M/s AVTIL Enterprises Limited vs. PCIT-5 (ITAT Mumbai)

Court: ITAT Mumbai
Head Notes:

This appeal has been filed by the assessee challenging the order of the ld. PCIT passed u/s 263 of the Income-Tax Act pertaining to AY 2017- 18.

The ld. PCIT invoked the provision of section 263 of the Act on the ground that the AO has failed to conduct all necessary enquiries required and has also erred in non-application of mandatory provisions of law in this case section 14A r.w. Rule 8D. The ld. PCIT has further held that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interests of the revenue.

The learned PCIT had directed the AO to reframe the assessment order denova after conducting all necessary enquiries and verification required on facts of the case and by giving opportunity of being heard to the assessee before passing the assessment order.
Having heard the rival submissions and perused the material on record it is evident that the assessee’s case was selected for limited scrutiny to the extent of inquiring the issue pertaining to expenses incurred for earning exempt income. It is observed that the AO has raised queries pertaining to this issue to the assessee for which the assessee has given a detailed submission along with relevant documents to substantiate the claim of the assessee. The assessee has further stated that the AO has analysed the submissions made by the assessee after due verification and detailed enquiry has applied his mind and passed the assessment order.

The assessee further submitted that the assessee’s case was for limited scrutiny to examine the issue of “expenses incurred for earning exempt income” for which the AO has made sufficient enquiry examining the details furnished by the assessee. The assessee also relied on the decision of Hon’ble jurisdictional Bombay High Court in the case of Commissioner of Income-Tax v/s Future Corporate Resources Ltd. (2021) 132 Taxmann.com 173 (Bombay High Court) which reiterated similar proposition as in the case of assessee. In addition to this the assessee relied on the plethora of judgment in favour of the assessee.

In view of the above observation we conclude that the assessment order passed by the AO is not erroneous insofar as it is prejudicial to the interest of the revenue as the AO in the present case has taken one of the possible view and the invocation of section 263 is not warranted in the present case. We hereby set aside the order of ld. PCIT and allow the appeal filed by the assessee.
In the result the appeal filed by the assessee is allowed.

Section(s): Section 14A, Section 263
Counsel(s): CA Devang Divecha
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Date of upload: May 27, 2024

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