2022 (5) TMI 151 - AT - Income Tax

Tribunal quashes order under Section 263, emphasizes rectification under Section 154 for substantial justice

M/s. Gurfateh films and sippy Grewal Productions (P.) Ltd. Versus Pr. C.I.T., (Central), Ludhiana

The Tribunal allowed the appeal, quashing the order passed by the Pr. CIT under Section 263 of the Income Tax Act. The Tribunal emphasized that the ... Rectification of mistake u/s 154 - Revision u/s 263 - mis-match of receipts as per 26AS form and books of account - A.O. has sent a proposal to Ld. Pr.CIT, Central for revision of proceedings u/s. 263 - HELD THAT:- In the Income Tax Act, no where mentioned that A.O. will send a proposal to the Pr.CIT/CIT for initiation of revisional proceedings u/s. 263. We are of the opinion, Ld. A.O. ought to not to have sent the aforesaid proposal to the Pr. CIT if there was any ambiguity in the order passed by the Ld. A.O. then he could have rectified he mistake u/s. 154 of the Income Tax Act. As we can see such exercise is not being done by the Ld. A.O. rather he chosen to send a proposal for revision of his order to the Ld. Pr. CIT. In revisional proceedings u/s. 263, Ld. Pr.CIT is required to apply his own mind and satisfaction before invoking the provision of Section 263 and not merely at the behest of the proposal forwarded by the A.O. is against the spirit of the Act as held by the Pune Tribunal in the case of Span Overseas Ltd. [2015 (12) TMI 1743 - ITAT PUNE] A.O. ought not to have forwarded proposal to the Pr.CIT/CIT for revision of his own order have already remedy is available with the Assessing Officer to rectify his mistake u/s. 154 of the Income Tax Act, 1961. Ld. Pr.CIT ought to have applied his own mind independently than should have initiated proceeding u/s. 263 of the Income Tax Act. We are of the considered opinion; same is amount to miscarriage of justice. Appeal of assessee allowed. Issues Involved:1. Jurisdiction under Section 263 of the Income Tax Act.2. Inclusion of receipts in the total income.3. Validity of the assumption of jurisdiction by the Principal Commissioner of Income Tax (Pr. CIT).4. Condonation of delay in filing the appeal.Detailed Analysis:1. Jurisdiction under Section 263 of the Income Tax Act:The primary issue revolves around whether the Pr. CIT correctly assumed jurisdiction under Section 263 of the Income Tax Act. The Assessee contended that the Pr. CIT erred in holding the assessment order dated 25.03.2015 as erroneous and prejudicial to the interest of revenue. The Tribunal noted that the Assessing Officer (A.O.) had already examined the relevant issues during the assessment proceedings under Section 143(3) and had discussed the same in the assessment order. The Tribunal emphasized that the A.O. should not have forwarded a proposal for revision to the Pr. CIT, as the A.O. had the power to rectify any mistakes under Section 154 of the Income Tax Act.2. Inclusion of Receipts in the Total Income:The Pr. CIT had concluded that receipts amounting to Rs. 1,19,09,072/- should be included in the total income of the Assessee for the year under consideration. However, the Tribunal observed that the A.O. had already examined this issue during the assessment proceedings. The Assessee had explained that the amount was received as an advance and the income pertaining to it was booked in the subsequent assessment year. The Tribunal found that the A.O. had adequately addressed this issue in the original assessment order.3. Validity of the Assumption of Jurisdiction by the Pr. CIT:The Tribunal referred to several precedents, including the cases of Ambey Construction Company vs. Pr. CIT and Manish Chirania vs. Pr. CIT, to underline that the Pr. CIT must independently apply his mind before invoking Section 263. The Tribunal noted that the Pr. CIT had initiated proceedings based on a proposal from the A.O., which is against the spirit of the Act. The Tribunal held that the Pr. CIT's action of initiating proceedings under Section 263 without independent application of mind amounted to a miscarriage of justice.4. Condonation of Delay in Filing the Appeal:The appeal was filed with a delay of 665 days. The Assessee attributed the delay to the inaction of its erstwhile Authorized Representative. The Tribunal, referring to the principles laid down by the Hon'ble Supreme Court in the case of Esha Bhattacharjee vs. Managing Committee of Raghunathpur Nafar Academy & Others, adopted a liberal approach in condoning the delay. The Tribunal found that the Assessee had sufficient reason for the delay and decided to condone it in the interest of justice.Conclusion:The Tribunal allowed the appeal filed by the Assessee, quashing the order passed by the Pr. CIT under Section 263. The Tribunal emphasized that the A.O. should have utilized the provisions of Section 154 to rectify any mistakes instead of forwarding a proposal to the Pr. CIT. The Tribunal's decision was aligned with the principles of substantial justice, ensuring that the Assessee was not prejudiced by procedural technicalities. The appeal was pronounced on 23-12-2021.