2019 (2) TMI 1462 - AT - Income Tax

Tribunal overturns PCIT's decision under Section 263, finds no error or prejudice to revenue

The Tribunal held that the Principal Commissioner of Income Tax (PCIT) erred in invoking Section 263 as the Assessing Officer had adequately examined the ... Revision u/s 263 - Lack of enquiry or inadequate enquiry - HELD THAT:- Insofar as two issues, i.e. excise duty not paid and claim of reversal of provision, the AO has made addition in the order passed u/s 143(3) r.w.s. 263 dated 29-09-2016. Further, we are of the considered view that the PCIT was erred in invoking the jurisdiction conferred u/s 263 under the guise of lack of enquiry or inadequate enquiry. Therefore, we are of the considered view that the issues questioned by the PCIT are not coming within the ambit of lack of enquiry or inadequate enquiry. For remaining issues assessee has already suo moto disallowed liability of contingent nature in statement of total income for AY 2008-09 and also capital expenditure debited to P&L Account has been disallowed in the statement of total income. As regards non disallowance of certain expenditure u/s 40(a)(ia), AR has brought out all materials to prove that there is no loss of revenue as provisions of section 40(a)(ia) has been amended w.e.f. 01-04-2010 by the Finance Act, 2010, relaxing the time limit to deposit tax up to the date of filing of return of income. Various Courts have held that such amendment to provision is retrospective in nature. The assessee also filed necessary details to prove that it has paid the TDS on or before due date of filing return of income. Similarly, the assessee has explained the issue of excess deduction u/s 43(6) so as to make it clear that there is no loss of revenue as it has given proper treatment in its books of account and statement of total income. AR further made it clear that this issue had not been questioned by the then CIT-1, Mumbai in the first found of proceedings u/s 263 and hence, under similar set of facts, the issue cannot be questioned once again by the PCIT. - Decided in favour of assessee. Issues Involved:1. Jurisdiction under Section 263 of the Income Tax Act.2. Liability of contingent nature.3. Capital expenditure debited to Profit & Loss account.4. Disallowance under section 40(a)(ia).5. Excess deduction under section 43(6).Comprehensive, Issue-wise Detailed Analysis:1. Jurisdiction under Section 263 of the Income Tax Act:The Principal Commissioner of Income Tax (PCIT) invoked Section 263, asserting that the assessment order dated 29-02-2016 was erroneous and prejudicial to the interests of the revenue. The PCIT's contention was based on the alleged failure of the Assessing Officer (AO) to examine certain issues adequately. The assessee argued that the AO had already examined these issues in detail during the first revision proceedings initiated by the then CIT-1, Mumbai. The Tribunal observed that the twin conditions required for invoking Section 263—erroneous order and prejudice to revenue—were not satisfied. The Tribunal referenced the Supreme Court's decision in Malabar Industrial Co Ltd vs CIT, emphasizing that an order must be both erroneous and prejudicial to the revenue to invoke Section 263. Since the AO had already examined the issues and no new facts were presented, the Tribunal concluded that the PCIT erred in assuming jurisdiction under Section 263.2. Liability of Contingent Nature:The PCIT directed the AO to re-examine the disallowance of contingent liability amounting to Rs. 1,13,20,765. The assessee contended that this amount had already been disallowed suo moto in its computation of income. The Tribunal noted that the AO had examined this issue during the first revision proceedings and found no additional tax liability. Therefore, the Tribunal held that the PCIT's directive for re-examination was unwarranted.3. Capital Expenditure Debited to Profit & Loss Account:The PCIT questioned the treatment of capital expenditure amounting to Rs. 1,35,05,595, which was debited to the Profit & Loss account. The assessee argued that it had already disallowed this amount in its computation of income. The Tribunal found that the AO had previously examined this issue and determined that no further disallowance was necessary. Consequently, the Tribunal ruled that the PCIT's directive to re-examine this issue was not justified.4. Disallowance under Section 40(a)(ia):The PCIT directed the AO to examine the allowability of expenses in terms of Section 40(a)(ia) of the Act, arguing that the AO had failed to disallow expenses due to delayed remittance of TDS. The assessee contended that the amendment to Section 40(a)(ia) by the Finance Act, 2010, which relaxed the time limit for depositing tax, should be considered retrospective. The Tribunal agreed with the assessee, noting that various courts had held the amendment to be retrospective. The Tribunal concluded that the PCIT's directive to re-examine this issue was not warranted.5. Excess Deduction under Section 43(6):The PCIT questioned the excess deduction claimed under Section 43(6) amounting to Rs. 1,21,80,653. The assessee argued that this issue was not part of the first revision proceedings and that the PCIT's directive was based on the same set of facts already examined by the AO. The Tribunal found that the AO had previously examined this issue and determined that no further disallowance was necessary. Therefore, the Tribunal ruled that the PCIT's directive to re-examine this issue was not justified.Conclusion:The Tribunal concluded that the PCIT erred in invoking Section 263, as the AO had already examined the issues in detail during the first revision proceedings. The Tribunal emphasized that the twin conditions for invoking Section 263—erroneous order and prejudice to revenue—were not satisfied. Consequently, the Tribunal set aside the order passed under Section 263 by the PCIT and restored the assessment order passed by the AO dated 29-02-2016. The appeal filed by the assessee was allowed.