2025 (12) TMI 402 - AT - Income Tax

Revision under Section 263 quashed for lack of independent satisfaction on alleged errors in Section 143(3) assessment

ITAT Kolkata allowed the assessee's appeal and quashed the revisionary order passed u/s 263. It held that the PCIT had assumed jurisdiction solely on the ... Revision u/s 263 - invalid exercise of jurisdiction by PCIT on the proposal moved by the AO - HELD THAT:- We find that apparently the jurisdiction u/s 263 of the Act was invoked upon a proposal was received from the AO that in assessment frame under section 143 (3) of the Act, there are certain mistakes and the learned PCIT acting on the said proposal initiated the proceedings under Section 263 of the Act. We note that even in the order framed u/s 263 PCIT has not recorded his own satisfaction as to how the assessment order is erroneous and prejudicial to the interests of the revenue. The case of assessee finds support from the decision of D. G. Housing [2012 (3) TMI 227 - DELHI HIGH COURT] wherein the Hon’ble High Court has held that it is incumbent upon the PCIT to record an objective finding as to how the issues raised in the revisionary proceedings has rendered the assessment as erroneous. Besides, the case is squarely covered by the decision of Sinhotia Metals & Minerals Pvt Ltd [2022 (1) TMI 1297 - CALCUTTA HIGH COURT] Karabi Dealers Pvt Ltd [2023 (4) TMI 1308 - CALCUTTA HIGH COURT] wherein as held that PCIT cannot invoke the jurisdiction at the instance of the AO. Consequently, we quash the order of the ld. PCIT by allowing the appeal of the assessee. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the inordinate delay of 1595 days in filing the appeal before the Tribunal deserved to be condoned. 1.2 Whether the exercise of revisionary jurisdiction under section 263 of the Income-tax Act, 1961, on the basis of a proposal moved by the Assessing Officer and without independent satisfaction of the revisional authority, was valid. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Condonation of delay of 1595 days in filing the appeal Interpretation and reasoning 2.1 The Tribunal examined the affidavit of the assessee's Chartered Accountant explaining that the revisionary order under section 263 had been handed over to him for filing appeal, that the order was misplaced during the Covid period, and that the omission came to light only when the assessee enquired about the status of the appeal, after which the papers were traced and appeal filed. 2.2 It was considered that the assessee had not derived any benefit from the delay and that the lapse occurred at the end of the professional representative, for which the assessee should not be penalized. Conclusion 2.3 The Tribunal condoned the delay of 1595 days and proceeded to decide the appeal on merits. Issue 2: Validity of revisionary jurisdiction under section 263 invoked on AO's proposal without independent satisfaction Legal framework (as discussed) 2.4 The Tribunal proceeded on the settled requirement under section 263 that the Principal Commissioner/Commissioner must be satisfied that the assessment order is 'erroneous in so far as it is prejudicial to the interests of the Revenue' and must record an objective finding to that effect. 2.5 Reliance was placed on the decision of the High Court in D.G. Housing vs. ITO, holding that it is incumbent upon the revisional authority to record an objective finding as to how the issues raised render the assessment order erroneous. 2.6 The Tribunal also relied upon decisions of the jurisdictional High Court in the cases of Sinhotia Metals & Minerals Pvt. Ltd. and Karabi Dealers Pvt. Ltd., holding that the Principal Commissioner cannot invoke jurisdiction under section 263 merely at the instance of, or based solely upon, a proposal from the Assessing Officer. Interpretation and reasoning 2.7 The Tribunal found from the record that the jurisdiction under section 263 was invoked only on receipt of a proposal from the Assessing Officer alleging mistakes in the assessment framed under section 143(3). 2.8 It was observed that the Principal Commissioner, acting on this proposal, initiated proceedings under section 263 and ultimately revised the assessment by directing a de novo assessment. 2.9 On examination of the revision order, the Tribunal noted that the Principal Commissioner had not recorded his own independent satisfaction or objective finding as to how the assessment order was erroneous and prejudicial to the interests of the Revenue. 2.10 The Tribunal held that the Principal Commissioner had merely relied on the information contained in the Assessing Officer's proposal and had not set out his own reasons or findings demonstrating error and prejudice, which is a jurisdictional requirement under section 263. 2.11 Applying the ratio of the cited High Court decisions, the Tribunal concluded that invocation of section 263 jurisdiction at the instance of the Assessing Officer, without independent satisfaction and reasoning by the revisional authority, is impermissible and renders the revision order invalid. Conclusion 2.12 The Tribunal held that the revision order passed under section 263 was without valid assumption of jurisdiction and therefore liable to be quashed. 2.13 The revisionary order was set aside and the assessee's appeal was allowed.