INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Validity - Erroneous and prejudicial order - AO overlooked applicability of provisions under section 184(5) even though assessment was completed under section 144

Issue arose as to whether assessment order passed was erroneous and prejudicial to interests of revenue due to non-application of provision contained under section 184(5) while allowing interest/remuneration paid to partners. Held: Once assessment was completed under section 144, provision of section 184(5) got triggered automatically and it will override all other provisions of Act. Thus, by very reason of AO completing assessment under section 144, provision of section 184(5) would automatically come into play. However, while completing assessment, AO completely overlooked provisions of section 184(5) and allowed deduction on account of interest/remuneration paid to partners. Failure on part of AO to apply or at least even examine applicability of section 184(5), certainly made assessment order erroneous and prejudicial to interests of revenue. Therefore, exercise of power under section 263 to revise the assessment order was valid.

REFERRED : Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83(SC) : 2000 TaxPub(DT) 1227 (SC) Mubarak Trading Co. v. CIT (2008) 174 Taxman 339 (Kar.) : 2009 TaxPub(DT) 0293 (Ker-HC) Vijay Veer Singh v. ITO (2014) 52 taxmann.com 462 (Agra) : 2015 TaxPub(DT) 0377 (Agra-Trib) Mas Properties & Developers v. ITO (2014) 52 taxmann.com 22 (Bang-Trib.) and Bhagwat Prasad Sharma Contractors v. Jt. CIT (2013) 38 taxmann.com 102 (Agra)

FAVOUR : Against the assessee

A.Y. :

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