TaxTMI 
TaxTMI 
2023 (7) TMI 1581
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....ither erroneous nor prejudicial to the interest of the revenue. The action of the ld. Principal Commissioner of Income Tax is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the order passed u/s 263. 2. The assessee company craves its right to add, amend or alter any of the grounds on or before the date of hearing." 3. The fact as culled out from the records is that that assessee has filed return of income on 31.10.2018 declaring total income at Rs. 24,87,27,450/-. Subsequently, the case was selected for limited scrutiny under CASS. During the year under consideration the assessee is having business income from the business of contractors, sub-contractors, construction, builders, engineers, civil, irrigations, telecom, tower services, etc. Notice u/s 143(2) of the IT Act was issued to the assessee on 22.09.2019, and served upon the assessee online. Notice u/s 142(1) of the Act accompanies with questionnaire was issued on 09.12.2020. In response to these notices' assessee submitted reply and evidences online as called for. The case was selected for limited Scrutiny assessment under the E-assessment Scheme, 2019 ....
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....ur units to check the quality of the assessment i.e Assessment Unit, Verification Unit, Technical Unit and Review Unit. Considering the purpose of the faceless assessment the subjected proceeding u/s. 263 is also devoid of merits as both the issues for which the order is not erroneous and prejudicial to the interest of the revenue. But the ld. PCIT relying on the decision of the Malabar Industrial Limited vs. CIT taken a view that the order is passed in casual manner and without verification of the issues discussed and therefore, she hold the order liable to revision under the explanation (2), clause (a) & (b) of section 263 of the Act. 5. Feeling dissatisfied from the order of the ld. PCIT, assessee preferred this appeal as per grounds so raised and reiterated in para 2 above. The ld. AR of the assessee in support of the grounds so raised, filed a detailed submission which is reproduced here in below:- 1. For the captioned assessment year, case of the assessee company was selected for scrutiny u/s 143(3) by the National e-Assessment Centre, Delhi (NAC). Thereafter, order dated 29.03.2021, was passed accepting the returned income of the assessee company. Subsequently, j....
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....f Form 3AA was not filed along with return of income but the same was filed during the assessment proceedings and before the final order of the assessment was made that would amount to sufficient compliance. These appeals are, accordingly, dismissed...." JURISDICTIONAL HIGH COURTS ITO vs Novelty Garments (2002) 175 CTR (Raj) 306 [PB 38] "....4. The admitted fact is that the assessment has been completed in the case in hand on 26-3-1998, and assessee had filed the auditor's report along with new format of Form No. 10CCAC on 298-1996, i.e., before completion of assessment order. The appeal is dismissed at admission stage...." OTHER HIGH COURTS a) CIT vs Fortuna Foundation Engineers & Consultants (P.) Ltd. [2017] 81 taxmann.com 189 (Allahabad) "Headnote II: Section 80-IB of the Income-tax Act, 1961 - Deductions - Profits and gains from industrial undertakings other than infrastructure development undertakings (Housing Project) - Assessment year 2005-06 - Whether where assessee, claiming deduction under section 80-IB(10), did not file audit report in Form 10CCB along with return of income but filed same before assessmen....
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....e light of the above, by virtue of hierarchy of judgements which are against the Revenue, the substantial question of law (1) would not arise at all for consideration...." c) CIT v. A.N. Arunachalam [1994] 208 ITR 481/ 75 Taxman 529 (Madras) "Headnote: Whether where return filed by assessee was not accompanied by audit report as required by section 80J(6A) although it was available to ITO before assessment was made, assessee could claim deduction under section 80J - Held Yes" d) CIT vs Contimeters Electricals (P.) Ltd. [2009] 178 Taxman 422 (Delhi) "....8. In view of this long line on decisions of various High Courts in considering the provisions of section 80J(6A) which are similar to the provisions of section 80-IA(7), we feel that the Tribunal has arrived at the correct conclusion that the requirement of filing the audit report along with the return is not mandatory but directory and that if the audit report is filed at any time before the framing of the assessment, the requirement of section 80-IA(7) would be met...." e) CIT vs ACE Multitaxes Systems (P.) Ltd. [2009] 317 ITR 207 (Karnataka) "Headnote: Section 80-IA of the In....
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.... "....5. We have considered the rival submissions as well as the relevant materials on record. The AO has not disputed the eligibility of the assessee for deduction U/s 80IE of the Act being nature of business and undertaking of the assessee engaged in the manufacturing of goods or articles. Only reasons for disallowance of claim of deduction U/s 80IE of the Act by the AO is not filing of the audit report in form No. 10CCB along with the return of income. It is also not in disputed that the assessee filed the requisite tax audit report in Form No. 10CCB during the course of assessment proceedings and before the assessment order was passed by the AO. .... The order of Hon'ble Madras High Court has been affirmed by the Hon'ble Supreme Court in case of CIT vs. G.M. Knitting Industries (P.) Ltd.(supra). Accordingly, in view of the various binding precedent as relied upon by the ld. CIT(A) while allowing the claim of the assessee, we do not find any error or illegality in the impugned order of the ld. CIT(A). Hence, we uphold the impugned order of the ld. CIT(A). In the result, the appeal of the Revenue is dismissed...." 4.1. v Thus, availability of Form 10....
