2022 (4) TMI 1056 - AT - Income Tax

Revision u/s 263 - Non-disallowance of amount of provision out of provision for IDRF, as an unascertained liability - Excess provision for bad debts claimed u/s 36(1)(viia) - HELD THAT - We concede with the contention of the Ld AR that, in support of appellant claim as expounded herein there was indeed unvarying and indistinguishable material placed be fore both these tax authorities during the course of regular assessment vis- -vis revisionary proceeding, which in turn demonstrates that, the AO considering the same submission of the assessee carried out enquiry with respect to eligibility of claim, basis of claim and compliance relating thereto(if any) and then finalized the assessment taking one of the plausible view in the light of settled legal position in allowing the deduction u/s 36(1)(viia) and claim of loss on account of diminution in the value of securities / investment reclassification, this evidently concludes that the adjudication squarely fell within aforementioned Queen Principle . Whereas under revisionary proceedings Ld PCIT yet again conducted an enquiry into the claim of the appellant based on the like material and sitting on the same fence displaced with the views of Ld AO and directed for modification of assessment by additional disallowance which is ostensibly impermissible under a law following the ration laid in down by Hon ble Jurisdictional High Court in CIT Vs Gabriel India Ltd. 1993 (4) TMI 55 - BOMBAY HIGH COURT and the Hon ble Apex Court in Malabar Industrial Co Ltd. Vs CIT 2000 (2) TMI 10 - SUPREME COURT - Ergo,in the above context, we find the order of Ld PCIT is unsustainable in law, consequently we set aside the 263 revisionary order and restore the order of assessment passed u/s 143(3). - Appeal of assessee allowed.

Summary

Issues involved:
Challenge to revisionary action of Principal Commissioner of Income Tax directing modification of assessment order under section 143(3).

Detailed Analysis:

Issue 1: Revisionary Action by Principal Commissioner of Income Tax
The appellant challenged the revisionary order of the Principal Commissioner of Income Tax (PCIT) directing the Assessing Officer (AO) to revise and modify the regular assessment order culminated under section 143(3) of the Income-tax Act, 1961. The PCIT invoked revisionary powers under section 263(1) and directed additional disallowances concerning bad debts and amortization of premium on investments. The appellant contended that the issues were duly considered during the regular assessment, making the PCIT's action untenable in law.

Issue 2: Compliance with Legal Requirements
The Tribunal examined whether the AO's order was erroneous and prejudicial to the revenue, as required under section 263(1). It was observed that the AO conducted a detailed assessment, considering submissions, audit reports, financial statements, and explanations provided by the appellant. The PCIT's revision was based on the non-disallowance of provisions and excess bad debts claimed by the appellant. The appellant demonstrated before the Tribunal the application of consistency and legal grounds supporting their claims.

Issue 3: Interpretation of Section 263(1)
The Tribunal analyzed the provisions of section 263(1) and emphasized the conditions for invoking revisionary jurisdiction. It highlighted that an order could be deemed erroneous if based on incorrect facts or law, lack of application of mind, or violation of natural justice. The term "prejudicial to the interests of revenue" was interpreted broadly, not limited to mere financial loss. The Tribunal outlined a "Queen Principle" involving explicit queries, clear submissions, detailed inquiries, fair application of law, and adherence to natural justice.

Conclusion:
After considering the facts and legal principles, the Tribunal concluded that the PCIT's revisionary order was unsustainable in law. The AO's assessment was found to be conducted diligently, complying with legal requirements and considering all relevant material. The Tribunal set aside the revisionary order and restored the original assessment under section 143(3). Consequently, the appellant's appeal was allowed, rendering other grounds moot.