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TMI Blog2023 (3) TMI 614X X X X Extracts X X X X X X X X Extracts X X X X ..... cial to the interest of the revenue, for passing the impugned order u/s 263 of the Act. We observe that in the course of proceedings u/s 263 of the Act before the Ld. PCIT, assessee had furnished the relevant details and explained the issues raised through the show cause notice issued by the Ld. PCIT, supporting its contentions by corroborative documentary evidences. We find that the issue in the present case is purely on facts verifiable from the records of the assessee which revealed that the issue raised by the Ld. Pr. CIT for invoking revisionary proceedings are ill founded. We also note that observation made by the Ld. Pr. CIT for the potential under statement of income owing to this inadvertent mistake of treating the share in loss as share in profit of one JV in the subsequent assessment year i.e. 2017-18 does not justify the present proceeding of revision undertaken by the Ld. Pr. CIT u/s. 263 - The mistake committed by the assessee is rectifiable in its books of accounts and has to be dealt in the respective assessment year. Accordingly, on the issue raised by the Ld. Pr. CIT in the present revisionary proceeding action u/s 263 of the Act is not justifiable, we therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee went in appeal before the Ld. CIT(A) and got substantial relief vide appellate order dated 30.09.2019. Subsequently, Ld. Pr. CIT, Asansol, on examination and verification of assessment records observed that an amount of Rs.50,11,857/- towards exempt income credited to the partners capital accounts also included an amount of Rs.12,83,610/- as profit earned from one Joint Venture (JV) called M/s. ARETPL-BDS-PMIW in which assessee had 33% share. Ld. Pr. CIT observed that there was in fact, a loss of Rs.38,89,726/- incurred by the said JV and, therefore, 33% of this loss coming to Rs.12,83,610/- should have been reduced from the capital of partners. According to him, this wrongful addition to the capital of partners has resulted in overstatement of partners capital in the firm as on 31.03.2016. 4.1. According to Ld. Pr. CIT, this leads to inadmissible payment of interest on the balance of partners capital amounting to Rs.1,54,033/- (12% of Rs.12,83,610/-) and thus, a potential understatement of income in the subsequent assessment year i.e. AY 2017-18 also. Based on these observations, a show cause notice dated 08.02.2021 was issued u/s. 263(1) of the Act. Assessee furnis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee, there is no element of interest which has been claimed on the incorrect figure of Rs.12,83,610/- and, therefore, the order as alleged by Ld. Pr. CIT cannot be termed as erroneous in so far as it is prejudicial to the interest of the revenue. Ld. Pr. CIT did not find favour with the submissions made by the assessee and drew his consideration to set aside the assessment made by the Ld. AO. He directed the Ld. AO to frame the assessment afresh after considering his observations. Aggrieved, assessee is in appeal before the Tribunal. 5. Before us, ld. Counsel for the assessee reiterated the submissions made before the Ld. Pr. CIT. Ld. Counsel emphasized on the fact that there is no prejudice to the revenue when there is no element of interest charged to the Profit and Loss Account on the amount of Rs.12,83,610/- which has been inadvertently taken as a share of profit instead of share in loss of the aforesaid JV. Thus, the observations made by the Ld. Pr. CIT are on incorrect set of facts. Further, Ld. Counsel objected on the observation of Ld. Pr. CIT that there is a potential understatement of income in the subsequent assessment year i.e. 2017-18 owing to the inadvertent mis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w that for invoking the provisions of section 263 of the Act, both the conditions that the order must be erroneous and prejudicial to the interest of revenue needs to be satisfied. This ratio stands laid down by various Hon'ble Courts. 7.2. For this, let us 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 need 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 in 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) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; [because AO has to discharge dual role of an investig ..... X X X X Extracts X X X X X X X X Extracts X X X X
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