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TMI Blog2025 (1) TMI 1390X X X X Extracts X X X X X X X X Extracts X X X X ..... n of law, the Ld. PCIT can't substitute his views with that of the AO, if the AO's view on the issue is a plausible view. Since there is no finding of the Ld. PCIT that the action of the AO accepting the claim made by the assessee on the fault found by the Ld. PCIT, are unsustainable in law, we are of the considered opinion that the Ld. PCIT erred in exercising his jurisdiction u/s. 263 of the Act without fulfilling the conditions precedent for doing so. Therefore, we quash the impugned action of u/s. 263 of the Act. Appeal filed by the assessee is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ant to receiving the reason for re-opening (supra), assessee filed its objection against re-opening of assessment. And the AO after hearing the assessee raised queries on two issues i.e. (i) As to why assessee claimed only 15% depreciation on the Higher Efficiency Boilers (being energy saving device), when it was eligible for depreciation allowance of 80% on the Written Down Value (WDV). The AO alleged that the assessee was claiming less depreciation on the Higher Efficiency Boilers in order to claim higher/excess deduction u/s. 80IA of the Act and asked assessee as to why the excess deduction claimed be disallowed. Pursuant to which, the assessee replied (found placed at Page Nos.25-48 of the Paper Book) wherein assessee brought to the notice of the AO that Boilers in question are generating electricity and can't be termed as Energy Saving Devises which are specifically prescribed under clause (ix) of item (8) of Schedule-III and that energy saving devices lowers consumption of energy and saving of energy can't be equal to generation of electricity. And the AO accepted the contention of the assessee and dropped this issue. And on the second issue which was raised in the reasons re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been found fault by the Ld.PCIT was one of the issues on which the AO had resorted to re-opening of scrutiny assessment which was completed on 10.05.2016 u/s. 143(3) of the Act. It was pointed out to the Ld.PCIT that the AO in the reassessment proceedings u/s 147 of the Act, had enquired about the very same issue regarding short claim of depreciation (80% depreciation on the WDV of boilers used by the assessee) alleging that assessee by claiming less depreciation on the Higher Efficiency Boilers, was claiming higher/excess deduction u/s. 80IA of the Act. And that the AO after going through the submissions which is placed from Page Nos.25 to 48 of the Paper Book, being satisfied, has accepted the claim of the assessee and dropped the issue; and has only made addition in respect of the second issue i.e. short claim of deduction in respect of the building (refer the reasons recorded supra). Thus, the assessee contended before the Ld.PCIT that the AO dropped the very same issue which Ld PCIT was raising, after re-opening the assessment and conducting enquiring about it i.e., claim of depreciation in respect of boilers and not drawing any adverse inference against the assessee's clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO has not investigated the issue before him. In the circumstances enumerated above only the order passed by the Assessing Officer can be termed as erroneous for the purpose of S.263 of the Act. Coming next to the second limb, the AO's erroneous order can be revised by the Ld. CIT only when it is shown that the said order is prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon'ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. "prejudicial to the interest of the revenue'' has to be read in conjunction with an "erroneous" order passed by the Assessing Officer. The Hon'ble Supreme Court, held that for invoking powers conferred by S.263; the CIT should not only show that the AO's order is erroneous as a result of any of the situations enumerated above but CIT must also further show that as a result of an erroneous order, some loss is caused to the interest of the revenue. Their Lordship in the said judgment held that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Schedule-III and that energy saving devices lowers consumption of energy and saving of energy can't be equal to generation of electricity. And the AO accepted the contention of the assesse especially stated at Page Nos.25-30 of the Paper Book. Thus on this precise issue, the AO had conducted his enquiry and being satisfied with the reply of assessee has accepted it. 8. Therefore, the action of the AO can't be held to be without conducting any enquiry. And the AO's action of accepting the reply of assessee on the issue and not drawing any adverse findings against the assessee, cannot be interfered by Ld PCIT without him giving a finding that the view of the AO on this issue was unsustainable in law as held by the Hon'ble Supreme Court in the case of Malabar Industries Ltd., (supra). We also note that the Hon'ble jurisdictional High Court in the case of Virtusa Consulting Services (P) Ltd. v. DCIT reported in [2022] 442 ITR 385 (Madras), has also taken such a view, which is reproduced as under: 27. In Kumar Rajaram v. ITO [2019] 110 taxmann.com 109/267 Taxman 65/[2020] 426 ITR. 185 (Mad.), the Court considered the scope of section 263 of the Act and after noting the decision in C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiation of proceedings will be illegal and without jurisdiction. It was further held that the Commissioner cannot initiate proceedings with a view to start fishing and roving enquiries into the matters or orders which are already concluded as such an action will be against the well accepted policy of law that there must be a point of finality in all illegal proceeding the stale issues should not be reactivated beyond a particular stage. Section 263 of the Act does not visualize a case of substitution of the judgment of the Commissioner for that of the Income Tax Officer, who passed the order unless the decision is held to be erroneous. Merely because the Commissioner is not fully satisfied with the conclusion of the Income Tax Officer, the order cannot be turned to be erroneous. On a reading of the order dated 1-7-2015/22- 7-2015 passed under section 263 of the Act one can easily form an opinion that the order is based upon the interpretation which the CIT has given to the terms and conditions of the last will and testament of the assessee's father dated 30.10.2008. Thus, it is evident that the CIT has made a roving enquiry and substituted his view to that of the view taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntial Question of law No.3 is answered in favour of the assessee." 28. Ms. R. Hemalatha, learned Senior Standing Counsel sought to sustain the order of the PCIT as affirmed by the Tribunal by reiterating the conclusion arrived at by the PCIT that enquiry was not conducted by the Assessing Officer. 29. In the preceding paragraphs, we have dealt with the said issue and we have recorded our satisfaction that the Assessing Officer did conduct an enquiry, called for documents from the assessee, which were submitted by the assessee and after considering the documents and records and discussing the case with the assessee, the assessment was completed. The reference to the TPO was also made, who had concluded that there is no adjustment required to the ALP. 30. In support of her contention, reliance was placed on the decision in CIT v. Nalwa Investments Ltd. [2011] 11 taxmann.com 98/199 Taxman 211 (Mag.)/338 ITR 522 (Delhi). We find the said decision would not assist the case of the Revenue, since in the said case, the Assessing Officer failed to apply his mind as to whether dividend income could be given character of business income for the purpose of set off and therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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