PCIT can revise assessment on different grounds during Section 263 proceedings beyond initial notice

The ITAT Rajkot dismissed the assessee's appeal challenging a second revision notice under Section 263. The PCIT had initially issued a revision notice on certain grounds, but subsequently revised the assessment order on different issues relating to non-deduction of TDS under Section 194C and disallowance under Section 40(a)(ia). The tribunal held that Section 263 contains no specific prohibition preventing the PCIT from addressing other erroneous aspects discovered during revision proceedings, provided the assessment order remains prejudicial to revenue interests and the limitation period is not exceeded.

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Issues involved:
The judgment involves the challenge to the validity and legality of a notice of 263 order passed by the Ld. PCIT on the grounds related to the scope of revision under Section 263 of the Act and the permissibility of revising the original assessment order on another issue not initially raised.

Issue 1 - Validity of notice of 263 order:
The Ld. PCIT issued a notice to the assessee regarding the deduction under Section 80P of the Act without proper inquiry, leading to the claim that the assessment order was erroneous and prejudicial to the interest of Revenue. The assessee responded, stating that the deduction had already been disallowed by the Assessing Officer. Subsequently, another notice was issued concerning non-deduction of TDS on contract expenses. The Ld. PCIT set aside the assessment order based on these issues. The assessee argued that the scope of 263 proceedings cannot be enhanced by a subsequent notice, especially when the initial notice's basis was satisfied. The Ld. D.R. contended that there is no statutory bar to raising additional issues under Section 263, and the Ld. PCIT has the right to do so.

Issue 2 - Revision of assessment order on another issue:
The main consideration was whether the Ld. PCIT could revise the original assessment order on an issue not part of the initial notice for 263 proceedings. The Tribunal agreed with the Ld. D.R., stating that there is no specific prohibition under Section 263 preventing the Ld. PCIT from addressing other aspects of the assessment order if records indicate oversights. The Assessing Officer had not adequately addressed the issue of non-deduction of TDS under Section 194C and had not made the necessary disallowances under Section 40(a)(ia). As there was no limitation on the Ld. PCIT's powers during 263 proceedings, and the second notice was not time-barred, the Tribunal found no fault in the Ld. PCIT's order under Section 263.

Conclusion:
The Tribunal dismissed the appeal of the assessee, upholding the Ld. PCIT's order under Section 263 of the Act. The judgment was pronounced in an open court on 20/12/2023.

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