The Delhi High Court has held that an order passed invoking section 263 of the Income Tax Act, 1961 without satisfying twin condition is invalid. The conditions are that the order of the AO should be erroneous and prejudicial to the interest of the revenue.
Dr Shashwat Bajpai, counsel, who appeared on behalf of the respondent/assessee Saif Partner India IV Ltd stated that he would have no objection if the delay in refiling is condoned. The appellant/revenue seeks to assail the order passed by the Income Tax Appellate Tribunal [“Tribunal”].
The Tribunal has set aside the order passed by the Commissioner of Income Tax (Appeals) [CIT(A)] in the exercise of its power under Section 263 of the Income Tax Act, 1961 [“Act”]. The CIT(A) has via the said order set aside the assessment order dated 09.12.2019 framed by the Assessing Officer (AO) under Section 143(3) of the Act.
The CIT(A) viewed that the loss claimed by the respondent/assessee upon the transfer of shares concerning Indian entities was both erroneous and prejudicial to the interest of revenue.
In the notes of accounts appended to the balance sheet as of 31.03.2017, the respondent/assessee had indicated that it was not carrying forward the cumulative loss amounting to Rs.62,85,40,289/-. It was stated that he has instructed to convey to the court that the said loss amounting to Rs.62,85,40,289/- will not be carried forward.
A division bench comprising Justice Rajiv Shakdher and Justice Girish Kathpalia viewed that for invoking powers under Section 263 of the Act, twin conditions have to be satisfied i.e., the order of the AO should be erroneous and prejudicial to the interest of the revenue.
In view of the statement made by Dr Shashwat Bajpai, the other condition is not fulfilled. Therefore, the court held that the appeal is disposed of, based on the statement made by Dr Shashwat Bajpai which shall bind the respondent/assessee.
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