2022 (5) TMI 542 - AT - Income Tax

Revision u/s 263 - PCIT setting aside the assessment order framed u/s 143(3) - prerequisite to exercise of jurisdiction u/s 263 of the Act by Commissioner - AO has failed to examine the documents(profit and loss account) SKAPL-1 which showed the business loss as on 31.03.2015 and another profit and loss account which showed profit - HELD THAT - We have perused the notices issued by the AO u/s 142(1) and replies/written submissions filed before the AO in response thereto and observe that issues as proposed by the ld PCIT in the orders passed u/s 263 of the Act were examined and enquired and only then the assessment was framed. The notice issued u/s 142(1) of the Act, questionnaire and reply with evidences are part of the assessment records and were also filed before the tribunal in the paper books as discussed above. We note that the assessee has produced the audited books of accounts before the AO and duly explained as to how the issues raised by the ld PCIT were not warranted in view of the explanation given by the assessee In our considered view, since the AO has examined all the issues raised by the PCIT in the revisionary order during assessment proceedings and only thereafter framed the assessments u/s 143(3) of the Act, the jurisdiction u/s 263 of the Act is not maintainable as the AO has taken a possible view or taken one of the two possible views to which the PCIT does not agree or is of the opinion that the AO has taken one view whereas according to PCIT the second view should have been taken by the AO. It is settled law that in order to invoke the jurisdiction u/s 263 of the Act by the PCIT, the twin conditions i.e. the order has to be erroneous and prejudicial to the interest of the revenue, have to be satisfied. In case one of the condition is satisfied out of the two, even then the PCIT cannot invoke the jurisdiction u/s 263 of the Act to revise the assessment. Similarly the powers of revision u/s 263 of the Act cannot be exercised arbitrarily in order to make roving enquiries and initiate fresh enquiries . In our considered view , the jurisdiction u/s 263 can be exercised to revise the assessment where no enquiry at all has been conducted by the AO which is a case of lack of enquiry but not in a case where the AO has conducted an enquiry which in the opinion of PCIT is inadequate /insufficient without showing as to how the order framed by the AO after appreciating the evidences filed by the assessee is contrary to facts or not in accordance with law - Appeal of assessee allowed

Issues Involved:
Appeal against order of PCIT u/s 263 of the Income Tax Act for AY 2015-16.

Detailed Analysis:

Issue 1: Time Barred Appeal
The appeal was initially considered time-barred, but following a Supreme Court decision during the COVID-19 pandemic, the period for filing the appeal was excluded, thus treating it as filed within the limitation period.

Issue 2: Revisionary Jurisdiction u/s 263 of the Act
The primary issue raised in the appeal was against the exercise of revisionary jurisdiction u/s 263 by the PCIT, setting aside the assessment order framed u/s 143(3) for AY 2015-16. The PCIT revised the assessment due to the AO's alleged failure to examine certain documents showing conflicting profit and loss figures, leading to the issuance of a show-cause notice and subsequent revision of the assessment order.

Issue 3: Examination of Documents during Assessment Proceedings
The PCIT contended that the AO did not adequately examine the seized documents during the assessment proceedings, leading to an erroneous assessment. However, the assessee argued that the AO had indeed called for explanations on the discrepancies in the documents, and the issues were thoroughly examined and replied to during the assessment proceedings.

Issue 4: Jurisdiction u/s 263 of the Act
The Tribunal analyzed the exercise of revisionary jurisdiction u/s 263 by the PCIT. It was emphasized that for the PCIT to revise an assessment, the order must be both erroneous and prejudicial to the revenue. In this case, since the AO had examined the issues raised by the PCIT during the assessment proceedings and taken a plausible view, the jurisdiction u/s 263 was deemed not maintainable.

Precedents and Legal Interpretation
The Tribunal referred to various legal precedents to support its decision. It highlighted that if the AO has taken one of the plausible views during assessment, the assessment cannot be termed as erroneous and prejudicial to revenue. The Tribunal emphasized that the PCIT's jurisdiction under section 263 cannot be exercised arbitrarily and must be based on specific grounds of lack of enquiry or incorrect application of law.

Conclusion
After considering the facts and legal principles, the Tribunal concluded that the revisionary jurisdiction exercised by the PCIT was not valid. Consequently, the revisionary proceedings initiated u/s 263 and the consequent order were quashed, and the appeal of the assessee was allowed.

← Previous Next →