The Income Tax Appellate Tribunal ( ITAT ), Delhi Bench, has recently, in an appeal filed before it, deleted the proceedings against Saif Partners India IV Limited, on the ground that conditions invoking revisional jurisdiction u/s 263 are not satisfied.
The aforesaid observation was made by the Delhi ITAT, when an appeal was filed before it by the assessee Saif Partners India IV Limited, as against the order dated 27.03.2022 framed under section 263 of the Income tax Act 1961, by the CIT, International Taxation, Delhi, pertaining to Assessment Year 2017-18.
The sum and substance of the grievance of the assessee being that the CIT(A) has erred in assuming jurisdiction u/s 263 of the Income Tax Act and further that he has erred in holding that the order dated 09.12.2019 framed u/s 143(3) of the Income Tax Act is erroneous and prejudicial to the interest of the Revenue, briefly stated, the facts of the case were that the assessee was a public company, incorporated under the laws of Mauritius in 2010, which operated as an investment holding company. And, for the purposes of Indian tax laws, the assessee was a non-resident company and was a tax resident of Mauritius under Article 4 of the India Mauritius Tax Treaty.
Holding a valid tax residency certificate issued in Mauritius for the period under consideration, the assessee also held a valid global business license issued by the Financial Services Commission in Mauritius.
It so happened that the assessee filed its return of income electronically on 30.10.2017, resulting in the total income of the assessee being computed and thereafter the return being selected for scrutiny assessment.
Subsequently, a notice dated 21.08.2018 was issued u/s 143(2) of the Income Tax Act, along with notice u/s 142(1) of the Income Tax Act, to which a detailed reply was filed by the assessee coupled with the notes to the computation of income. And this specific reply of the assessee along with notes to the computation of income was considered by the Assessing Officer, who completed the assessment vide order dated 09.12.2019.
Assuming jurisdiction conferred upon him by provisions of section 263 of the Income Tax Act, the CIT issued notice dated 06.01.2022 and requested the assessee to show cause as to why necessary action should not be taken in the assessee’s case under section 263 of the Income-tax Act, thereby requiring the assessee to submit reply along with all necessary details on or before 17.01.2022.
Thereafter, the CIT proceeded on the assumption that the assessee was not entitled to any treaty benefit for taxation of capital gain in India, clearly ignoring the fact that the assessee had neither claimed nor carried forward such capital loss in its return of income filed in India.
“It is a settled position of law that powers u/s 263 of the Act can be exercised by the Commissioner on the satisfaction of twin conditions, i.e., the assessment order should be erroneous and prejudicial to the interest of the Revenue. By ‘erroneous’ is meant, contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of the revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry. Our view is fortified by the decision of the Hon’ble High Court of Bombay in the case of CIT vs. Nirav Modi”, hearing the opposing contentions of either side as submitted by Shri Kanchun Kaushal, FCA and Ms Shruti Khimta, CA, on behalf of the assessee, and by Ms Meenakshi Singh, the CIT-DR, on behalf of the Revenue, the ITAT Bench noted.
“We find that the Hon’ble Delhi High Court in the case of CIT Vs Sunbeam Auto, has held as held if there was any inquiry, even inadequate, that would not by itself give occasion to the CIT to pass orders under s. 263 of the Act, merely because he has a different opinion on the matter. The Hon’ble Delhi High Court in the case of Delhi Airport metro Express had also had the occasion to consider a similar issue.”, relying upon the mentioned judgements, the ITAT added.
“If we consider the aforementioned judgment of the Hon’ble Jurisdictional High Court on the facts of the case in hand, we find that in the appeal under consideration, the ld. CIT called for a valuation report in revisionary proceedings. However, when the valuation reports were filed by the assessee, the ld. CIT chose to set aside the entire matter back to the file of the Assessing Officer without appreciating that it was incumbent upon the ld. CIT to himself examine the valuation reports and verify as to how the case of the assessee was erroneous and prejudicial to the interest of the Revenue following the ratio laid down by the Hon’ble Jurisdiction High Court in the case of the Delhi Airport Metro Express [P] Ltd. A Similar view was taken by the Hon’ble Delhi High Court in the case of Jyoti Foundation”, the ITAT Panel comprising of Anubhav Sharma, the Judicial Member, along with N K Billaiya, the Accountant Member, noted.
Thus, allowing the assessee’s appeal the Delhi ITAT held:
“Considering the facts of the case in hand in light of judicial decisions discussed hereinabove, we set aside the order of the ld. CIT and restore that of the Assessing Officer dated 09.12.2019 framed u/s 143(3) of the Act.”
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