ITAT allows appeal, vacates PCIT's revision. AO's order not erroneous, based on plausible view.

The ITAT allowed the assessee's appeal, vacating the PCIT's revision order. The ITAT held that the AO's assessment order was not erroneous or prejudicial to the revenue as it was based on a plausible view supported by judicial precedents. The ITAT emphasized that the absence of detailed reasoning in the AO's order did not render it erroneous.

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Issues Involved:
1. Whether the assessment order passed by the Assessing Officer (AO) under Section 143(3) of the Income Tax Act, 1961, is erroneous and prejudicial to the interest of the revenue.
2. Whether the AO failed to examine the issue of deduction under Section 80P(2)(d) of the Act.
3. Whether the Principal Commissioner of Income Tax (PCIT) was justified in invoking Section 263 to revise the assessment order.

Detailed Analysis:

Issue 1: Erroneous and Prejudicial Assessment Order
The appeal was filed by the assessee against the order of the PCIT, Jaipur-2, under Section 263 of the Income Tax Act, 1961, for the assessment year 2017-18. The PCIT held that the assessment order dated 11.12.2019 was erroneous and prejudicial to the interest of the revenue. The PCIT observed that the AO allowed a deduction of Rs. 13,00,000/- under Section 80P(2)(d) without proper verification, making the order erroneous and prejudicial to the revenue.

Issue 2: Examination of Deduction under Section 80P(2)(d)
The PCIT issued a show cause notice under Section 263, questioning the AO's allowance of the deduction under Section 80P(2)(d). The assessee argued that the AO had raised queries during the assessment proceedings, including those related to the interest earned and the deduction claimed under Section 80P. The AO, satisfied with the responses and documents provided by the assessee, passed the assessment order accepting the returned income.

Issue 3: Justification for Invoking Section 263
The PCIT, after examining the submissions and assessment records, concluded that the AO's failure to properly consider the deduction under Section 80P(2)(d) resulted in an erroneous order. The PCIT cited the Supreme Court ruling in Malabar Industrial Limited V/S CIT, which states that an incorrect assumption of facts or an incorrect application of law renders an order erroneous. The PCIT set aside the AO's order, invoking Section 263, on the grounds that the AO passed the order in a routine and perfunctory manner without examining the issue of deduction under Section 80P(2)(d).

Assessee's Arguments:
The assessee contended that the AO had conducted the necessary inquiries and allowed the deduction based on a plausible view. The assessee cited various judicial precedents, including decisions from the Rajasthan High Court and ITAT, which supported the claim for deduction under Section 80P(2)(d) for interest earned from cooperative banks. The assessee argued that the AO's order was not erroneous or prejudicial to the revenue, as it was based on a plausible view and supported by judicial precedents.

ITAT's Findings:
The ITAT examined the contentions and found that the AO had indeed conducted inquiries and applied his mind to the issue of deduction under Section 80P(2)(d). The ITAT noted that the AO's decision was based on a plausible view supported by judicial precedents. The ITAT emphasized that an assessment order cannot be deemed erroneous merely because the AO did not record detailed reasons for accepting the assessee's explanation. The ITAT concluded that the PCIT's invocation of Section 263 was not justified, as the AO had taken a permissible view and conducted the necessary inquiries.

Conclusion:
The ITAT vacated the PCIT's revision order, allowing the assessee's appeal. The ITAT held that the AO's assessment order was not erroneous or prejudicial to the interest of the revenue, as it was based on a plausible view and supported by judicial precedents. The ITAT emphasized that the mere absence of detailed reasoning in the AO's order does not render it erroneous or prejudicial to the revenue.

Order:
The appeal of the assessee is allowed, and the order pronounced in the open court on 15/12/2022.

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