TaxTMI 
TaxTMI 
2026 (9) TMI 1546
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....ing S. u/s 263of the Act. The same is being purely contrary to the provisions of law, therefore the impugned order u/s 263 as well as notice u/s 263 of the Act may kindly be quashed. 3. That the Ld. Pr. CIT-2, Jaipur is grossly erred in law as well as on the facts of the case in taking the action u/s 263 of the Act on the allegations that: (a). The deduction of Rs. 6,34,145/- u/s 80P(2) is not allowable to the assessee as per Sec. 80AC, being return not filed u/s 139 rather filed u/s 148. Which are contrary to the facts, without considering the material evidences available on record in their true perspective and sense and such a finding being perverse, the impugned action is bad in law without jurisdiction and being void ab initio, the impugned order u/s 263 may kindly be quashed. 4. That the Id. Pr. CIT-2, Jaipur is grossly erred in law as well as on the facts of the case in observing that the deduction of Rs. 6,34,145/-u/s 80P(2) is not allowable to the assessee as per Sec. 80AC, being return not filed u/s 139 rather filed u/s 148, which are contrary to the facts, without considering the material evidences available on record in their true pers....
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....d by the AO and, * The AO had taken a plausible view by allowing assessee's claim of deduction u/s 80P of the Act. 7. Both the contentions of the assessee were rejected by the Ld. PCIT, noting that the AO had blindly accepted the assesses claim of deduction u/s 80P of the Act without taking into consideration the strict timeline provided u/s 80AC of the Act, and that the provisions of Section 80AC of the Act were clear and the assessee had categorically failed the said provisions and therefore, the AO could not be said to taken a plausible view on the issue. Accordingly, the ld. PCIT set aside the assessment order and directed the AO to initiate afresh assessment de novo. 8. Before us, several arguments were made by the ld. Counsel for the assessee challenging the assumption of jurisdiction by the Ld. PCIT u/s 263 of the Act on the following grounds:- * The Ld. PCIT had assumed jurisdiction u/s 263 of the Act on the basis of proposal made by the AO to him and not on the basis of any examination of the records of the assessee himself, as stipulated by the law u/s 263 of the Act. * The notice issued u/s 263 of the Act found the assessment order to be ....
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....arguments by drawing our attention to the notice issued by the Ld. PCIT u/s 263 of the Act placed before us at paper book page No.68 and 69 wherein he drew our attention to para 2 to contend that the Ld. PCIT had assumed jurisdiction on the basis of proposal received from AO and to para 7 to point out that he had found the assessment order prima facie to be erroneous. The said para 2 and 7 are reproduced hereunder:- ...... 2. On perusal of the assessment records and the proposal received from the Assessing Officer it is observed that you have claimed a deduction under section 80P of the Act amounting to Rs. 6,71,580/- in your Return of Income filed on 13.04.2023. The Assessing Officer accepted this claim and assessed your total income at Rs. Nil.. ...... 7. In view of the above the assessment order prima facia is found to be erroneous as the assessing officer has erred in correctly computing the revised total income u/s 147 r.w.s 144B of the Act. Therefore, in exercise of powers vested u/s 263 of the Act, the undersigned call upon to show cause as to why the assessment should not be revised suitably. You may appear in person or through an Authori....
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....f report/proposal of the AO. Therefore, the contention of the assessee that the Ld. PCIT had assumed jurisdiction incorrectly on the basis of proposal of the AO is found to be factually incorrect and accordingly rejected. 15. The other contention of the ld. Counsel for the assessee that the notice issued u/s 263 of the Act merely noted the Ld. PCIT to have found the assessment order prima facie erroneous and not erroneous so as to cause prejudice is also found to be incorrect. In para 5 of the notice issued, the Ld. PCIT, we have noted has categorically stated that by allowing the assessee's deduction u/s 80P of the Act without verifying the applicability of Section 80AC of the Act, the order passed appears to be erroneous and prejudicial to the interest of the revenue. Therefore the Ld. PCIT has clearly recorded his satisfaction of the assessment order both being erroneous and pre judicial to the interest of the Revenue. The contention of the ld. Counsel for the assessee that only prima facie satisfaction is recorded by the Ld. PCIT, we find, is of no consequence since it is only prima facie satisfaction which is sufficient for assuming jurisdiction u/s 263 of the Act and after....
