Revisionary jurisdiction under Section 263 denied where assessing officer adopted a permissible view; assessment restored in favour of the taxpayer.

Revisionary jurisdiction under Section 263 cannot be exercised where the assessing officer, after scrutiny under Section 143(3), examined audited financial statements and supporting annexures disclosing inadmissible tax and GST written-off and adopted a legally permissible view treating the amounts as business expenditure. Because material was on record and the AO made a considered, permissible finding, the statutory test that the assessment is both erroneous and prejudicial to revenue is not satisfied; accordingly the Section 263 order was quashed and the original assessment restored in favour of the taxpayer.

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Issues: (i) Whether the Principal Commissioner of Income Tax was justified in exercising jurisdiction under Section 263 of the Income-tax Act, 1961 and holding the assessment order dated 12.04.2021 under Section 143(3) of the Income-tax Act, 1961 to be erroneous and prejudicial to the interest of the Revenue in respect of unutilised input tax credit and GST written-off.

Analysis: The issue concerns exercise of revisionary jurisdiction under Section 263 where the assessing officer had completed assessment under Section 143(3) after scrutiny and filed audited financial statements and schedules. The record shows that details of inadmissible tax and GST written-off were disclosed in Schedule 19 of the audited balance sheet and supporting annexures were furnished during proceedings including responses to notices under Section 142(1) and 143(2). The amounts in question relate to historical VAT credits and GST amounts that could not be claimed as input tax credit after the GST transition. The assessing officer examined the documents and adopted a legally permissible view in accepting the claimed amounts as business expenditure. The revisionary power under Section 263 requires a finding that the assessment is both erroneous and prejudicial to the revenue; where the assessing officer has taken a permissible view after examining material on record, revisionary interference is not warranted.

Conclusion: The exercise of jurisdiction under Section 263 was not justified; the assessment order dated 12.04.2021 is not erroneous and prejudicial to the interest of the Revenue in respect of the unutilised input tax credit and GST written-off, and the impugned Section 263 order is quashed and the assessment order restored in favour of the assessee.

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