The Income Tax Appellate Tribunal (ITAT), Bangalore Bench, has recently, in an appeal filed before it, held that the Commissioner of Income Tax (CIT), shall exercise revisional power under section 263, only when A. O’s order is erroneous and prejudicial to the interest of the Revenue.
The aforesaid observation was made by the Tribunal when two appeals were preferred before it by an assessee, as against the order passed by the Pr.CIT dated 22/03/2017 and 19.03.2020, for the assessment year 2013-14 respectively.
The brief facts of the case being that the assessee had filed his return of income on 29/09/2013 declaring income of Rs.1,00,89,520/, the case of the assessee was selected for scrutiny and subsequently statutory notices were issued to the assessee.
The assessee being an Orthopaedic Surgeon in Gokak, survey u/s 133A was conducted on 06/09/2012, wherein he admitted the additional income of Rs.70,76,000/- and offered the same for tax.
However, the AO made some other additions and determined the income at Rs.1,03,68,608/- by adding Rs.2,79,088/, but the assessee did not file an appeal and paid the tax accordingly as per the advice of CA.
Later on, the Pr.CIT, on 27/02/2017, issued a show cause notice to the assessee and against this show cause notice, the assessee had filed reply before the Pr.CIT., who after considering the submission of the assessee, partly accepted the first issue and fully accepted the second issue, as was raised by the assessee.
However, in respect of issue No.3 regarding the valuation of the property by the Departmental Valuation Officer (DVO), which was not got done by the AO, the Pr.CIT observed that the AO while passing the assessment order dated 30/03/2015 , had not referred the matter to the DVO for the determination of the cost of construction of the hospital building which was part of survey u/s 133A.
Accordingly, he observed that the AO had not carried out proper enquiry while passing the assessment order, and subsequently, he issued a show cause notice to the assessee.
On reply being furnished by the assessee, after considering the entire material available before him, the Pr.CIT observed that the order passed by the AO is erroneous and prejudicial to the interest of the revenue and hence, directed the AO to pass a fresh assessment order. And it is being aggrieved by this order of the Pr.CIT, that the assessee has filed the instant appeal before the ITAT.
The ground of the assessee’s appeal being the question as to the whether the Pr. CIT can be justified in law, in holding that the order passed by the Assessing officer is bad in law, without appreciating that there was no error in the order passed, much less prejudicial to the interest of revenue, on the facts and circumstances of the case, it was submitted by Shri S.V Ravishankar, Advocate for the assessee that the AO had called the details as per notice issued by him, which were submitted before the AO and that it is only after being satisfied by the same, had the AO passed the assessment order.
However, with Shri Arun Kumar, CIT (DR) relying on the order of the Pr.CIT, the Tribunal consisting of Beena Pillai, the Judicial Member and Laxmi Prasad Sahu, the Accountant Member, observed as follows:
“We do not find any substance in the order of the ld.Pr.CIT that the AO passed the order in a hurry without waiting for the DVO report. The DVO submitted report on 25/04/2018 u/s 142A of the Act after 6 months from the receipt of reference, therefore, the DVO report has no value in the eye of law as per sec. 142A (6) of the Act”
“In support of our view, we rely on the decision of Kolkata Bench in the case of Narula Educational Trust, vide order dated 05/02/2020. Therefore, the AO will not get any benefit of extended period of 60 days as per sec. 153 of the Act. The ld.Pr.CIT is also not justified for reckoning the period for completion of assessment by the AO, which as per the limitation is also wrong.”, they added
Thus, allowing the assessee’s appeal, the Tribunal ruled:
“Considering the totality of facts and circumstances of the case, we set aside the order passed by the ld.Pr.CIT for exercising his power u/s 263 of the Act. Hence, the order passed by the AO cannot be revised us/ 263 of the Act. Therefore, the order passed by the AO is neither erroneous nor prejudicial to the interest of revenue”.
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