2021 (10) TMI 1189 - AT - Income Tax

Revision u/s 263 by CIT - AO has not examined the large commission expenses and low net profit and there is a mismatch of interest paid to the related persons u/s 40A(2)(b) - HELD THAT - We find that the claim was allowed by the Hon ble Tribunal in the earlier assessment year and the miscellaneous application filed by the revenue is dismissed. Whereas in respect of twin conditions of (i) Erroneous and (ii) Prejudicial to the interest of the revenue. We find the revenue is disputing of the Assessment order. Whereas, the assessee has discharged the burden by submitting the information and requisite details as called for by issue of statutory notice u/s 142(1) of the Act along with the questioner which cannot be overlooked. Since the information was available with the A.O in the course of the assessment, the A.O. has considered the facts, submissions and evidences filed and took a possible view. In the assessment proceedings the assessee has responded to the clarifications/ queries raised by the A.O. and after verification and satisfaction of claims, A.O has passed the order U/sec 143(3) - AO order passed u/sec 143(3) of the Act does not satisfy the twin conditions of erroneous and prejudicial to the interest of revenue and Accordingly, the revision order passed by the Ld.Pr.CIT is quashed and allow the grounds of appeal in favour of the assessee.

Summary

Issues:
1. Pr. Commissioner's order u/s 263 of the Income Tax Act, 1961 for AY 2015-16.
2. Whether the assessment order was erroneous and prejudicial to the interests of revenue.
3. Failure to examine large commission expenses and low net profit.
4. Compliance with jurisdictional conditions for exercising powers u/s 263.
5. Consideration of previous ITAT orders in similar cases.
6. Communication of final order u/s 263 to the Appellant Company.
7. Whether the order was against the weight of evidence, equity, and natural justice.

Detailed Analysis:

1. The appellant challenged the order passed by the Pr. Commissioner under section 263 of the Income Tax Act for the assessment year 2015-16. The grounds of appeal included contentions that the assessment order was not erroneous or prejudicial to revenue, and jurisdictional conditions were not met for invoking section 263.

2. The Pr. Commissioner found discrepancies in the assessment related to large commission expenses and low net profit, leading to a mismatch in interest payments to related parties under section 40A(2)(b) of the Act. The Pr. Commissioner set aside the assessment order as prejudicial to revenue and directed a fresh assessment.

3. The appellant argued that the assessment order was based on cooperation during scrutiny proceedings and submissions of information. The appellant referenced previous ITAT decisions favoring similar commission payments, emphasizing proper evidences were submitted.

4. The appellant's submissions were countered by the Departmental Representative, supporting the Pr. Commissioner's order due to lack of verification of claims by the Assessing Officer.

5. The Tribunal analyzed the facts and submissions. It noted the previous ITAT rulings in the appellant's favor regarding commission payments. The Tribunal found that the assessment order did not meet the twin conditions of being erroneous and prejudicial to revenue, quashing the revision order.

6. The Tribunal highlighted the appellant's compliance with statutory notices and the Assessing Officer's consideration of facts and evidences. It concluded that the assessment order did not satisfy the conditions for invoking section 263, thereby allowing the appeal in favor of the assessee.

7. The Tribunal's decision was based on the lack of error in the assessment order, the appellant's cooperation, and the absence of grounds for the revision order, ultimately ruling in favor of the assessee.

This detailed analysis covers the issues raised in the judgment, providing a comprehensive understanding of the legal arguments and decisions made by the Tribunal.