In a relief to the Reliance Industries, the Mumbai Bench of Income Tax Appellate Tribunal (ITAT) ruled that the revision by Pr. CIT(A) was not justified in case AO conducted the proper enquiry.
As per the provisions of Section 263 of Income Tax Act, 1961, the revenue authorities namely Pr. Commissioner of Income Tax or Commissioner of Income Tax is vested with the supervisory powers of suo-moto revision of any order passed by the Assessing Officer. For the said purpose, the appropriate authority may call for and examine the record of any proceedings under the Act and may proceed to revise the same provided two conditions are satisfied namely the order of the assessing officer sought to be revised is erroneous, and it is prejudicial to the interest of the revenue. If one of the conditions is absent i.e. if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but it is prejudicial to the revenue.
The Pr. CIT observed that AO did not apply his mind to the issue, is without much substance. Merely because the similar adjustment was made in subsequent years, the same would not lead to a conclusion that the orders passed in earlier years would require revision unless it was shown that the order was erroneous as well as prejudicial to the interest of the revenue.
The division bench headed by Vice President Mahavir Singh and Accountant Member, Manoj Kumar Aggarwal noted that an order was passed by AO under section 143(3) read with section 147 of the Act. One of the reasons to reopen the case was the allegation of AO that income from assets given on lease, though offered to tax under normal provisions, was not routed through Profit & Loss Account which has led to short-computation of Book Profits under MAT provisions. However, the assessee well explained the fact that the accounting treatment given by the assessee was in accordance with mandatory AS- 19 which mandate the assessee to reflect investment in asset under finance lease as ‘Lease Receivable’ in Balance Sheet on the asset side under the head ‘Loans & Advances’. The Tribunal held that the subject matter of the proposed revision was already deliberated upon by AO and a possibility was taken in the matter. That view could not be said to be contrary to law, perverse or unsustainable in law, in any manner and the same would be a possible view keeping in mind the assessee’s submissions during reassessment proceedings. This being the case, the assessment order could not be subjected to revision u/s 263, and the action of Ld. Pr. CIT in invoking jurisdiction u/s 263 could not be sustained in the eyes of law.
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