The Chennai Bench of Income Tax Appellate Tribunal ( ITAT ) criticized the Principal Commissioner of Income Tax for not recognizing that the assessee had already disallowed a higher amount of expenses than the exempt income they received and set aside the unnecessary revisional order of the PCIT. It emphasized the essential of invoking section 236 of the Income Tax Act, 1961.
Assessee, Dr. Agarwals Health Care Ltd, filed income tax returns for the assessment years 2017-18 and 2018-19 and it was processed by the National e-Assessment Centre, Delhi under section 143(3) of the Income Tax Act.
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PCIT revised the order for both assessments invoking section 263 of the income tax law. PCIT disallowed expenses under section 14A in the revisional order. Aggrieved by the revision order, the assessee filed an appeal before ITAT, Chennai.
The assessee counsel represented by R. Sivaraman argued that the revisional order passed by the PCIT are baseless without any proper verification and the assessee duly disallowed the expenses from the exempt income amounting to Rs. 34,17,729 as per section 14A r.w. rule 80D of the IT rules. 1962. The assessee had disallowed an amount which is greater than the exempt income earned and proved the points with the relevant paper-book.
On the other hand, the PCIT’s counsel represented by Nilay Baron Som only supported the revision order.
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The two member bench Mahavir Singh (Vice President) and S.R Raghunatha (Accountant Member) observed both sides’ arguments and criticized that the PCIT simply carried out unnecessary exercises without proper analysis. The tribunal noted that the assessee received exempt income of Rs. 26,97,926 and assessee made disallowance of expense related to exempt income of Rs. 34,17,729 which is greater than the exempt income itself. The tribunal focused on the fact that the PCIT has not noted any error or prejudice caused to the revenue by the assessment order.
The Tribunal observed that the PCIT failed to satisfy the two essentials for invoking section 263 of the Income Tax Act. The tribunal set aside the revisional order of the Principal Commissioner of Income Tax.
The Tribunal allowed the appeal of the assessee.
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