the bank of ₹ 2,8,53/- (supra) pertains to the very account only as well as the fact that the impugned depreciation/amortization has been a continuing relief granted very well from the preceding assessment years, whose facts and figures are nowhere in dispute. Coupled with this, the assessee has also filed on record the necessary correspondence/show cause notice issued by the Assessing Officer in Section 143(2) 142(1) notices dt. 13-05-2014 and 24-02-2015 followed by its detailed reply on 02-12-2015 - PCIT has erred in law and on facts in assuming Section 263 revision jurisdiction. We quote hon'ble apex court's landmark decision in Malabar Industrial Co. 2000 (2) TMI 10 - SUPREME COURT wherein it was held that an assessment has to be both erroneous as well as causing prejudice to the interest of the Revenue; simultaneously, before it is sought to be subjected to exercise of revision jurisdiction u/s. 263. Their lordships further make it clear that it is not each and every assessment which attracts Section 263 revision but only wherein the Assessing Officer has not taken one of the two possible views; as the case may be. We draw strong support therefrom and reverse the learned PCIT's action exercising Section 263 revision jurisdiction. The impugned Section 143(3) regular assessment dt. 16-03-2015 stands revived as the necessary corollary therefore assessee's instant Section 263 is accepted. - Decided in favour of assessee.

Summary

Issues:
1. Delay condonation in filing appeal.
2. Challenge to PCIT's revision jurisdiction under Section 263.
3. Allowability of administrative expenses, financial costs, and depreciation against interest income.
4. Application of Malabar Industrial Co. Vs. CIT [243 ITR 83] precedent.
5. Consequential appeal following the Section 263 revision.

Analysis:

1. Delay Condonation:
The appellant's appeal for AY 2012-13 faced an 85-day delay, attributed to reasons beyond their control. The department did not contest the delay, leading to its condonation by the tribunal.

2. Challenge to PCIT's Revision Jurisdiction:
The appellant contested the PCIT's Section 263 revision jurisdiction regarding the assessment for AY 2012-13. The PCIT deemed the assessment erroneous and prejudicial to revenue due to the treatment of expenses against interest income. However, the tribunal found no justification to uphold the revision, as the expenses were held eligible for set-off by the Assessing Officer under relevant provisions.

3. Allowability of Expenses Against Interest Income:
The PCIT objected to the set-off of administrative expenses, financial costs, and depreciation against interest income. The tribunal disagreed, noting that administrative expenses were eligible for set-off under Section 57(iii), and the financial costs and depreciation were justified based on past assessments and correspondence with the Assessing Officer.

4. Application of Precedent:
The tribunal cited the Malabar Industrial Co. case, emphasizing that for an assessment to be revised under Section 263, it must be both erroneous and prejudicial to revenue. Since the Assessing Officer's actions were justifiable and within legal bounds, the tribunal reversed the PCIT's revision jurisdiction.

5. Consequential Appeal:
The tribunal allowed the appellant's Section 263 appeal for AY 2012-13 and directed a similar outcome for the consequential appeal related to the revised assessment. No additional grounds were presented, leading to the allowance of both appeals.

In conclusion, the tribunal upheld the appellant's position, rejecting the PCIT's revision jurisdiction and reinstating the original assessment for AY 2012-13. The decisions were based on the legality of expense treatment, adherence to legal precedents, and the absence of grounds for revision.