INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Erroneous and prejudicial order - AO examined entire case and than dicided to in under section 14A -

The main grievance raised by assessee was against the invocation of revisional jurisdictional under section 263 PCIT without satisfying the condition precedent as laid down in the statute. The main reason of PCIT to exercise his revisional jurisdiction under section 263 was that AO had not disallowed the interest expenses for earning exempt income under section 14A read with rule 8D. Since AO had not disallowed the interest expenses to earn exempt income by applying the provisions of section 14A read with rule 8D of the rules, according to PCIT the assessment order of AO passed under section 143(3) was erroneous in so far as prejudicial to interest of revenue. Held: AO observed that assessee's case was selected for scrutiny for verification of large interest expenses relatable to exempt income and during the assessment proceedings when assessee explained the aforesaid facts, AO agreed with assessee that it had not incurred any interest expenditure for earning the exempt income. AO had rightly not disallowed/made any disallowance/expenses especially the interest expenditure for earning any exempt income which was a plausible view. Order of AO passed under section 143(3) could not be faulted with for non-invocation of section 14A read with rule 8D for such disallowance. Since order of AO was not erroneous as well as prejudicial to interest of revenue, the conditions precedent for invoking revisional jurisdiction under section 263 was absent.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2014-15

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