The Jodhpur Bench of the Income Tax Appellate Tribunal (ITAT), refused to quash and stay the operation of order under Section 263 of the Income Tax Act, 1961 by Commissioner of Income Tax (Exemption) (CIT(E)) on revision of erroneous order prejudicial to interests of revenue.
Facts giving rise to the present appeal are that the CIT (Exemption) after examining the records issued a show cause notice under Section 263 of the Income Tax Act, calling upon the assessee, Ajmer Development Authority, as to why assessment order framed under Section 147 read with Section 143(3) of the Income Tax Act, should not be revised.
The Assessing Officer assessed income of the assessee at Rs. NIL. Therefore, it is not the case that the issue related to Section 2(15) of the Income Tax Act, was not under consideration before the Assessing Authority.
The Counsel for the assessee, Mahendra Gargieya, Advocate vehemently argued that CIT(Exemption) exceeded his jurisdiction in issuing notice under Section 263 of the Income Tax Act and submitted that ex facie the order was revised on the ground different from the ground of re-opening of the assessment.
The CIT, DR argued that despite having concluded that the activity is hit by mischief of section 2(15) of the Income Tax Act, the AO proceeded to assess income under Section 143(3) of the Income Tax Act at Rs. NIL. Hence, he submitted that ex facie the assessment order is erroneous insofar as it is pre-judicial to the interest of the revenue.
The Coram comprising Kul Bharat, Judicial Member and Maneesh Borad, Accountant Member observed that “In our considered view, any issue which was considered by the AO in the assessment order, such order would be open for revision under Section 263 of the Income Tax Act, if such order is erroneous and prejudicial to the interest of justice. There is no infirmity in the order of CIT(E) in revising the assessment under section 263 of the Act.”
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