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....tes as specified under the Employees State Insurance Act, 1948 and Employee's Provident Funds & Miscellaneous Act, 1952. 4.2. iv It is submitted that once any disallowance/addition is made in preceding assessment proceeding [143(1) in the instant case], the same disallowance/addition cannot be made in subsequent proceeding [143(3) in the instant case] as it will amount to double disallowance/ addition. 4.2. v Under the Income tax Act, 1961, proceeding u/s 143(1) and proceeding u/s 143(3) are separate. It is explicitly confirmed by the fact that no penalty can be levied u/s 270A for addition u/s 143(1) while penalty u/s 270A can be levied for addition u/s 143(3). 4.2.vi The present case was selected for limited scrutiny and accordingly NFAC confined itself to the issues involved for limited scrutiny. Hon'ble Calcutta High Court in the case of PCIT v. Naga Dhunseri Group Ltd. [2023] 146 taxmann.com 424 (Calcutta) held that in case of limited scrutiny, PCIT cannot invoke jurisdiction u/s 263. [CLC - 1 to 3] 4.2. vii Hon'ble ITAT, Jaipur Bench, in the case of Annu Agrotech Private Limited, ITA No. 09/JP/2021, laid down the ratio that in case of limit....
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....trial Co. Ltd [2000] 109 Taxman 66 (SC) held that "...A bare reading of this provision makes it clear that the prerequisite to exercise of jurisdiction by the Commissioner suomotu under it, is that the order of the ITO is erroneous insofar as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied with twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent - if the order of the ITO is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to section 263(1)..." 4.8 It is further submitted that where the assessee has furnished the requisite information and the Assessing Officer has completed the assessment after considering all the facts, the order cannot be termed as erroneous. Reliance is placed on the following judicial pronouncements: 4.8. i CIT v Ratlam Coal Ash Co (1988) 171 ITR 141 (MP) 4.8. ii Ashok Kumar Parasramka v ACIT (1998) 65 ITD 1 (Cal) 4.8. iii CIT v Mehrortra Brothers (2004) 270 ITR 157 ....
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....d. AR of the assessee filed the copy of the following judgment in support of the fact that when the case is selected for limited purpose the ld. PCIT cannot invoke the provision of section 263 for the other reasons: S. No. Particulars Page No. Quick Ref. 1 Copy of order in the case of Naga Dhunseri Group Ltd. [2023] 146 taxmann.com 424 (Calcutta) 1-3 3 2 Copy of order in the case of Lata Phulwani, ITA No. 246/JP/2020 4-25 12,15 3 Copy of order in the case of Annu Agrotech Private Limited, ITA No. 09/JP/2021 26-73 65,71 6. On the other hand, ld. DR representing the Revenue has supported the order of the ld. PCIT and submitted that the observation made by the ld. PCIT in para Rs. 6.1 are directly linked to deduction claimed by the assessee and therefore the provision of section 263 of the act has rightly been invoked by the ld. PCIT as ld. AO has not applied his mind on the various aspect of the condition deduction claimed by the assessee as prescribed for relevant deduction u/s 80JJAA of the Act. The ld. DR also submitted that the ld. FAO has not considered the adjustment made u/s. 143(1) of the Act while making the final order and ....
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....gards the second issue the same was out of the preview of object of the scrutiny and thus, the order passed by the FAO is neither erroneous nor prejudicial to the interest of the revenue. Thus, we are of the considered view that the issue has been carefully examined by the FAO while passing the order u/s 143 of the Act and that too under the team based faceless assessment scheme framed by the Board. There are plethora of decisions that when the Assessing Officer has considered the issue on hand and has taken a plausible view of the matter merely the Assessing Officer ought to have been verified the other facet on the issue and same is not mentioned in the order it does not tantamount that order is erroneous and prejudicial to the interest of the revenue and thus cannot support the invocation of provisions of Section 263 of the Act. In fact the provision of section 263 of the Act nowhere allow to challenge the judicial wisdom of the ld. AO or to replace the wisdom of the PCIT in the guise of revision unless the view taken by the ld. AO is not at all sustainable in the law. The extent of the enquiry can be stretched to any level by forcing the AO to go through the assessment process ....
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....section 263 cannot be invoked. This provision cannot be invoked to correct each and every type of mistake or error committed by the AO; it is only when an order is erroneous as also prejudicial to Revenue's interest, than the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase 'prejudicial to the interest of the Revenue has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. It is pertinent to mention that if the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two views are possible and AO has taken one view with which the Pr. CIT does not agree, it cannot be treated as an erroneous order and it is prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law. In this process even the AO has no power to review his own. In this regard, we draw strength from the decision of the Hon'ble Supreme Court in the....