PCIT can exercise revision powers under Section 264 even when CPC processes returns as JAO retains jurisdiction

Bombay HC quashed PCIT's order rejecting revision application under Section 264 on grounds that DCIT, CPC was not subordinate to PCIT. Court held that CPC acts merely as facilitator to Jurisdictional Assessing Officer who retains jurisdiction over assessee under Section 120. Processing of return by CPC does not curtail JAO's regular jurisdiction, as evidenced by JAO's role in demand enforcement and scrutiny selection. CBDT directions confirm jurisdictional PCIT can exercise powers under Sections 263 and 264. PCIT directed to dispose revision application in accordance with law.

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Issues involved: Impugning an order u/s 264 of the Income Tax Act, 1961 regarding denial of set off of unabsorbed business loss against long term capital gain.

Summary:
1. The petitioner challenged an order passed by the Principal Commissioner of Income Tax -5 (PCIT-5) u/s 264 of the Income Tax Act, 1961.
2. The petitioner filed a return of income for Assessment Year 2016-17, which was later processed under Section 143(1) of the Act, resulting in a difference in the assessed income due to the denial of set off of unabsorbed business loss against long term capital gain.
3. A Rectification Application u/s 154 was filed by the assessee, which was not accepted by the Centralized Processing Center (CPC), leading to the filing of an application u/s 264 of the Act.
4. The application u/s 264 was rejected by PCIT-5, Mumbai, citing jurisdictional issues regarding reporting relationships within the Income Tax department.
5. The petitioner argued that the CPC acts as a facilitator to the Jurisdictional Assessing Officer (JAO) and does not curtail the regular jurisdiction of the JAO.
6. The High Court agreed with the petitioner's stance, emphasizing that the JAO retains jurisdiction even in faceless assessment scenarios.
7. The Court ruled that PCIT-5's claim of lacking jurisdiction to entertain the petitioner's application u/s 264 due to reporting structures was incorrect.
8. An affidavit was filed justifying PCIT-5's decision, but the Court criticized the lack of clarity on which PCIT would have jurisdiction.
9. The CBDT's directions confirmed that powers u/s 263 and 264 of the Act are to be exercised by the Jurisdictional Principal Commissioners of Income Tax, supporting the Court's view on jurisdiction.
10. The Court quashed the impugned order and directed PCIT-5 to dispose of the petitioner's application u/s 264 in accordance with the law, ensuring a personal hearing for the petitioner.
11. The issue of jurisdiction and delay were instructed not to be raised, and the application was to be decided on merits by a specified date.
12. The petition was disposed of by the Court.

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