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TMI Blog2024 (8) TMI 1230X X X X Extracts X X X X X X X X Extracts X X X X ..... terest of Revenue, which is sine qua non to invoke the powers u/s. 263 Loss of sale of assets - Claim being capital in nature was disallowed by the assessee company while computing taxable income for the relevant assessment year and moreover, the disallowance of this loss on sale of assets was duly disclosed in the return of income filed for the relevant assessment year and appropriate disclosure was made in TAR filed by the assessee for the relevant assessment year. PCIT has nowhere recorded finding of fact that the assessment order is erroneous insofar as prejudicial to the interest of Revenue and once this twin conditions is not mentioned or not probed, the PCIT has no power to exercise powers u/s. 263 of the Act for revising the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-Tax Chennai-1, in ITBA/REV/F/REV5/2023-24/1063611564(1) 1063309473(1) dated 29.03.2024 24.03.2024. The assessments were framed by the National e-Assessment Centre, Delhi for the assessment years 2017-18 2018-19 u/s. 143(3) r.w.s.143(3A) 143(3B) of the Income Tax Act, 1961 (hereinafter the Act ) vide orders dated 05.04.2021 16.04.2021 respectively. 2. The only common issue in these two appeals of assessee is as r against the revision order passed by the PCIT u/s. 263 of the Act that he failed to satisfy the twin conditions i.e., for order passes by the AO u/s. 143(3) of the Act, is erroneous insofar as prejudicial to the interest of Revenue, which is sine qua non to invoke the powers u/s. 263 of the Act on the following two issues:- i) Set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of Rs. 26,98,000 being dividend. As per rule 8D(2), an amount equal to 1% of annual average of monthly averages of the opening and closing balance of the value of investments should of the value of investments should e disallowed as expenditure incurred for earning exempt income. Average of investments: 35,95,30,000 + 74,55,32,000 = 1,10,50,62,000/2 = 55,25,31,000 1% of average investments = 55,25,310/- 3.2 Disallowance to be made = 26,98,000/- (restricted to exempted income) 3.3 While scrutinizing from 3CA an amount of Rs. 1,13,16,189 being loss on sale on assets being capital expenditure, which needs to be disallowed. These aspects were not considered at the time of framing of assessment. The PCIT accordingly passed revision order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which cause prejudice to the Revenue. 5.1 As regards to second issue, in regard to disallowance of loss on sale of assets, the ld.counsel explained that the assessee company has incurred loss on sale of assets amounting to Rs. 1,13,16,189/- and the same being capital in nature was disallowed by the assessee company while computing taxable income for the relevant assessment year and the disallowance on loss of sale of assets was duly disclosed in the return of income filed for the relevant assessment year and the appropriate disclosure was also made in the TAR filed for the relevant assessment year. Hence, there is no cause for PCIT to revise the assessment. There is no error in the assessment order nor it is prejudicial to the interest of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see itself has made disallowance of expenses relatable to exempt income to the extent of Rs. 34,17,729/- which is greater than the exempt income itself. Even otherwise, the PCIT has not noted any error in the assessment order or any prejudice caused to the Revenue by the assessment order. There is no iota of any finding on the above subject and cannot be inferred from the above reproduced para 5 5.1 from the order of PCIT. Further for revising the assessment, the PCIT has to give a clear cut finding that the order passed by the AO u/s. 143(3) of the Act suffers from the twin conditions i.e., erroneous insofar as prejudicial to the interest of Revenue, which is sine qua non to invoke the powers u/s. 263 of the Act. 7.1 Coming to next issue o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecessarily presupposes the statutory satisfaction that although there is some error with regard to the completed assessment but the order passed by the officer has to be erroneous insofar as prejudicial to the interest of the Revenue. The plain language of the provision is more than abundantly clear that it is not every error or mistake that should induce the PCIT to resort to exercise the powers u/s. 263 of the Act. Where the factual matrix shows that it is a marginal situation and when by a careful and cautious judgment the AO has considered the issue in hand, the exercise of the power u/s. 263 of the Act by the PCIT is not proper. For invoking the revisionary powers u/s. 263 of the Act, it is necessary for the PCIT to state in what manne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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