Case Law Details
Om Prakash Agarwal Vs PCIT (ITAT Jaipur)
ITAT held that the prerequisite exercise of jurisdiction by the learned Principal CIT under section 263 of the Act is that the order of the AO is established to be erroneous in so far as it is prejudicial to the interest of the Revenue. The Principal CIT has to be satisfied of twin conditions, namely (i) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If any one of them is absent i.e., if the assessment order is not erroneous but it is prejudicial to the Revenue, provision of section 263 cannot be invoked. This provision cannot be invoked to correct each and every type of mistake or error committed by the AO; it is only when an order is erroneous as also prejudicial to Revenue’s interest, that the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase ‘prejudicial to the interest of the Revenue has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. It is pertinent to mention that if the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two views are possible and AO has taken one view with which the Pr. CIT does not agree, it cannot be treated as an erroneous order and it is prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law. In this process even the AO has no power to revie his own order taking the route of proceeding under section 263 of the Act.
ITAT held that one of the pre-requisite before invoking S. 263 and the allegation of the Ld. Pr. CIT is that there has been incorrect assumption of fact and law by the Assessing Officer. However, despite our deep and careful consideration of the material on record including the finding recorded in the subjected Assessment order dated 03.07.2019 and in the findings recorded in the order under challenge, we do not find any incorrectness and incompleteness in the appreciation of facts made by the AO. In the light of these observations, we do not agree on this aspect to this extent with Ld. Pr. CIT. However, we now proceed to consider whether the AO has also incorrectly appreciated and assumed the law while making the subjected assessment to be termed, as erroneous and prejudicial to the interest of the revenue. The facts are not disputed that the assessee has submitted the books of accounts and documents related there upon and has been verified by the AO. The AO has recorded his satisfaction in the assessment order that he has verified the books of account and other records produced before him and the same is verified in the light of the reasons for selection of the case under CASS. This itself shows that the AO has applied his mind on the reasons and has verified the records produced before him by the assessee and the assessee has filed a detailed submission in this proceeding that the AO has verified each and every aspect of the issue on hand and looking the facts of the case on hand the exercise of the power under section 263 via AO is nothing but a change of opinion which is not permitted in the eyes of the law. We have precisely gone through the para of the judgement relied upon by the ld. DR that the AO has power to refer the matter to PCIT where he establishes that there is an error apparent on record where in this case merely the AO has agreed to review the order in his proposal which is not permitted under the law and therefore, the facts relied upon by the ld. DR are factually different and with the fact of this case and thus, based on our detailed observations and relying on the decision of co ordinate bench of Pune ITAT in the case of Alfa Laval Lund AB in ITA no. 1287/PUN/2017 where in the bench in para 5 observed as under:-
“5. It is trite that a power which vests exclusively in one authority, can‟t be invoked or cause to be invoked by another, either directly or indirectly. Section 263 of the Act confers power on the CIT to revise an assessment order, subject to certain conditions. Instantly, we are confronted with a situation in which the revision was initiated on the basis of the AO sending a proposal to the CIT and not on the CIT suo motu calling for and examining the record of the assessment proceedings and thereafter considering the assessment order erroneous and prejudicial to the interests of the revenue. The AO recommending a revision to the CIT has no statutory sanction and is a course of action unknown to the law. If AO, after passing an assessment order, finds something amiss in it to the detriment of the Revenue, he has ample power to either reassess the earlier assessment in terms of section 147 or carry out rectification u/s 154 of the Act. He can‟t usurp the power of the CIT and recommend a revision. No overlapping of powers of the authorities under the Act can be permitted. As the revision proceedings in this case have triggered with the AO sending a proposal to the ld. CIT and then the latter passing the order u/s 263 of the Act on the basis of such a proposal, we hold that it became a case of jurisdiction deficit resulting into vitiating the impugned order. Without going into the merits of the case, we quash the impugned order on this legal issue itself.
In the result, the appeal is allowed.”
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