TaxTMI 
TaxTMI 
2025 (11) TMI 1665
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.... learned PCIT has erred in initiating proceedings under section 263 of the Act; 1.2. On facts and in the circumstances of the case, and in law, the learned PCIT has erred in undertaking the revisionary proceedings under section 263 of the Act without satisfying the twin statutory preconditions viz. the order being erroneous and the order being prejudicial to the interests of the revenue, and is therefore without jurisdiction and thus, deserves to be quashed. 1.3. On the facts and in the circumstances of the case, and in law, the learned PCTT failed to appreciate that the learned AO after thorough examination of the facts on record and after making all possible enquiries and exercising the quasi-judicial power as conferred by the Act, passed the assessment order, accepting all the claims of the Appellant. 1.4. On facts and in the circumstances of the case, and in law, the learned PCIT failed to appreciate that if the assessment order is in accordance with the law and has been passed after conducting the necessary enquiries and verification, the same cannot be held to be 'erroneous in so far as it is prejudicial to the interests of the revenue' as given und....
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....ds, it was seen from the P & L a/c, computation of Income and Tax, Audit Report that although it debited an expense of Rs. 21,05,95,308/- being "Payment to Contractors", TDS u/s 194C had been deducted only in respect of payments to the tune of Rs. 16,71,96,720/-.Accordingly, as per the provisions of sec 40a(ia), 30% of the expenses on which tax at source was not deducted was required to be disallowed. However, the A.O while completing the assessment failed to make a disallowance u/s 40(a)(ia), thereby leading to underassessment of income to the tune of Rs. 1,30,49,577/- (30% of 4,34,98,588/-). 3.2 Further, verification of records revealed that for the year under consideration, the assessee had paid taxes as per the MAT provisions and claimed carry forward of MAT credit amounting to Rs. 2,32,20,860/-. The assessment was completed at total income of Rs. 32,17,83,625/- after making an addition of Rs 9,24,29,885/- u/s 10AA and the assessee was liable to pay taxes under the normal provision. However, the A.O while computing the tax liability had inadvertently allowed carry forward of excess MAT credit to the extent of Rs. 1,11,46,575/-. Thus, the order u/s 143(3)/144B of the Act date....
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....ng contained in this Act, where the regular income-tax payable for a previous year by a person, other than a company, is less than the alternate minimum tax payable for such previous year, the adjusted total income shall be deemed to be the total income of that person for such previous year and he shall be liable to pay income-tax on such total income at the rate of eighteen and one-half per cent." In its case, the regular income tax payable was less than alternate minimum tax payable for the year and as a result adjusted total income shall be deemed to be the total income and shall be liable to pay income tax on such total income at the rate of 18.5% after addition of Rs. 9,24,29,885/- u/s. 10AA of the Act. Copy of the comparison of Tax Liability as per Normal Provisions vs Alternate Minimum Tax under section 115JC of the Act as per Return of Income filed and as per the Tax Computation sheet passed by the Department were filed as also copy of the Tax Computation sheet passed. It was submitted that there was no excess carry forward of MAT to the extent of Rs. 1,11,46,575/- and request was made to drop proceeding initiated under section 263 of the Act. 5. The ld.PCIT after taking....
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....of Rs. 4,34,98,589/-, as reported under Clause 21(B)(ii) of the Tax Audit Report pertained to provision made without TDS deduction. Consequently, 30% of this amount was disallowed under Section 40(a)(ia) of the Act in the Return of Income of the assessee. As per Clause 21(B) (ii) of the Tax Audit Report Rs. 4,34,98,589/- pertained to Provision for contractor Rs. 80,90,413/- pertained to provision for professional charges and Rs. 17,74,226/- pertained towards provision for Rent. The total amount of Rs. 1,60,08,968/- (30% of Rs. 4,34,98,589 + Rs. 80,90,413+ 17,74,226), being 30% of disallowance as per section 40(a)(ia) of the Act had been voluntarily disallowed in its Return of Income as per page 124 of Paper book) and Computation of income. 6.2 It is further contended that the ld.PCIT ignored the submission vide letter dated 4 December 2024 and the details regarding the disallowance under section 40(a)(ia) of the Act without appreciating that the disallowance had already been made and no further disallowance was warranted. He did not consider the said submission as per statutory requirement under section 263 of the Act. The ld. PCIT failed to form an opinion as to whether there w....
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....appeal before the Commissioner of Appeals ('CIT-A') against the 10AA disallowance. 6.4 It is further submitted that during the 263 proceedings, the assessee made a detailed submission (Page 97 of Paper book). However, the ld. PCIT failed to appreciate the submissions and directed the AO to conduct a fresh verification and pass a revised order. He failed to form an opinion as to whether there was any error in the assessment order. Instead of forming a clear opinion, he initiated revision proceedings merely to re-verify facts, which is not in accordance with the provisions of section 263 of the Act. 7. We have carefully considered all the relevant facts of the case, perused the records and have taken note of the rival submission. Before proceeding further, it would be relevant to examine the provisions of section 263 of the Act which read as under:- "263(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard and after makin....
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....stayed by an order or injunction of any court shall be excluded." 7.1 On bare perusal of the sub section(1), it is seen that powers of revision granted by section 263 to the ld.PCIT have four main ingredients. Firstly, he may call for and examine the records of any proceedings under this Act. For calling of the record and examination, he was not required to show any reason. It is a part of his administrative control to call for the records and examine them. Secondly, he will judge an order passed by an AO on culmination of any proceedings or during the pendency of those proceedings. On an analysis of the record and of the order passed by the AO, he forms an opinion that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. By this stage he is not required the assistance of the assessee. Thereafter, at the third stage, he would issue a show cause notice pointing out the reasons for the formation of his belief that action u/s 263 is required on a particular order of the AO. At this stage, opportunity of hearing to the assessee would be given. Further, he has to conduct an inquiry as he may deem fit. After hearing the assessee, he will pass the ....
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.... explanation of the assessee, the decision of the AO cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard. 7.3 In the instant case, the ld.PCIT issued a show cause notice on two issues as discussed in the preceding paras which were duly replied by the assessee in a detailed submission made which is also reproduced by him in the revision order. The assessee had pleaded to drop the proceedings u/s 263 of the Act by claiming that the assessment order was neither erroneous nor prejudicial to the interest of the Revenue since both the aspects of the cases did not reveal any error. The ld.AR before us also reiterated the same contentions which are duly supported by reference to various pages of the Paper Book submitted. However, we find that the ld.PCIT has apparently not examined the submissions as the revision order is completely silent on merits of the case. He has utterly failed to point out any infirmity in these submissions made. Thus, it can be fairly concluded that he failed to record any satisfaction after evaluating the submissions of the assessee that the assessment order was erroneous or prejudicial. 7.4 It i....