2016 (10) TMI 696 - AT - Income Tax

Tribunal rejects Section 263 revision, finds Assessing Officer's actions justified.

The Tribunal held that the Principal Commissioner's invocation of revisionary powers under Section 263 was unjustified as the Assessing Officer's order ... Revision u/s 263 - not offering the sales income to tax - charging of interest u/s.220(2) - Held that:- In the present case, we find that during the course of assessment proceedings AO had raised a specific query wherein the assessee was asked to furnish the details of income from all operations alongwith the necessary evidences. The query was replied by the assessee . It is seen that on receipt of reply from Assessee, no adjustment to the sales was made by AO meaning thereby that the AO was satisfied with the reply of assessee. Thus, it can be seen that the issue of not offering the sales income to tax on which ld. CIT has resorted to revisionary proceedings u/s. 263 of the Act, had been examined by the AO. Before us, Revenue has not brought any material on record to demonstrate that the view taken by the A.O was an impermissible view, or was contrary to law or was upon wrong application of legal principles which required initiating the exercising of revisionary powers u/s. 263 of the Act. In view of it we are of the view that in the present case Ld. CIT was not justified in resorting to revisionary powers u/s. 263 of the Act, we therefore set aside the order of CIT cancelling the order dated 28/03/2013 passed u/s. 143(3) of the Act. Thus, the grounds of the Assessee are allowed. Issues Involved:1. Invocation of revisionary powers under Section 263 of the Income Tax Act.2. Alleged understatement of income by the assessee.3. Non-charging of interest under Section 220(2) by the Assessing Officer (AO).4. Adequacy of the AO's examination and verification during the assessment proceedings.5. Jurisdiction and legality of the proceedings initiated under Section 263.Detailed Analysis:1. Invocation of Revisionary Powers Under Section 263:The Principal Commissioner of Income Tax (CIT) invoked Section 263, claiming the AO's order was erroneous and prejudicial to the interests of the Revenue. The CIT believed the assessee had not disclosed income corresponding to the TDS claim of Rs. 3,32,94,191/- and failed to charge interest under Section 220(2). The Tribunal emphasized that Section 263 can only be invoked if the order is both erroneous and prejudicial to the Revenue's interests. The Tribunal found that the AO had examined the issues during the assessment, making the invocation of Section 263 unjustified.2. Alleged Understatement of Income:The CIT argued that the assessee understated its income by Rs. 2,50,43,697/- because the TDS certificates indicated a higher gross income than reported. The assessee contended that the discrepancy was due to TDS being deducted on amounts including service tax, which is not income. The Tribunal noted that the AO had specifically queried and verified the income details during the assessment, and no adjustments were made, indicating the AO's satisfaction with the assessee's explanations.3. Non-Charging of Interest Under Section 220(2):The CIT claimed the AO erred by not charging interest under Section 220(2). The Tribunal clarified that interest under Section 220(2) is chargeable only when there is a failure to pay the tax specified in a notice under Section 156 within the stipulated time. In this case, there was no such failure at the time of the assessment order, making the CIT's claim baseless.4. Adequacy of AO's Examination and Verification:The Tribunal found that the AO had issued detailed notices and questionnaires and had thoroughly examined the assessee's income details, including the TDS and service tax components. The AO's acceptance of the assessee's explanations and the lack of adjustments indicated a proper and adequate examination.5. Jurisdiction and Legality of Proceedings Under Section 263:The Tribunal referred to precedents, emphasizing that an order cannot be termed erroneous unless it is not in accordance with law. The Tribunal cited the Hon'ble Bombay High Court's decision in CIT vs. Gabriel India Ltd., which held that the CIT cannot substitute his judgment for that of the AO if the AO's order is lawful. The Tribunal also referred to the Hon'ble Supreme Court's decision in CIT vs. Max India Ltd., which stated that if two views are possible and the AO has taken one, the CIT cannot deem the order erroneous unless the AO's view is unsustainable in law.Conclusion:The Tribunal concluded that the CIT was not justified in invoking revisionary powers under Section 263, as the AO's order was neither erroneous nor prejudicial to the Revenue's interests. The Tribunal set aside the CIT's order and allowed the assessee's appeal.Order Pronounced:The appeal of the assessee was allowed, and the order pronounced in open court on 31/08/2016.