Tribunal quashes PCIT's jurisdiction assumption under Section 263, finding AO's order after full enquiry.

The Tribunal held that the ld. PCIT erred in assuming jurisdiction under Section 263 of the Income Tax Act, 1961 as the assessment order passed by the AO was found to be after full enquiry and not falling within the specified clauses. Consequently, the order by the ld. PCIT was quashed, and the appeal of the assessee was allowed.

---

---

Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act, 1961.
2. Error in the assessment order and its prejudicial impact on the revenue.
3. Consideration of the assessee's explanation and judicial pronouncements.
4. Allowability of expenses under Section 37(1) of the Income Tax Act, 1961.

Summary:

1. Jurisdiction under Section 263 of the Income Tax Act, 1961:
The assessee contested the jurisdiction assumed by the ld. PCIT, Kolkata-1 under Section 263 of the Income Tax Act, 1961. The Tribunal noted that the scope of revisionary jurisdiction under Section 263 is specific and limited. The law does not permit the ld. PCIT to impose his view over the judicious view adopted by the ld. AO unless the view adopted by the AO is unsustainable in law.

2. Error in the assessment order and its prejudicial impact on the revenue:
The ld. PCIT held that the assessment order dated 04.03.2021 was erroneous and prejudicial to the interest of the revenue due to the allowance of Rs. 1,28,95,729/- as revenue expenditure under Section 37(1). However, the Tribunal found that the AO had allowed the expenses after thorough examination of the facts and judicial wisdom, which was supported by the Hon'ble Bombay High Court in the case of Cinecita Pvt. Ltd. 137 ITR 652.

3. Consideration of the assessee's explanation and judicial pronouncements:
The Tribunal observed that the ld. PCIT did not properly consider the submissions and judicial pronouncements cited by the assessee. The assessee had relied on cases such as Cinecita Pvt. Ltd., Hoechst Pharmaceuticals Ltd., and Octavious Steel and Co. Ltd., where similar expenditures were allowed as revenue expenses under Section 37(1).

4. Allowability of expenses under Section 37(1) of the Income Tax Act, 1961:
The Tribunal upheld the AO's decision to allow the expenses under Section 37(1), noting that the expenditure was incurred to draw up and register a proper lease deed, which is revenue in nature. The Tribunal also highlighted that the assessment was carried out in a faceless manner by NFAC, involving multiple officers, thereby negating the possibility of lack of enquiry.

Conclusion:
The Tribunal concluded that the assessment order passed by the AO was after full enquiry and did not fall within the clauses (a) and (b) of Explanation 2 to Section 263. Hence, the ld. PCIT erred in assuming jurisdiction under Section 263, and the order passed by him was quashed. The appeal of the assessee was allowed.

---