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2023 (11) TMI 296 - AT - Income Tax


Issues Involved:
1. Jurisdiction under Section 263.
2. Audit objection and independent application of mind.
3. Procedural compliance under Section 80IA and Rule 18BBB.
4. Consistency in allowing deductions across assessment years.
5. Adequacy of AO's inquiry and verification.

Summary of Judgment:
Jurisdiction under Section 263:
The assessee contested that the assessment order passed by the AO was neither erroneous nor prejudicial to the interest of Revenue. The PCIT invoked Section 263, arguing that the AO did not conduct adequate inquiries or verification, making the order erroneous and prejudicial to the interest of Revenue.

Audit Objection and Independent Application of Mind:
The assessee raised an additional ground, arguing that the PCIT's jurisdiction under Section 263 was based solely on an audit objection without independent application of mind. The Tribunal found no merit in this argument, stating that the PCIT had perused the case records independently and decided to invoke Section 263 based on his own satisfaction, in line with the provisions of the law and CBDT instructions.

Procedural Compliance under Section 80IA and Rule 18BBB:
The PCIT noted that the assessee did not maintain a separate balance sheet for the power unit, violating Rule 18BBB. The Tribunal agreed that this procedural lapse needed verification and justified the PCIT's invocation of Section 263 for further examination.

Consistency in Allowing Deductions Across Assessment Years:
The assessee argued that deductions under Section 80IA were allowed in previous years, suggesting a principle of consistency. However, the Tribunal held that compliance for each assessment year must be verified independently, and past allowances do not automatically validate current claims.

Adequacy of AO's Inquiry and Verification:
The Tribunal found that the AO did not adequately verify the specific requirements for allowing deductions under Section 80IA, particularly the necessity of a separate balance sheet for the power generation unit. This lack of inquiry made the AO's order erroneous and justified the PCIT's revisionary action under Section 263.

Conclusion:
The Tribunal dismissed the appeal, upholding the PCIT's order under Section 263. The Tribunal found that the PCIT had rightly assumed jurisdiction and that the AO's order was indeed erroneous and prejudicial to the interest of Revenue due to inadequate inquiry and verification. The appeal filed by the assessee was thus dismissed.

 

 

 

 

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