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TMI Blog2025 (3) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of Gem Plus Jewellery India Ltd. [2010 (6) TMI 65 - BOMBAY HIGH COURT] Therefore, once the AO has allowed the claim of deduction u/s. 10AA on the enhanced disallowance u/s. 14A which is in consonance with the decision of the Hon'ble Jurisdictional High Court, the order cannot be held to be erroneous although it may be prejudicial to the interest of the Revenue.
Thus PCIT in our opinion is not justified in assuming jurisdiction u/s. 263 as order is certainly not erroneous lthough it may be prejudicial to the interest of the Revenue. Since the twin conditions are not satisfied in the instant case, set aside the order of ld. PCIT and the grounds raised by the assessee are allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... icial to the interest of the Revenue. He therefore issued a show cause notice asking the assessee to explain as to why the order passed by the AO should not be set aside within the meaning of Explanation 2 of sub-section (1) of section 263 of the Act. The notice so issued by the PCIT reads as under : "NOTICE FOR THE HEARING M/s/Mr/Ms Subject: Notice for Hearing in respect of Revision proceedings u/s 263 of the THE INCOME TAX ACT, 1961-Assessment Year 2017- 18. In this regard, a hearing in the matter is fixed on 20/02/2024 at 11:00 AM. You are requested to attend in person or through an authorized representative to submit your representation, if any alongwith supporting documents/information in support of the issues involved (as mentioned below). If you wish that the Revision proceeding be concluded on the basis of your written submissions/representations filed in this office, on or before the said due date, then your personal attendance is not required. You also have the option to file your submission from the e-filing portal using the link: incometaxindiaefiling.gov.in. Please refer to the order dated 26/02/2022 u/s 143(3) r.w.s. 144C(13) r.w.s.144B of the Income Tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(3) r.w.s. 144C(13) r.w.s. 144B of the Income-tax Act, 1961 for the A.Y 2017-18 is erroneous and prejudicial to the interest of revenue within the meaning of Explanation 2 of sub-section 1 of section 263 of the Income-tax Act, 1961 and is proposed to be revised. 09. You are hereby given an opportunity to file your submission, if any, through e-filing portal or email (pune.pcit1@ incometax.gov.in) on or before 20/02/2024 which will be taken into account while finalizing the proceedings. Necessary documentary evidences, wherever required, may also be submitted. Please note that in case your reply is not received by the given date, it shall be presumed that you have nothing to say in this regard and the proceedings shall be completed on the basis of information available on record. 10. The attendance as mentioned in Para 1 is not insisted. You may furnish the reply through e-portal on or before 20/02/2024." 4. Rejecting the various explanations given by the assessee and relying on various decisions the ld. PCIT partly set-aside the order to the file of AO for the limited issue of claim of deduction u/s. 10AA of the Act including the additional deduction allowed by the Faceless A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the aspects discussed above. Thus, the scenario of this case equates with the scenario in the case of Malabar Industrial Company Ltd, and as in that case Hon'ble Supreme Court held that exercise of jurisdiction by CIT under section 263(1) of the Act was justified, so it should be in this case. 4.3.1 Similarly the Hon'ble Apex Court in the case of BSES Rajdhani Power Ltd. [152 taxmann.com 139 (SC)] have upheld the findings of High Court that Commissioner has power to consider all aspects which were subject matter of Assessing Officer's order, if in his opinion, they were erroneous, despite assessee's appeal on that or some other aspect. 4.3.2 The Hon'ble Bombay High Court in the case of Jeevan Investment & Finance (P) Ltd. Vs Commissioner of Income Tax, City- 1. Mumbai [(2017) 88 taxmann.com 552 (Bombay)], has held that as under: "Merely asking a question which goes to the root of the matter and not carrying it further is a case of non-enquiry, if the query is not otherwise satisfied while responding to another query. In the instant case, the Assessing Officer raised query regarding valuation of shares in question to which response was only that the unquo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits and also that the arrangement is to earn more than ordinary profits to the eligible unit so that the profits can be routed back to the parent AE was proved in the earlier years. The assessee did not furnish any other facts contrary to the facts involved in those years, before the FAO. Therefore, the FAO has not verified / examined of the facts of the case in its proper perspective. Even the correctness of the claim has not been verified by the FAO. 4.5 In addition to the claim of deduction under section 10AA made by the assessee in the revised return of income at Rs 263,46,37,168/-, the FAO has allowed further deduction under the said section at Rs. 1,23,15,523/- in respect of the disallowance made by him under section 14A of the Act. The assessee contended that the FAO has allowed such additional deduction after considering the binding judgement of Hon'ble Bombay High Court in the case of CIT vs. Gem Plus Jewellery India Ltd. (330 ITR 175). However, it is pertinent to note here that the FAO failed to carry out proper verification / examination of the original claim itself, the facts discussed in respect of the original claim are equally applicable to the additional d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act, based on conjecture and surmises and without recording an objective finding or a conclusive evidence as to how the assessment order passed by the Assessing Officer ("AO") under section 143(3) of the Act is erroneous and prejudicial to the interest of Revenue, was bad in law and liable to be quashed. 