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....or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. ........ 18. The case of the ld. Counsel for the assessee is that, the order passed by the AO in the present case was after conducting inquiries and verification and the relief allowed to the assessee was not without conducting any inquiry into the claim of the assessee. That therefore, both the conditions of sub-clause (a) and (b) to Explanation 2 to Section 263 of the Act were not satisfied in the present case and the ld. PCIT had erred therefore in holding order passed by the AO to be erroneous for having allowed the claim of deduction u/s 80P of the Act without verifying the said claim in the light of the provisions of Section 80AC of the Act. 19. To substantiate his contentions, that the issue was examined during assessment proceedings, he drew our attention to the reply filed to the AO during assessment proceedings placed before us at paper book page No.46 to 52 contending that the assessee therein had justified its claim of deduction in res....
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....y no addition was made to the income of the assessee and the income returned by the assessee of Rs. 6,74,145/- which was claimed as deducted u/s 80P(2) of the Act was allowed by the AO. 24. The ld. PCIT found this assessment order to be erroneous since he noted that in terms of provision of Section 80AC of the Act claim of deduction u/s 80P of the Act was allowable only in case the return of income is filed by the assessee within the time prescribed u/s 139(1) of the Act. The relevant provision of Section 80AC of the Act applicable for the impugned year is reproduced hereunder:- ..... Deduction not to be allowed unless return furnished. 80AC. Where in computing the total income of an assessee of any previous year relevant to the assessment year commencing on or after- (i) the 1st day of April, 2006 but before the 1st day of April, 2018, any deduction is admissible under section 80-IA or section 80-IAB or section 80-IB or section 80-IC or section 80-ID or section 80- IE; (ii) the 1st day of April, 2018, any deduction is admissible under any provision of this Chapter under the heading "C.-Deductions in respect of certain incomes", no su....
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....This constitutes a "lack of proper inquiry" and an incorrect application of law. B. Violation of Binding Statutory Provision (Section 80AC): The assessee claims the AO took a "plausible view." A view which is directly contrary to the explicit provisions of the Income Tax Act cannot be termed as a "plausible view." Effective from Assessment Year 2018-19, Section 80AC (ii) was amended to mandate that: "...no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139." By allowing the deduction on a return filed on 13.04.2023 (years after the 139(1) deadline), the AO committed a gross error of law. As held in Malabar Industrial Co. Ltd., an order passed without applying the correct legal principles or on an incorrect assumption of law is erroneous. C. Prejudice to Revenue: The incorrect allowance of the deduction of Rs. 6,71,580/-has directly resulted in the under-assessment of income and non-levy of legitimate tax. Thus, the order is prejudicial to the interest of the revenue. 27. In the light of the above, it is clear that the present was a ca....
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....nder section 139(1) of the Actonly w.e.f. 01.04.2021 when the same was introduced to the said section by way of an amendment. Noting so the ITAT held that the said amendment was not in force for the year impugned before it i.e. AY 2019-20 and accordingly, the AO was not entitled as per law to make any adjustment on account of deduction claimed under Chapter VIA for non-furnishing of returns within time prescribed u/s 139(1) of the Act. 30. The facts of the case are clearly distinguishable from the facts of the present case. Since in the said case the issue of allowing of claim u/s 80P of the Act on account of the claim having been made in a return filed beyond the time prescribed u/s 139(1) of the Act have been considered in the intimation made u/s 143(1) of the Act, wherein it was found that for the impugned year the section did not prescribe any such adjustment to be made. In the facts of the present case, the claim of deduction u/s 80P of the Act was being examined in a regular assessment being framed u/s 147 of the Act. Therefore, the ratio laid down in the said decision is not applicable in the facts of the present case. The contention of the ld. Counsel for the assessee th....
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....O to have examined the eligibility of the deduction claimed by the assessee u/s 80P r.w.s. 80AC of the Act. 35. We have considered the contentions raised by the ld. Counsel for the assessee and we do not find any merit in the same. The thrust of the arguments is that it is legally settled that once the AO loses his jurisdiction to frame assessment u/s 147 of the Act, being satisfied with the explanation of the assessee regarding the income found to have escaped assessment, he cannot make any other addition or disallowance with respect to any other issue. That this is a settled proposition of law there is no quarrel with the same. However, in the present case the issue of allowability of claim of deduction u/s 80P r.w.s. 80AC of the Act cannot be said to be a different issue being taken up by the AO in the present case u/s 147 of the Act. 36. Undoubtedly and admittedly, the assessee originally had filed no return of income and the AO had come in possession of information that there were huge cash deposits in his bank account. Accordingly, he recorded reasons for escapement of income of the assessee based on this information and reopened the case of the assessee. The assessee c....