INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Erroneous and prejudicial order - AO framed assessment after making due inquiry -

Assessee filed return of income declaring total income of Rs. 1,17,45,590. Assessment was completed by passing order under section 143(3) determining total income at Rs. 1,20,46,450 after making disallowance of Rs. 3,00,853 out of common expenses. Pr. CIT observed that assessee claimed deduction under section 80-IA to tune of Rs. 34,75,920. He further observed that assessee had claimed deduction under section 80-IA(4)(iv). He observed that eligible unit had been engaged in business of generating power but not distributing or transmitting power. Therefore, PCIT held that assessment order passed under section 143(3) was erroneous and prejudicial to interest of Revenue as AO failed to correct amount of deduction under section 80-IA(4) by making disallowance out of deduction of expenses claimed and bringing correct income from other sources to tax. Thus, PCIT set aside said order and directed AO to pass a fresh Assessment Order. Hence this appeal. Held: It was pertinent to note that very issue which was taken into account by PCIT under section 263 was already controverted by AO to assessee during assessment proceedings under section 143(3) and after verification disallowed upon which CIT(A) rejected appeal of assessee. Section 263 is invoked when there is assessment order which is prejudicial to interest of Revenue. But, in present case, very basis of exercising revisionary power under section 263 did not survive as AO took precaution and verified all factors on very same issue during assessment proceedings. PCIT cannot review AO's order unless there is substantial loss on part of AO which is prejudicial to interest of Revenue. In present case, very basis of section 263 had not been properly invoked by PCIT as AO took utmost interest of Revenue and same could not be stated as prejudicial to interest of Revenue.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2017-18

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