2021 (6) TMI 359 - AT - Income Tax

Tribunal Overturns PCIT's Revisionary Jurisdiction, Upholds Validity of Assessment

The tribunal ruled in favor of the assessee, holding that the Principal Commissioner of Income Tax (PCIT) improperly assumed revisionary jurisdiction ... Revision u/s 263 - assumption of revisionary jurisdiction by PCIT - order passed u/s 143(3) r.w.s 153A - Disallowance under section 14A - HELD THAT:- As proved during the assessment proceedings u/s 153A of the Act and the only addition made was on account of disallowance under section 14A of the Act. When DR was specifically asked as to how the action of the PCIT is justified, the ld DR simply relied on the order passed u/s 263 of the Act. Thus, we find merits in the contentions of the AR that the said assessment framed under section 143(3) r.w.s. 153A of the Act can not be faulted with and held to be 'erroneous' and prejudicial to the interest of the revenue which is correctly framed by the AO as per the provisions of the Act. Under these circumstances the exercise of jurisdiction under section 263 of the Act can not be held to be valid. We also find merit in the alternative plea of the AR that in the immediately previous year relevant to assessment year 2013- 14, income earned from NSEL was offered as business income and the same was duly accepted by the revenue in the assessment framed u/s 143(3) r.w.s 153A. We note that the Ld. PCIT has not disturbed the previous year. Therefore, once the revenue has accepted the income from trading in commodity on NSEL as business income, then loss which arise from the NSEL trading cannot be termed as Speculation loss. Consequently, the view taken by the AO cannot the termed as erroneous. We are therefore inclined to hold that the jurisdiction under section 263 of the Act was invalidly exercised and consequently the order passed under section 263 of the Act by PCIT is bad in law and is hereby quashed. - Decided in favour of assessee. Issues:Invalid assumption of revisionary jurisdiction by PCIT under section 263 of the Act.Analysis:The appeal was filed against the order of the Principal Commissioner of Income Tax relevant to the assessment year 2014-15. The key issue raised by the assessee was the invalid assumption of revisionary jurisdiction by the PCIT under section 263 of the Act. The facts revealed that the assessee, engaged in shares and commodity trading, initially declared a loss in the return of income. Subsequently, a search action was conducted, leading to the framing of the assessment by the AO under section 143(3) of the Act. The PCIT, exercising revisionary jurisdiction, issued a notice stating that the order was erroneous due to the treatment of business loss as speculation loss. The tribunal noted that no incriminating evidence was found during the search, and the assessment had been finalized under section 143(3) r.w.s 153A. The PCIT's order under section 263 was challenged, emphasizing that the assessment was correctly framed by the AO as per the provisions of the Act, and the exercise of jurisdiction under section 263 was deemed invalid.The tribunal referred to precedents, including the case of All Cargo Global Logistics Ltd, to support the contention that in the absence of incriminating material, no addition could be made to an unabated assessment. The tribunal also highlighted the case of CIT vs Murli Agro Products Ltd, emphasizing the finality of assessments and the limitations on revising orders under section 263. Additionally, the case of Wind World India Infrastructure Pvt. Ltd. vs. PCIT was cited to reinforce the principle that in the absence of incriminating material, assessments cannot be deemed erroneous. The tribunal found merit in the argument that the PCIT's exercise of jurisdiction under section 263 was invalid, especially considering the acceptance of income from NSEL trading as business income in the previous year. Consequently, the tribunal allowed the appeal, quashing the order passed under section 263 of the Act by the PCIT.In conclusion, the tribunal ruled in favor of the assessee, emphasizing that the assessment framed under section 143(3) r.w.s. 153A of the Act was valid and could not be faulted. The tribunal found that the PCIT's assumption of jurisdiction under section 263 was unjustified, considering the absence of incriminating material and the consistent treatment of income from NSEL trading as business income. Therefore, the order passed by the PCIT under section 263 was deemed invalid and was set aside, resulting in the allowance of the assessee's appeal.