2 That on the facts and circumstances of the case and in law, the PCIT has erred in invoking jurisdiction under section 263 of the Act and setting aside the order passed by the AO qua the deduction under section 10AA of the Act without appreciating that the assessment order passed was neither erroneous nor prejudicial to the interest of the revenue. 3. That on the facts and circumstances of the case and in law, the revisionary jurisdiction assumed by the PCIT under section 263 of the Act is bad in law and liable to be quashed as the Pune Bench of the Income Tax Appellate Tribunal ("ITAT") has allowed the deduction under section 10AA for the consecutively years 2012-13 to 2016-17 and the AO has taken a stand in conformity with the orders of the ITAT being binding on the AO. 4. That on the facts and circumstances of the case and in law, the PCIT has erred in initiating the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0AA(9) read with section 80IA(10) of the Act, could not have been invoked as there was no erosion of Indian Tax base. 11. That on facts and circumstances of the case and in law, the PCIT erred in applying the provisions of section 10AA(9) read with section 80IA(10) of the Act, without establishing the existence of any 'arrangement' to manipulate profits of the eligible unit between Appellant and its AE Each of the above grounds are independent and without prejudice to the other grounds of appeal preferred by the Appellant. The Appellant prays for leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before, or at, the time of hearing of the appeal. 6. Ld. Counsel for the assessee submitted that the assessee during the course of assessment proceedings has given details of deduction u/s. 10AA of the Act which was verified by the AO. He submitted that the AO has allowed the deduction made u/s. 10AA of the Act on the disallowance made u/s. 14A after considering the binding decision of the Hon'ble Bombay High Court in the case of CIT vs. Gem Plus Jewellery India Ltd. [2010] 330 ITR 174. Since the AO during the course of assessment p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He accordingly submitted that the order has become erroneous as well as prejudicial to the interest of the Revenue for which the ld. PCIT was fully justified in assuming jurisdiction u/s. 263 of the I.T. Act. 8. We have heard the rival arguments made by both the sides, perused the orders of the AO and the PCIT and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO in the instant case completed the assessment us/.143(3) r.w.s.144C(13) r.w.s.144B of the Act on 26.02.2022 determining total income of the assessee at Rs. 455,25,53,250/- wherein he made Transfer Pricing adjustment of Rs. 9,41,77,133/- and made disallowance u/s. 40(a)(i) at Rs. 26,39,84,698/-. We find in the said order the AO although determined the disallowance u/s. 14A at Rs. 1,23,15,523/-, however, following the decision of Hon'ble Bombay High Court in the case of CIT vs. Gem Plus Jewellery India Ltd. (supra) held that such disallowance will enhance the income which is otherwise eligible for deduction u/s. 10AA for which he did not make any addition on this count. We find the PCIT holding that the AO has not carried out proper verification of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue has filed an appeal before the Hon'ble Bombay High Court against the order of the Tribunal which is pending for decision, the order of the AO cannot be held to be erroneous although it may be prejudicial to the interest of the Revenue. Further, the disallowance made by the AO u/s. 14A was allowed by him as deduction u/s. 10AA in light of the decision of Hon'ble Bombay High Court in the case CIT vs. Gem Plus Jewellery India Ltd. (supra). Therefore, once the AO has allowed the claim of deduction u/s. 10AA on the enhanced disallowance u/s. 14A which is in consonance with the decision of the Hon'ble Jurisdictional High Court, the order cannot be held to be erroneous although it may be prejudicial to the interest of the Revenue. 9.1 It is the settled proposition of law that for assuming jurisdiction u/s. 263 of the I.T. Act, the twin conditions namely, the order is erroneous and the order is prejudicial to the interest of the Revenue must be cumulatively satisfied. As held in the preceding paragraphs, the order is certainly not erroneous since the Tribunal in assessee's own case has consistently allowed the deduction u/s. 10AA from A.Y. 2013-14 to A.Y. 2016-17. Similarly, the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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