City and Industrial Development Corporation of Maharashtra Limited Vs PCIT (ITAT Mumbai)
Mumbai ITAT: Section 263 Revision Invalid When AO Follows Binding High Court Decision and PCIT Acts on AO’s Proposal
The Mumbai ITAT quashed the revisionary order passed under section 263, holding that the Assessing Officer’s order could not be regarded as erroneous and prejudicial to the interests of the Revenue when it had been passed in conformity with the binding judgment of the Bombay High Court. The assessee, a statutory corporation acting as an agent of the Government of Maharashtra, had offered only its agency commission of ₹5 lakh to tax, while treating all other receipts as belonging to the State Government. The Assessing Officer accepted this position after examining the facts and following the jurisdictional High Court’s decisions. The Tribunal held that the mere fact that the Department had filed an SLP before the Supreme Court did not dilute the binding nature of the High Court judgment, and judicial discipline required the Assessing Officer to follow it. The Tribunal further held that the very initiation of section 263 proceedings was vitiated, as the Principal Commissioner had acted on a proposal received from the Assessing Officer, instead of independently calling for and examining the record as mandated by section 263. Since the revisionary authority had effectively abdicated its statutory discretion and the issue was already covered by earlier coordinate bench decisions in the assessee’s own case, the Tribunal quashed the section 263 order and restored the original assessment.
