The Delhi High court held revision by CIT(A) under Section 263 is invalid as appreciation of material placed before AO exclusively within his domain.
Ms. Vibhooti Malhotra, Senior Standing Counsel for the appellant/revenue contended that the Tribunal had erred in holding that the PCIT had wrongly invoked powers under Section 263 of the Act. Explanation 2 appended to Section 263 of the Act, which was inserted via Finance Act, 2015 w.e.f. 01.06.2015, was declaratory, and therefore, contrary to what the Tribunal as held, would be applicable retrospectively even for the AYs in issue, i.e., AY 2012-13 and 2013-14. In other words, the argument was that Clause (a) and (b) of Explanation 2 appended to Section 263 of the Act, would apply to the aforementioned AYs, although the provision came into effect from 01.06.2015.
Ms. Jha contended on behalf of the assessee that Clause (a) and (b) of Explanation 2 appended to Section 263 of the Act could not have been invoked by the PCIT to interfere with the assessment orders, as said provisions did not have retrospective effect. Even if one were to assume for a moment that Clause (a) and (b) of Explanation 2 appended to Section 263 of the Act could be applied to the assessee’s case concerning AYs 2012-2013 and 2013-14, a close perusal of the assessment orders and the record, which was examined by the Tribunal, would show that the AO had made enquiries with regard to interest earned on fixed deposits by the assessee, and it was only after he was satisfied, that it had nexus with the real estate business undertaken by the assessee, that the adjustment/ deduction made by the assessee was left undisturbed.
The division bench of Justice Rajiv Shakdher and Justice Talwant Singh ruled that section 263 of the Act invests a power of revision in a superior officer and therefore, by the very nature of the power, does not allow for supplanting or substituting the view of the AO. The appreciation of material placed before the AO is, exclusively within his domain which cannot be interdicted by a superior officer while exercising powers under Section 263 of the Act only on the ground that if he had appraised the said material, he would have come to a different conclusion.
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