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TMI Blog2022 (3) TMI 612X X X X Extracts X X X X X X X X Extracts X X X X ..... d the following grounds of appeal:- "1. That under the facts and circumstances of the case and under the provisions of law the order passed u/s. 143(3) of IT Act that has become subject for review by the Learned Principal Commissioner Of Income Tax (in short LdPr.CIT), is neither erroneous nor prejudicial to the interest of the revenue, therefore, the impugned order passed u/s 263 of the IT Act 1961 is liable to be quashed. 2. The Ld.Pr.CIT failed to consider that the alleged under assessment of power subsidy and interest receipt was a subject matter dealt by the Assessing Officer (in short AO) who after due verification accepted the income reported of these two in which event the order of the AO termed as erroneous under the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee submitted details as called for. The AO after perusing the submissions of the assessee accepted the return of income. 4. Subsequently, by virtue of powers vested in section 263 of the Act, PCIT noticed that total power subsidy and TUF subsidy were wrongly declared by the assessee. In this connection, a show-cause notice dated 14/05/2019 was issued to assessee and an opportunity was provided vide letter dated 17/02/2020 to the assessee. In response to the show-cause notice, the assessee filed its written submission on 23/05/2019 & 23/02/2020. The PCIT made the following inferences from the submissions of the assessee company:- (i) The assessee company has been maintaining mercantile system of accounting as was evident from column ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal 69[Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on actual basis. By passing erroneous order which resulted in allowance of excess claim of power subsidy and TUF subsidy to the extent of (Rs. 96,71,800 + Rs. 7,36,83,531) Rs. 8,33,55,331/- and has to be brought to tax now. In this context the contention of the assessee company that the AO had conducted necessary enquiry before passing assessment order has no relevance at all in so far as issue(s) concerned. In the instant case the contentious issue is whether the assessee has offered subsidies on accrual basis for taxation even though the assessee has been following mercantile system of accounting." 10. Ld.AR contended that assessee is following mercantile system of accounting and has accounted the income received during the year in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0816 [ Ld.AR also argued that balance sheet figures are cumulative in nature and income from subsidy accruing each year is accounted in the respective year"s profit and loss account. The ld AR pointed out that PCIT have erred in taking the "Claims receivable" figures instead of income shown in the profit & loss account for every assessment year. The ld AR also pointed out that since the subsidies has already suffered tax in the respective previous years, it cannot be taxed again. 11. Ld.DR relied on the order passed by the PCIT u/sec. 263 of the Act. 12. We have heard both the parties and perused the material placed on record. We find force in the argument of the ld.AR who has demonstrated that the income accruing each year is accounted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s take the guidance of judicial precedence laid down by the Hon"ble Apex Court in the case of Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83 (SC) wherein their Lordships have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer"s order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii) Assessing Officer"s order is in violation of the principle of natural justice; or (iv) i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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