TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 1300
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..... 35,48,74,770/-. Thereafter the ld. PCIT on perusal of the assessment records found that the assessment so framed was erroneous in so far as prejudicial to the interest of the Revenue for two reasons namely (i) the assessee company has debited Rs. 2,42,60,000/- in Profit and Loss account on account of provision for warranty under the head of other expenses which were not allowable and (ii) that assessee has reduced Rs. 31,35,42,299/- on account of brought forward unabsorbed losses and depreciation from business income of Rs. 61,92,86,177/- to arrive at a gross total income of Rs. 32,25,52,500/-. According to the PCIT at the end of A.Y. 2017-18 only unabsorbed depreciation of Rs. 9,23,52,053/- remained to be adjusted against the income of the subsequent assessment year. However, the assessment order for A.Y. 2018-19, stated that brought forward unabsorbed losses and depreciation amounting to Rs. 31,35,42,299/- was set off against the current year income and thus, thereby, claiming the excess brought forward losses to the tune of Rs. 22,11,90,246/- i.e. (Rs. 31,35,42,299-Rs. 9,23,52,053/-. Accordingly notice u/s 263 of the Act was issued 08.01.2024 as show cause notice to the assess....
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.... be erroneous and prejudicial to the interest of the Revenue on this score. Similarly, the ld. AR submitted that so far as the second issue on which the ld. PCIT invoked the jurisdiction u/s 263 of the Act, is concerned, the claim made by the assessee of Rs. 31,35,42,299/- on account of brought forward unabsorbed losses and unabsorbed depreciation was correct and as per the provisions of the Act and has been determined on the basis of assessments framed by the ld. Assessing Officer. The ld. AR referred to page no. 9 of tax audit report, a copy of which is available at page no.79 to 93 of he Paper Book (particularly page no.189), wherein the tax audit auditor has stated the unabsorbed depreciation being assessed at Rs. 61,00,55,596/- out of which an amount of Rs. 51,77,03,543/- was set off in the return of income for A.Y. 2017-18 and the remaining amount of Rs. 9,23,52,053/- was carried forward to the subsequent year. The ld. AR submitted that the ld. PCIT took the said figure from page no.39 of the tax audit report, whereas the assessed unabsorbed depreciation by the ld. AO was Rs. 85,55,67,855/-. Therefore, the ld. PCIT has grossly erred in taking the figure of unabsorbed deprecia....
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....isdiction u/s 263 of the Act, the twin conditions have been set satisfied concurrently i.e. the order has to be erroneous as well as prejudicial to the interest of the Revenue. In the present case, as has been submitted hereinabove on both the counts, the order passed by the ld. AO is correct and as per the provisions of the Act and therefore, cannot be said to be erroneous and prejudicial to the interest of the Revenue. In this case none of the conditions as envisaged in section 263 of the Act were satisfied and therefore, the jurisdiction u/s 263 of the Act is not available to the ld. PCIT. The ld. AR argued that even the jurisdiction is not available if one of the two conditions is satisfied. In defense of his arguments the ld. AR relied on the case of the Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. Vs. CIT (2000) 243 ITR 83 (SC). The ld. AR further contended that where two views are possible and ITO has taken one of the possible views with which the PCIT does not agree then the assessment order cannot be treated as erroneous or prejudicial to the interest of the Revenue, unless the view taken by the ld. AO is unsustainable in law. The ld. AR submitted that....
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....the level of the AO and assessed accordingly. 07. We have heard the rival conventions and perused the materials available on record. We observed that in the impugned case, the assessment was framed by the ld. AO u/s 143(3) read with section 144C(3) read with section 144B of the Act vide order dated 15.11.2001 copy of which is available in the paper book at page no.15 to 18. The ld. PCIT revised the said order on two grounds namely one the assessee debiting and charging an amount of Rs. 2,42,60,000/- on account of provisions for warranty in the profit and loss account which according to the ld. PCIT is not allowable expenditure and the second excessive claim of brought forward of unabsorbed losses / depreciation to the tune of Rs. 22,11,90,246/- against the current year income. According to PCIT, due to the above two reasons, the assessment framed by the AO is rendered as erroneous in so far as prejudicial to the interest of the Revenue. A show cause notice u/s 263 of the Act was issued on 08.01.2024 as to why the assessment so framed should not be cancelled and revised which was comprehensively replied by the assessee submitting that the two items as proposed di not render the ass....
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.... the Hon'ble Apex court has held that provision for warranty charged on the basis of technical evaluation and past experience was allowable expense. Therefore, so far as the first issue is concerned, we are inclined to note that the jurisdiction by the PCIT u/s 263 of the Act has wrongly been invoked. With regards to the excessive claim of brought forward unabsorbed loss / depreciation, we observe that the claim made by the assessee is based upon the orders passed by the ld. AO giving appeal effect to the various appellate orders the copies of which are available at page nos. 99,102,105 and 106 whereas the figures picked up by the tax auditors in para 32A of the tax audit report from the assessment orders. The copy of TAR is available at page no.79-93. 08. We note that the figures of unabsorbed loss/ depreciation were appearing in the assessment orders passed by the ld. AO which were before giving appeal effect to the appellate orders. We have fully examined these orders as these are available in the paper book and find that even the claim of assessee is in accordance with the orders passed by the AO u/s 254/143(3) of the Act. For the sake of ready reference the unabsorbed dep....
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....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). 7. There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue' is not an expression of art and is not defined in the Act. Understood in its ordinary meaning, it is of wide import and is not confined to loss of tax. The High Court of Calcutta in Dawjee Dadabhov & Co. v. S.P. Jain [1957] 31 ITR 872, the ....
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....ed the order of nil assessment without application of mind. Indeed, the High Court recorded the finding that the ITO failed to apply his mind to the case in all perspective and the order passed by him was erroneous. It appears that the resolution passed by the board of the appellant-company was not placed before the Assessing Officer. Thus, there was no material to support the claim of the appellant that the said amount represented compensation for loss of agricultural income. He accepted the entry in the statement of the account filed by the appellant in the absence of any supporting material and without making any inquiry. On these facts, the conclusion that the order of the ITO was erroneous is irresistible. We are, therefore, of the opinion that the High Court has rightly held that the exercise of the jurisdiction by the Commissioner under section 263(1) was justified. 11. The second contention has to be rejected in view of the finding of fact recorded by the High Court. It was not shown at any stage of the proceedings that the amount in question was fixed or quantified as loss of agricultural income and, admittedly, it is not so found by the Tribunal. The further question w....