In a remedy to Aishwarya Rai Bachchan, the Mumbai Bench of the Income Tax Appeal Tribunal (ITAT) has ruled that the Commissioner of Income Tax cannot invoke his review jurisdiction under the 263 of the Income Tax Act 1961 merely on the ground of an invalid decision. – valuation order placed by the valuation agent.
In this case, the Appraisal Officer (AO) had reopened the appraisal for the years concerned on the grounds that the appraisee had failed to disclose the true and complete facts necessary for the purposes of the appraisal and had thus issued a notice under Section 148 of the Income Tax Act. Act, 1961. The reassessment proceedings against the assessee were completed in 2018 with the AO accepting reimbursement of the assessee’s income. The reassessment was requested for review by the Principal Commissioner of Income Tax (PCIT) against whom the assessee filed an appeal with the ITA.
The department argued that the valuation was requested by the PCIT on the basis that the AO had not wrongly disallowed the deduction of “investment transaction costs”, prima facie capital in nature, when computing income business of the assessee.
The Bench of ITA Mumbai, consisting of Members Kuldip Singh (Judicial Member) and Mr. Balaganesh (Accounting Member), ruled that where a valuation drafted by the Valuation Officer is invalid in law, said invalid order shall not cannot be reviewed. under Section 263 of the Income Tax Act 1961.
Section 263 of the Act empowers specified revenue authorities to review orders made under the Act if they consider that an order made by the assessment officer is wrong to the extent that it is detrimental to the interests income.
The Court observed that the Commissioner of Income Tax (Appeal) (CIT(A)) in his order had already ruled on the disallowance of “investment transaction fees” under Section 14A of the Act and that the same transaction was to be considered and added by the PCIT in its review proceedings under Section 263 of the Act. The court held that the order issued by CIT(A) became final since no appeal was preferred by the assessee. Furthermore, the appeal filed by the tax authorities against the CIT (A) decree was rejected by the ITAT. The court observed that, pursuant to the provisions of paragraph (c) of Explanation 1 to Section 263(1) of the Act, a matter which has already been considered and decided by the CIT(A) cannot subject to review by the PCIT under Section 263 of the Act.
Quashing the review order, the Court ruled that “When an assessment framed by ld. AO is untenable in the eyes of the law, said invalid and illegal order cannot be the subject of proceedings under section 263. On this point also, the review order passed by ld. PCIT Act u/s.263 deserves to be struck down.
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