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TMI Blog2022 (9) TMI 549X X X X Extracts X X X X X X X X Extracts X X X X ..... nt that it relates to the payments made to More Ideas, UAE, the AO should not have decided the issue at all. For this reason, the entire Order of Assessment cannot be said to be void. Payments made to More Ideas, UAE, AO has already disallowed the payment and added the same to the total income of the assessee and the assessee is in appeal before the CIT(A). In these circumstances, it cannot be said that the Order passed by the AO was prejudicial to the interest of the Revenue. The fact that in the proceedings before the first appellate, the addition will be attacked on the ground that the addition has been made contrary to the provisions of section 245R(2)(i) of the Act and therefore void, cannot be the basis to say that the interest of the Revenue is prejudiced, at this stage. Thus twin conditions have to be satisfied for exercising of powers under section 263 of the Act viz., (i) the Order sought to be revised must be erroneous and (ii) prejudicial to the interest of the Revenue. Since the payments made to More Indeas, UAE has already been added by the AO in the order of Assessment, there is no prejudice to the interest of the Revenue. In the facts and circumstances of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvance Ruling (AAR) (Income Tax, Mumbai) on 29.08.2019 in which it sought a ruling on the payment of Rs.27,64,91,272/- made to M/s. More Ideas General Trading Company LLC, UAE (More Ideas). The application of the assessee was for Assessment Years 2016-17 and 2017-18. The application of the assessee for ruling was dismissed by the AAR for the reason that as per the provisions of section 245R(2)(i) of the Act, the application will not be entertained, if the question raised in the application is already pending for consideration before any income tax authorities. The AAR found that the issue for Assessment Year 2017-18 was already pending before the AO pursuant to the return of income filed by the assessee and queries raised by the AO on the aforesaid payment in the context of disallowance u/s.40(a)(i) of the Act for non-deduction of tax at source. Therefore, AAR refused to entertain the application of the assessee seeking a ruling that the said sum is not chargeable to tax and therefore there was no obligation on the part of the assessee to deduct tax at source. The AAR passed the order on 28.01.2020. 5. It is not in dispute that the assessee did bring to the notice of the AO that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court was also filed before the PCIT. Considering that the disallowance has already been made by the Learned AO in the aforesaid order, the said order is not prejudicial to the interest of revenue and initiating proceedings under section 263 of the Act, would result in a double disallowance. Accordingly, the Assessee requested not continue proceedings under section 263 of the Act. 9. The PCIT however proceeded to pass the impugned order setting aside the order of the AO and directed the AO to pass a fresh order with the following observations: 7. Whereas taking into consideration the material available on record, I hold that the assessment order passed by the AO under section 143(3) of the Act dated 27.09.2019 is erroneous and prejudicial to the interest of the revenue within the meaning of section 263 of the Act as the AO has failed to verify the outcome of the order of the Hon'ble AAR and therefore as per section 245RR read with section 245S and clause (ix) to Explanation-1 of section 153 (as per which the extended time was available to complete the assessment) was required to complete the assessment only after such order is passed by the AAR. Accordingly, I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s justified in invoking he provisions of section 263 of the Act. 12. In his rejoinder, learned Counsel for the assessee submitted that the CIT(A) in an appeal against the Order of Assessment under section 251(1)(a) of the Act can confirm, reduce, enhance or annul the assessment. Under section 263(1)(i) of the Act, the CIT(A) has power of cancelling an assessment and directing a fresh assessment besides enhancing or modifying the assessment and has no power to annul an order of assessment. An order annulling an assessment can be passed only when it is illegal and void, whereas an order cancelling an assessment can be passed when an order is otherwise valid and suffers from some curable defects. The PCIT u/s.263 of the Act cannot annul an order of assessment. If an order is void then that order can only be annulled and it cannot be cancelled and a fresh assessment cannot be directed to be made in exercise of powers under section 263 of the Act. 13. We have given a very careful consideration to the rival submissions. The first and the foremost aspect which we notice is that under the provisions of section 245R(2)(i) of the Act, it is only the question raised in an application be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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