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| The Tax Publishers2020 TaxPub(DT) 3668 (Mum-Trib) INCOME TAX ACT, 1961
Section 263
Where no addition was made on the issue for which the assessment was reopened, it was not open to AO to make independent addition for which he had not recorded reason to believe for issuing notice under section 148 and there was no error in the action of AO in not travelling to other issues for making addition once no addition was made on the issue for which assessment was reopened, therefore, PCIT clearly erred in invoking revisional jurisdiction on an issue, which AO could not have examined in reassessment proceedings.
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Revision under section 263 - Validity - AO reopened assessment on one issue but did not make addition thereunder - AO could not travel to another issue
The return of assessee was processed under section 143(1) and assessment was reopened on the ground that there was misuse of Client Code Modification. Consequently, notice under section 148 was issued. Order under section 143(3) r.w.s. 147 was passed without any addition. Thereafter, PCIT invoked the provisions of section 263 on the ground that AO had failed to examine interest expenditure claimed in the P&L Account. PCIT observed that assessee did not have its own capital, therefore, the loan was given from borrowed funds. PCIT further observed that assessee had not shown any interest from borrowed money, as such, interest expenditure debited to the P&L Account was required to be disallowed in proportion to money borrowed but not used for business purpose. Held: A perusal of the assessment order shows that assessment was reopened to examine misuse of Client Code Modification for tax evasion. No addition was made by AO in respect of the issue for which the assessment was reopened. It is a well settled law that where no addition is made on the issue for which assessment is reopened, it was not open to AO to make independent addition for which he had not recorded reason to believe for issuing notice under section 148. There was no error in action of AO in not travelling to other issues for making addition once no addition was made on the issue for which assessment was reopened. Therefore, PCIT clearly erred in invoking revisional jurisdiction on an issue, which AO could not have examined in reassessment proceedings.
Relied:CIT v. Sun Engineering Works Pvt. Limited (1992) 198 ITR 297 (SC) : 1992 TaxPub(DT) 1434 (SC) CIT v. Jet Airways (I) Ltd. (2011) 331 ITR 236 (Bom) : 2011 TaxPub(DT) 0218 (Bom-HC) CIT v. Paul Brothers (1995) 216 ITR 548 (Bom) : 1995 TaxPub(DT) 0140 (Bom-HC)
REFERRED :
FAVOUR : In assessee's favour
A.Y. :
APPELLATE TRIBUNAL RULES, 1963
Rule 34
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