Assessment order quashed under section 263 of Income Tax Act for 2014-15

The Tribunal quashed the order of the Ld. Pr. Commissioner of Income Tax assuming revisionary jurisdiction under section 263 of the Income Tax Act for the assessment year 2014-15. The Tribunal found that the assessment order did not meet the criteria of being both erroneous and prejudicial to the Revenue's interest as required for such jurisdiction. Therefore, the appeal of the assessee was allowed, and the order invoking revisionary jurisdiction was set aside. (Judgment date: December 5th, 2019)

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Issues:
Assumption of revisionary jurisdiction by the Ld. Pr. Commissioner of Income Tax u/s.263 of the Income Tax Act, 1961 for the assessment year 2014-15.

Analysis:
The appeal before the Appellate Tribunal ITAT Pune challenged the order of the Ld. Pr. Commissioner of Income Tax-1, Aurangabad invoking revisionary jurisdiction u/s.263 of the Act. The crux of the grievance was the assumption of such jurisdiction. The limited scrutiny under CASS had initially focused on specific issues - higher turnover in Service Tax Return compared to ITR and a mismatch in amounts paid to related persons u/s.40A(2)(b). The assessment order accepted the income filed by the assessee after verification. However, the Ld. Pr. Commissioner sought to delve into other issues not covered by the limited scrutiny, contrary to the CBDT Circular's guidelines for handling such cases. The Tribunal noted that the Assessing Officer had already verified the issues under limited scrutiny, rendering the revisionary jurisdiction invalid.

The Tribunal referred to the CBDT Circular and the Malabar Industrial Co. Ltd. case to emphasize that for revisionary jurisdiction under section 263, the Assessing Officer's order must be both erroneous and prejudicial to the Revenue's interest. In this case, the Tribunal found that the assessment order did not meet these criteria. As a result, the Tribunal quashed the order passed by the Ld. Pr. Commissioner of Income Tax u/s.263 of the Act, thereby allowing the appeal of the assessee. The judgment was pronounced on December 5th, 2019.

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