2020 (1) TMI 1023 - AT - Income Tax

Tribunal restores assessment order, holds AO's decision not erroneous under Sec. 263

Tata Steel Limited Versus Principal Commissioner of Income Tax-2 (3) (1), Mumbai

The Tribunal set aside the Principal Commissioner of Income Tax's order under Sec. 263, restoring the assessment order passed by the Assessing Officer. ... Revision u/s 263 - interest received on the income tax refund against the interest paid on the taxes to the income tax department - HELD THAT:- We are unable to comprehend as to how the order passed by the A.O under Sec. 143(3) r.w.s 144C(13), dated 24.02.2017 could be held as erroneous. Be that as it may, in our considered view as the A.O while framing the assessment had arrived at a plausible view and therein concluded that the claim of netting off the interest received on income-tax refund as against the interest paid by the assessee to the tax department U/ss. 234B and 234C was in order, therefore, the same could not have been brought within the realm of the revisional jurisdiction of the Pr. CIT u/s 263. On the basis of our aforesaid observations, we are of the considered view that the Pr. CIT had clearly exceeded the scope of the jurisdiction vested with him under Sec. 263 and revised the assessment framed by the A.O under Sec. 143(3) r.w.s 144C(13), dated 24.02.2017. Accordingly, we ‘set aside’ the order passed by the Pr. CIT under Sec. 263, dated 28.03.2019 and restore the assessment framed by the A.O Sec. 143(3) r.w.s 144C(13), dated 24.02.2017. As we have quashed the order passed by the Pr. CIT under Sec. 263 of the Act, dated 28.03.2019, therefore, we refrain from adverting to the other contentions advanced by the ld. A.R on the basis of which the validity of the impugned order has been assailed before us. Appeal filed by the assessee is allowed Issues Involved:1. Jurisdiction of the Principal Commissioner of Income Tax (Pr. CIT) under Sec. 263 of the Income Tax Act, 1961.2. Validity of netting off interest received on income tax refund against interest paid under Sections 234B and 234C of the Income Tax Act, 1961.3. Whether the assessment order passed under Sec. 143(3) r.w.s 144C(13) could be revised under Sec. 263.Issue-wise Detailed Analysis:1. Jurisdiction of the Principal Commissioner of Income Tax (Pr. CIT) under Sec. 263:The assessee challenged the jurisdiction of the Pr. CIT to revise the assessment order under Sec. 263, arguing that the assessment order dated 27th February 2017 was passed pursuant to the directions of the Dispute Resolution Panel (DRP) and thus fell outside the purview of Sec. 263. It was contended that the initiation of proceedings under Sec. 263 was without jurisdiction because the provision authorizes revision of orders passed by the Assessing Officer (A.O.), not those passed under the directions of the DRP. The Pr. CIT rejected this argument, holding that the assessment order was erroneous and prejudicial to the interests of the revenue due to the failure of the A.O. to disallow the claim of netting off interest.2. Validity of Netting Off Interest:The assessee had netted off the interest received on income tax refund of Rs. 44,24,14,839/- against the interest paid under Sections 234B and 234C amounting to Rs. 41,70,51,091/- and offered the balance of Rs. 2,53,63,748/- as income from 'Other sources'. The Pr. CIT observed that this claim was not as per the provisions of the Act and held that the A.O.'s failure to disallow this claim rendered the assessment order erroneous and prejudicial to the interests of the revenue. The assessee argued that the netting off was in conformity with settled law, citing several judicial precedents, including the Bombay High Court's decision in DIT(IT) Vs. Bank of America NT & SA and other ITAT decisions that supported the practice of netting off interest received against interest paid to the same party, i.e., the Government of India.3. Revisional Jurisdiction under Sec. 263:The Tribunal deliberated on whether the A.O.'s order could be considered erroneous when it followed judicial precedents. It was noted that the A.O. had allowed the netting off based on binding decisions of the jurisdictional High Court and ITAT. The Tribunal cited the Supreme Court's judgment in CIT Vs. Max India Ltd., which held that a plausible view taken by the A.O. could not be dislodged by the revisional authority. As the A.O. had taken a view supported by judicial precedents, the Tribunal concluded that the assessment order was not erroneous, and the Pr. CIT had exceeded his jurisdiction under Sec. 263.Conclusion:The Tribunal set aside the Pr. CIT's order under Sec. 263, restoring the assessment order passed by the A.O. under Sec. 143(3) r.w.s 144C(13). The appeal filed by the assessee was allowed, and the Tribunal refrained from addressing other contentions as the primary issue was resolved in favor of the assessee. The judgment emphasized that a plausible view taken by the A.O., supported by judicial precedents, could not be revised under Sec. 263, thus preserving the assessment order's validity.