Kaur Cookies (P) Ltd Vs PCIT (ITAT Delhi)
ITAT Delhi held that for invoking revisional jurisdiction u/s 263 it is necessary to satisfy twin conditions i.e. one being that order should be erroneous and second, such order should be prejudicial to the interests of the Revenue. Non-satisfaction of the conditions renders the proceedings unsustainable.
Facts- the assessee filed its return of income declaring loss of Rs. 2,40,88,622/- on 6.11.2017. Thereafter, revised return was filed on 21.06.2018 declaring loss of Rs. 2,40,84,958/-. The case was selected for scrutiny assessment and the assessment was completed at a loss of Rs. 2,40,67,255/- after making addition of Rs. 17,703/-.
Thereafter the learned PCIT after examining the record issued notice u/s 263 of the Act calling upon the assessee as to why the assessment order dated 10.12.2019 be not revised. In response thereto the assessee filed its reply. However, the reply of the assessee was not found acceptable and the learned PCIT held the assessment order dated 10.12.2019 as erroneous in as much as prejudicial to the interest of revenue. He, therefore, directed the assessing Officer to frame the assessment de novo. Aggrieved against this the assessee is in appeal before this Tribunal.
Conclusion- The law is well settled. The powers u/s 263 can be exercised if the order sought to be revised is erroneous inasmuch as prejudicial to the interests of the Revenue. Hence twin conditions are required to be satisfied – one being that order should be erroneous and second, such order should be prejudicial to the interests of the Revenue.
Held that we are of the considered view that it was not a fit case for exercising powers u/s 263 of the Act, as the learned Pr. CIT did not verify the correct facts from the records before embarking upon the issuance of notice u/s 263 of the Act and initiating the proceedings. There is no dispute with regard to the fact that the learned Pr. CIT is empowered by law to initiate such proceedings, but the exercise of power u/s 263 envisages satisfaction of aforesaid twin conditions. In the present case, in our considered view both the conditions are not satisfied, which is sine qua non for revising the concluded assessment. We, therefore, set aside the impugned order and restore the original assessment order passed by the AO. The grounds raised in this appeal are allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal, by the assessee, is directed against the order of the learned Principal Commissioner of Income-tax (PCIT), Delhi-4, New Delhi, dated 24.03.2022, passed u/s 263 of the Income-tax Act, 1961, hereinafter referred to as the “Act”, pertaining to the assessment year 2017-18. The assessee has raised following concise grounds of appeal:
“1. That order dated 24.3.2022 u/s 263 of the Act by the learned Pr. Commissioner of Income Tax, Delhi-4, New Delhi has been made without satisfying the statutory preconditions contained in the Act and is therefore without jurisdiction and thus, deserves to be quashed as such.
2. That the learned Principal Commissioner of Income Tax has also erred both in law and on facts in directing and, holding that “entire amount of Rs. 99,209/- of PF and Rs. 30,841/- of ESIC required addition as these payments are not within permitted time” when as a matter of fact, no such addition was warranted either on fact and in law and therefore unsustainable.
2.1 That even otherwise that conclusion that ‘”the assessee is not eligible for claim beyond due date prescribed under PF Act & ESIC Act to be disallowed u/s 36 of IT Act” is factually incorrect, legally misconceived and wholly untenable.
2.2 That further finding of the learned Principal Commissioner of Income Tax that the issue regards to details of Entertainment tax, EPF, ESCIC, Service Tax and VAT needs to be enquired thoroughly is not based on correct appreciation of facts and in law, apart from being without jurisdiction.
3. That the finding of the learned Principal Commissioner of Income Tax that “the claim of loss on disposed off assets the assessee was not eligible to claim loss on car wherein the block of assets not ceased to exist. The assessee accepts that due to inadvertent errors on the part of the assessee company the value of assets have been taken at Rs. 11,70,034/-instead f Rs. 13,60,034/-. On the claim of loss detailed enquiry was required to have been made by the Assessing Officer” is factually incorrect, contrary to record and otherwise too perverse and without application of mind and therefore untenable.”
2. Facts giving rise to the present appeal are that in this case the assessee filed its return of income declaring loss of Rs. 2,40,88,622/- on 6.11.2017. Thereafter, revised return was filed on 21.06.2018 declaring loss of Rs. 2,40,84,958/-. The case was selected for scrutiny assessment and the assessment was completed at a loss of Rs. 2,40,67,255/- after making addition of Rs. 17,703/-. Thereafter the learned PCIT after examining the record issued notice u/s 263 of the Act calling upon the assessee as to why the assessment order dated 10.12.2019 be not revised. In response thereto the assessee filed its reply. However, the reply of the assessee was not found acceptable and the learned PCIT held the assessment order dated 10.12.2019 as erroneous in as much as prejudicial to the interest of revenue. He, therefore, directed the assessing Officer to frame the assessment de novo. Aggrieved against this the assessee is in appeal before this Tribunal.
3. Apropos to the grounds of appeal the learned counsel for the assessee reiterated the submissions as made in the written submissions. For the sake of clarity the submissions of the assessee are reproduced as under:
“MAY IT PLEASE YOUR HONOURS:
1 The instant appeal arises from an order dated 24.3.2022framedu/s 263 of the Act.
2 Issue No. 1
2.1 It is submitted that learned Pr. Commissioner of Income Tax in revision order has held that sum of Rs. 3,48,324/- has not been considered for disallowance in return of income by relying upon tax audit report (hereinafter referred to as “TAR”) furnished by learned Auditor (para 9.1 – 9.2, page 8 and para 10(1) page 9 of impugned). Break-up of the aforesaid figure as also submitted to learned PCIT in reply dated 12.3.2022 (pages 77-100 at page 79 of Paper Book) is as under:
