469 total views
Assumption of revisional jurisdiction by CIT u/s 263 without pointing out exact error committed by AO and directed AO to make detailed and roving enquires is unsustainable in law.
Revision Orders erroneous and prejudicial to Revenue Assessee filed return of income AO completed assessment u/s 143(3) after making disallowance u/s 14A and adjustment to ALP as proposed by TPO AO also computed assessee’s book profit u/s 115JB Thereafter, CIT sought to revise assessee’s case u/s 263 on ground that AO erred in not making addition towards adjustment made to ALP while computing book profit u/s 115JB CIT observed that AO did not made any enquiry on this aspect and had not verified compliance of provisions of s. 297 of Companies Act, 1956 by assessee together with compliance of ASs issued by ICAI It was also found that assessee had not verified assessee’s related party transactions CIT treated assessment order as erroneous in as much as it was prejudicial to interest of Revenue Held, TP adjustment made u/s 92CA(3) was not an item falling under said list provided in Explanation 1 to s. 115JB(2) There was no qualification made by statutory auditors in their audit report for violation of ASs or non-compliance to same or non-compliance to preparation of accounts prescribed under Part II & Part III of Schedule VI of Companies Act Related party loan transactions carried out by assessee were duly reflected in assessee’s audit report Entire related party transactions were duly reflected in notes Forming Parts of Accounts for year as mandated in AS-18 Accounts were prepared in proper compliance with applicable accounting standards There was no evidence brought on record by CIT that assessee’s accounts were not approved by shareholders in General Body Meeting or they were subject to any enquiry by ROC for non-compliance to any accounting standards—Hence, entire observations of CIT with regard to verification of compliance of provisions of s. 297 of Companies Act, compliance to Ass were totally irrelevant and not germane to issue under consideration CIT had only mentioned that transactions with related parties and AEs require elaborate examination by AO by conducting detailed enquires and verifications in light of provisions of Companies Act, relevant accounting standards and Income Tax Acts CIT had not specifically pointed out any exact error committed by AO while framing assessment instead, he only directed AO to make detailed and roving enquires through route of invoking revisional jurisdiction u/s 263 AO was not empowered to make any addition or deletion to net profit as per P&L a/c prepared in accordance with Part II & Part III of Schedule VI of Companies Act 1956 and relevant accounting standards thereon, other than those items specifically mentioned in Explanation 1 to section 115JB(2) Thus, order of AO was neither erroneous nor prejudicial to interest of Revenue warranting invocation of revisional jurisdiction u/s 263—Assessee’s appeal allowed.
HIMADRI CHEMICALS & INUDSTRIES LTD. vs. PRINCIPAL COMMISSIONER OF INCOME TAX
(2019) 55 CCH 0406 KolTrib