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TMI Blog2024 (9) TMI 1558X X X X Extracts X X X X X X X X Extracts X X X X ..... n our considered opinion, the facts of the case do not indicate that the twin conditions contained in Section 263 of the Act are fulfilled in its letter and spirit. Decided in favour of assessee. - Hon ble Shri Manoj Kumar Aggarwal, AM And Hon ble Shri Manu Kumar Giri, JM For the Appellant : Shri. Sriram Seshadri, C.A. For the Respondent : Shri. Nilay Baram Som, IRS, CIT. ORDER PER MANU KUMAR GIRI (JUDICIAL MEMBER) This appeal by the assessee is arising out of the order of the Principal Commissioner of Income Tax-1, Chennai in DIN No.ITBA/REV/F/REV5/2023-24/ 1063734589(1) dated 30.03.2024. The assessment was framed by the Additional/Joint/Deputy/Assistant Commissioner of Income Tax/ Income-tax Officer, National faceless assessment centre, Delhi passed u/s. 147 r.w.s 144B of the Income Tax Act, 1961 (hereinafter the Act ) for the assessment year 2016-17 vide order dated 28.03.2022. 2. Brief facts of the case are that the assessee company filed its revised ITR for the A.Y. 2016-17 on 30.03.2017 declaring total income of Rs 27,91,58,970/-. Assessment proceedings under section 143(3) of the Act were completed for the assessee vide order dated 29.12.2019 and the income assessable to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld shares of the company carrying not less than fifty-one per cent of the voting power on the last day of the year or years in which the loss was incurred . Therefore, the ld.AO held that the assessee company is not eligible to bring down any losses from past years. In the assessment year the only the assessee company incurred was short term capital loss of Rs. 2,60,14,469/- which it can't set off against any other head as per provisions under section 71 (3), it is not allowed to do. It was seen that assessee's has set off its income against brought down losses of Rs. 35,54,07,169/- but assessee is not eligible for any such set off in the relevant assessment year i.e. 2016-17. Therefore the ld. Assessing Officer added back this amount to assessee's income. Aggrieved, assessee preferred an appeal before the ld.CIT(A). 4. Pending appeal before the ld.CIT(A) against the order of the ld.AO dated 28.03.2022, the ld.CIT issued notice under section 263 dated 22.02.2024 to the assessee by observing as under: On a scrutiny of the computation statement, it was noticed that brought forward loss of Rs. 59,82,73,179/- was allowed (brought forward loss of Rs. 95,36,80,348/- unexplai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act since the Assessing Officer has not made complete verification and not appreciated the facts while passing the order u/s 147 read with section 144B of the Act without due verification. The assessment order so passed, therefore, is considered both erroneous and prejudicial to the interest of the revenue. Accordingly, the ld. PCIT partly set aside the assessment order u/s 263 of the Act, with a direction to the Assessing Officer to examine the aspects, during the Accounting Year in question and pass a fresh order after granting opportunity to the assessee, within the stipulated time. Further, the ld. PCIT stated that the assessee can furnish documents which were not available at the time of assessment in the records of the Assessing Officer for fresh examination. Aggrieved, assessee preferred an appeal before the Tribunal. 6. Before us, the ld.Counsel for the appellant submitted that the issue which is sought to be revised is already investigated and enquired by the ld.AO in earlier re-assessment proceedings. He furthermore, argued that on same material ld. CIT has taken a different view than AO. In fact, the ld.AO on same material available before him already duly inquired t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t off of brought of losses admittedly was duly deliberated upon by the AO in Section 147 proceedings after the notice u/s 142(1) dated 31.12.2021 and reply dated 12.01.2022; The ld.CIT wrong in saying that AO has not done complete verification. vi. The impugned order of the ld.CIT is in complete violation of the clause (d) of the Explanation 2 of Section 263 of the Act for the reason that ld.AO in re-assessment proceedings respectfully followed the ratio of the judgment of the Hon ble Supreme Court in the case of Shri Subhulaxmi Mills Ltd (supra) Therefore, it cannot be said that re-assessment order 23.03.2023 is prejudicial to the revenue. vii. Here the assessee had challenged jurisdiction of the Commissioner of Income-tax to exercise powers under section 263 of the Act. For an order of the Assessing Officer to be interfered with in exercise of revisional powers the Commissioner of Income-tax has to find in the first instance that the order is erroneous and, secondly, the order is prejudicial to the interests of the Revenue. The conditions are twin conditions as held by the apex court and both of them have to be fulfilled before the Commissioner of Income-tax can exercise jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, [including, (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) an order modifying the order under Section 92-CA; or (iii) an order cancelling the order under Section 92-CA and directing a fresh order under the said section.] *** [Explanation 2. For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] 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 [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 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly inadequacy of enquiry would not confer the power of revision under Section 263 of the Act on the Commissioner. The relevant paragraph of the said decision reads as under:- We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned counsel for the Revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order, which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried out by the assessee. 25. Further, the decision of the Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd., enunciates the meaning and intent of the phrase prejudicial to the interests of the Revenue , in the following words:- 8. The phrase prejudicial to the interests of the Revenue is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The High Court of Calcutta in Dawjee Dadabhoy Co. v. S.P. Jain[(1957) 31 ITR 872(Cal)], the High Court of Karnataka in CIT v. T. Narayana Pai[(1975) 98 ITR 422(Kant)], the High Court of Bombay in CIT v. Gabriel India Ltd.[(1993) 203 ITR 108(Bom)] and the High Court of Gujarat in CIT v. Minalben S. Parikh[(1995) 215 ITR 81(Guj)] treated loss of tax as prejudicial to the interests of the Revenue. 9. Mr. Abraham relied on the judgment of the Division Bench of the High Court of Madras in Venkatakrishna Rice Co. v. CIT[(1987) 163 ITR 129(Mad)] interpreting prejudicial to the interests of the Revenue . The High Court held: In this context, (it must) be regarded as involving a conception of acts or orders which are subversive of the adminis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd held that in order to exercise the jurisdiction under Section 263(1)of the Income tax Act, the Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. It is further observed that if one of them is absent, recourse cannot be had to Section 263(1) of the Act. *** . 27. Considering the aforesaid judicial pronouncements, it can be safely concluded that inadequacy of enquiry by the AO with respect to certain claims would not in itself be a reason to invoke the powers enshrined in Section 263 of the Act. The Revenue in the instant case has not been able to make out a sufficient case that the CIT has exercised the power in accordance with law. Rather, in our considered opinion, the facts of the case do not indicate that the twin conditions contained in Section 263 of the Act are fulfilled in its letter and spirit. 28. Notably, the ITAT, while making a categorical finding that the CIT had failed to point out any definite or specific error in the assessment order, has satisfactorily explained both the claims in question in Paragraph 8.2 of its order, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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