2021 (12) TMI 1432 - AT - Income Tax

Dismissal of Appeal Upholding PCIT's Revision Order for Fresh Assessment

The appeal challenging the revision order passed by the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income-tax Act for the ... Revision u/s 263 - AO had passed an “Order Giving Effect” (OGE) allowing full relief to the assessee - As per CIT allowing relief to the assessee in the OGE without conducting fresh examination as directed by AO and without passing fresh assessment order has rendered the OGE erroneous and prejudicial to the interests of revenue - HELD THAT:- We notice that the Tribunal, vide its order [2016 (10) TMI 1374 - ITAT BANGALORE] has restored following three issues to the file of AO for examining them afresh on Disallowance u/s 14A of the Act, Whether Royalty income is eligible for computing deduction u/s 10A/10AA of the Act and Whether foreign currency expenses should be reduced from export turnover for computing deduction u/s 10A/10AA. As observed by the Ld PCIT, the AO has failed to pass a fresh assessment order u/s 143(3) r.w.s. 254 of the Act. Instead, the AO has passed an OGE and granted relief to the assessee in respect of all the three issues mentioned above without examining them at all. Thus, granting to relief to the assessee without examining the issues as directed by ITAT and also failure to pass a fresh assessment order u/s 143(3) r.w.s 254 of the Act would definitely render the OGE erroneous and prejudicial to the interests of revenue. Hence we do not find any infirmity in the impugned revision order passed by Ld PCIT. We make it clear that while giving effect to the revision order passed u/s 263 of the Act by PCIT, the AO is duty bound to follow the binding decision rendered by the Hon’ble jurisdictional Karnataka High Court for AY 2010-11 - Appeal filed by the assessee is dismissed. Issues:Challenge to validity of revision order passed by Ld Principal CIT (PCIT) under section 263 of the Income-tax Act, 1961 for assessment year 2010-11. Settlement of issues related to computation of deduction under sections 10A/10AA and disallowance under section 14A of the Act.Analysis:The appeal was filed by the assessee challenging the order dated 13.11.2017 passed by Ld Principal CIT-1, Bengaluru under section 263 of the Income-tax Act,1961. The Ld PCIT initiated revision proceedings as the AO had allowed full relief to the assessee on specific issues without conducting a fresh examination as directed by the ITAT. The Ld PCIT held that the Order Giving Effect (OGE) was erroneous and prejudicial to the interests of revenue, leading to the initiation of revision proceedings. Consequently, the Ld PCIT set aside the OGE and directed the AO to pass a fresh assessment order in accordance with the Act.The Ld A.R argued that certain issues mentioned in the revision order had been settled by the Hon'ble High Court of Karnataka, rendering them infructuous. The High Court had decided in favor of the assessee on various questions of law related to the computation of deduction under section 10A/10AA. However, the Ld D.R supported the order of Ld PCIT, emphasizing the importance of following the binding decisions of the High Court.Upon hearing both parties and examining the record, the Tribunal observed that the AO had failed to pass a fresh assessment order as directed by the ITAT. Instead, the AO had issued an OGE granting relief to the assessee without examining the specified issues. This action was deemed erroneous and prejudicial to the revenue's interests, justifying the revision order passed by Ld PCIT. The Tribunal upheld the decision of Ld PCIT, emphasizing the necessity for the AO to adhere to the binding decisions of the jurisdictional Karnataka High Court for the relevant assessment year.In conclusion, the appeal filed by the assessee was dismissed, affirming the revision order passed by Ld PCIT. The Tribunal stressed the importance of following the High Court's decisions while implementing the revision order.