2023 (12) TMI 977 - AT - Income Tax

Legality of second revision notice of 263 order passed by Ld. PCIT - subsequent revision of original assessment order on another issues - Scope of the first notice for revision u/s 263 of the Act cannot be enhanced by way of issuance of subsequent notice by Principal CIT - Whether once the assessee has satisfied the Ld. PCIT that the assessment order is not erroneous and prejudicial to the interest of the Revenue with respect to reasons recorded in the first notice, then whether the PCIT is permitted to revise the original assessment order on another issue, not forming part of the initial notice, on the basis of which 263 proceedings were initiated? HELD THAT - We agree with the contention of the Ld. D.R. that there is no specific prohibition under Section 263 of the Act which prohibits the Ld. PCIT to give a finding with respect to any other aspect of the assessment order, if from the records it is find that the assessment has over-looked this issue. Admittedly in this case, the Assessing Officer had no plausible reason to explain the lack of inquiries with respect to non-deduction of TDS under Section 194C of the Act and there was no reason why disallowance under Section 40(a)(ia) of the Act was not made while framing the impugned assessment year. Further, in absence of any specific restriction on the powers of Ld. PCIT during the course of 263 proceedings itself, which were admittedly not barred by jurisdiction i.e. the second notice dated 04.02.2022 was not barred by period of limitation of two years as prescribed under Section 263 of the Act, we find no infirmity in the order of Ld. PCIT under Section 263 of the Act, so as to call for any interference. Appeal of the assessee dismissed.

Summary

Issues involved:
The judgment involves the challenge to the validity and legality of a notice of 263 order passed by the Ld. PCIT on the grounds related to the scope of revision under Section 263 of the Act and the permissibility of revising the original assessment order on another issue not initially raised.

Issue 1 - Validity of notice of 263 order:
The Ld. PCIT issued a notice to the assessee regarding the deduction under Section 80P of the Act without proper inquiry, leading to the claim that the assessment order was erroneous and prejudicial to the interest of Revenue. The assessee responded, stating that the deduction had already been disallowed by the Assessing Officer. Subsequently, another notice was issued concerning non-deduction of TDS on contract expenses. The Ld. PCIT set aside the assessment order based on these issues. The assessee argued that the scope of 263 proceedings cannot be enhanced by a subsequent notice, especially when the initial notice's basis was satisfied. The Ld. D.R. contended that there is no statutory bar to raising additional issues under Section 263, and the Ld. PCIT has the right to do so.

Issue 2 - Revision of assessment order on another issue:
The main consideration was whether the Ld. PCIT could revise the original assessment order on an issue not part of the initial notice for 263 proceedings. The Tribunal agreed with the Ld. D.R., stating that there is no specific prohibition under Section 263 preventing the Ld. PCIT from addressing other aspects of the assessment order if records indicate oversights. The Assessing Officer had not adequately addressed the issue of non-deduction of TDS under Section 194C and had not made the necessary disallowances under Section 40(a)(ia). As there was no limitation on the Ld. PCIT's powers during 263 proceedings, and the second notice was not time-barred, the Tribunal found no fault in the Ld. PCIT's order under Section 263.

Conclusion:
The Tribunal dismissed the appeal of the assessee, upholding the Ld. PCIT's order under Section 263 of the Act. The judgment was pronounced in an open court on 20/12/2023.