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2022 (10) TMI 818 - AT - Income TaxRevision u/s 263 by CIT - wrong claim of deduction u/s. 80JJA - HELD THAT - The phrase should have been done as provided in the newly inserted Explanation means the verification/ enquiry which ought to have been done. In the given case the assessee s case was selected for scrutiny and one of the reasons was examination of deduction from total income under Chapter VIA. The AO issued various notices calling for details including the details pertaining to section 80JJA deduction. However, in the assessment order as extracted below for AY 2017-18 the AO has not brought out anything explicitly and not recorded any finding with regard to the deduction claimed u/s.80JJAA and also there is nothing mentioned in the order that he has verified the eligibility and the correctness of the claim of deduction u/s. 80JJA. In the case under consideration the ld. PCIT has excised the revisionary powers u/s. 263 of the Act since he has noticed that during the survey u/s. 133A of the Act there were evidences regarding the wrong claim of deduction u/s. 80JJAA and that the AO has not brought out anything on record to show that he has examined the correctness of the claim for the year under consideration. It is noticed that the PCIT in the show cause notice has also listed out the discrepancies in the claim of deduction u/s.80JJAA which according to the PCIT should have been done by the AO and to that extent the PCIT has found the order of the AO to be erroneous and prejudicial to the interest of the revenue. In view of decision of Infosys Technologies Ltd. 2012 (1) TMI 76 - KARNATAKA HIGH COURT and Gee Vee Enterprises 1974 (10) TMI 29 - DELHI HIGH COURT we hold that the PCIT was justified in assuming the jurisdiction u/s 263 of the Act by setting aside the assessment order. Appeals of the assessee are dismissed.
Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act. 2. Examination of the allowability of deduction under Section 80JJAA. 3. Adequacy of inquiry by the Assessing Officer (AO). 4. Relevance and impact of survey findings under Section 133A. 5. Procedural fairness in the issuance of the revision order by the Principal Commissioner of Income Tax (PCIT). Detailed Analysis: 1. Jurisdiction under Section 263 of the Income Tax Act: The appeals were filed against the orders of the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act for the assessment years 2017-18 and 2018-19. The PCIT invoked Section 263, asserting that the assessment orders were erroneous and prejudicial to the interests of the revenue. The Tribunal upheld the PCIT's jurisdiction, emphasizing that the AO must conduct adequate inquiries and verifications, especially when the case is selected for scrutiny. 2. Examination of the Allowability of Deduction under Section 80JJAA: The PCIT observed that the AO did not adequately examine the allowability of the deduction claimed under Section 80JJAA. The Tribunal noted that the AO's assessment order lacked explicit findings or records of verification regarding the deduction claim. The PCIT's review highlighted discrepancies found during a survey conducted under Section 133A, suggesting that the AO's failure to examine these discrepancies rendered the assessment order erroneous and prejudicial to the interests of the revenue. 3. Adequacy of Inquiry by the Assessing Officer (AO): The Tribunal emphasized the necessity for the AO to record the extent of verification and application of mind regarding the deduction claims. The AO's assessment order for AY 2017-18 did not explicitly mention any findings or verifications regarding the Section 80JJAA deduction. The Tribunal cited the Karnataka High Court's decision in CIT v. Infosys Technologies Ltd., which underscored the need for the AO to provide reasons and findings in the assessment order, irrespective of whether the order is favorable or adverse to the assessee. 4. Relevance and Impact of Survey Findings under Section 133A: The PCIT's decision to invoke Section 263 was partly based on findings from a survey conducted under Section 133A, which revealed inconsistencies in the assessee's deduction claims. The Tribunal supported the PCIT's reliance on these survey findings, noting that the AO did not adequately address or verify these discrepancies during the assessment process. 5. Procedural Fairness in the Issuance of the Revision Order by the PCIT: The assessee argued that the PCIT did not provide an opportunity to be heard regarding the points on which the assessment order was deemed erroneous. The Tribunal found that the PCIT had issued a show cause notice listing the discrepancies and provided the assessee an opportunity to respond. However, the PCIT concluded that the AO's lack of verification warranted the invocation of Section 263. The Tribunal upheld this procedural approach, emphasizing the importance of thorough verification and inquiry by the AO. Conclusion: The Tribunal dismissed the appeals, upholding the PCIT's revision orders under Section 263. The Tribunal concluded that the AO's failure to adequately verify the deduction claims under Section 80JJAA and the reliance on survey findings justified the PCIT's decision to set aside the assessment orders for fresh verification. The judgment underscored the necessity for detailed inquiries and explicit findings in assessment orders to avoid being deemed erroneous and prejudicial to the revenue.
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