Comer Industries India Pvt. Ltd. Vs DCIT (ITAT Bangalore)
PCIT Can Invoke Revision u/s 263 Based on Subsequent Supreme Court Decision; DRP-Based Assessment Also Revisable
In this case, the assessee challenged the revisionary order passed by the PCIT u/s 263 for AY 2017-18. The PCIT held that the assessment order passed u/s 143(3) r.w.s. 144C was erroneous and prejudicial to the interests of revenue as the AO failed to disallow delayed employees’ contribution to PF/ESI of ₹1,21,861 and certain penalty/interest payments.
The assessee argued that at the time of passing the assessment order (20-07-2022), jurisdictional High Court decisions permitted deduction of employees’ contribution if paid before the due date of filing the return u/s 139(1). It was further contended that since the assessment was passed pursuant to DRP directions, the PCIT could not revise it u/s 263.
The Tribunal held that while the AO’s view may have been correct at the time of assessment, the allowability changed after the Supreme Court decision in Checkmate Services Pvt. Ltd. (SC) which clarified that delayed employees’ contribution is not allowable. For purposes of Section 263, the correctness of the assessment order must be examined at the time when the PCIT reviews the record, and the “record” can include subsequent legal developments.
The Tribunal also rejected the argument that orders passed pursuant to DRP directions cannot be revised. It held that Section 263 does not bar revision of such final assessment orders.
Accordingly, the Tribunal upheld the PCIT’s revisionary order. However, it directed that the AO, while giving effect to the 263 order, must restrict the reassessment only to the issues mentioned in the revision order and not undertake a roving inquiry.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
