An assessment has to be both erroneous as well as causing prejudice to the interest of the Revenue simultaneously, before it is sought to be subjected to exercise of revision jurisdiction u/s.263 (of Income Tax Act, 1961).

Held There is no reason to sustain impugned revision action. This is for the reason that the assessee's administrative expenses are in the nature of compulsorily office expenditure which have been held eligible for intra-head set-off against income from other sources than u/s.57(iii) (of Income Tax Act, 1961) by the Assessing Officer. The factual position is hardly different qua its latter two heads of financial costs; including that directly paid to the bank of Rs.2,8,53/- (supra) pertains to the very account only as well as the fact that the impugned depreciation/amortization has been a continuing relief granted very well from the preceding assessment years, whose facts and figures are nowhere in dispute. Assessee has also filed on record the necessary correspondence/show cause notice issued by the Assessing Officer in Section 143(2) (of Income Tax Act, 1961) & 142(1) notices followed by its detailed reply on 02-12-2015. PCIT has erred in law and on facts in assuming Section 263 (of Income Tax Act, 1961) revision jurisdiction. An assessment has to be both erroneous as well as causing prejudice to the interest of the Revenue; simultaneously, before it is sought to be subjected to exercise of revision jurisdiction u/s.263 (of Income Tax Act, 1961). Impugned Section 143(3) (of Income Tax Act, 1961) regular assessment dt.16-03-2015 stands revived as the necessary corollary therefore. Assessee's appeals allowed. (para 4)

These assessee’s appeals for AY.2012-13 arise against the Pr.CIT-3 & CIT(A)-6, Hyderabad’s order(s) dated 18-11- 2016 & 13-03-2019 in appeal Nos.10 / Pr.CIT-3 / 263 / 16-17 & 10098 / 2017-18 / A3 / CIT(A)-6, involving proceedings u/s.143(3) (of Income Tax Act, 1961) (in former appeal) and u/s.143(3) (of Income Tax Act, 1961) r.w.s.263 (of Income Tax Act, 1961) (in latter appeal) of the Income Tax Act, 1961 [in short, ‘the Act’]; respectively.

Heard both the parties. Case files perused.

2. It transpires at the outset that this assessee’s instant appeal suffers from 85 days delay stated to be attributable to the reason(s) beyond its control as per condonation petition/affidavit. No rebuttal has come from the departmental side. The impugned delay is condoned therefore.

3. We advert to the assessee’s former appeal ITA No.557/Hyd/2018 challenging correctness of the PCIT’s action assuming Section 263 (of Income Tax Act, 1961) revision jurisdiction thereby terming the corresponding regular assessment dt.16-03-2015 as an erroneous and prejudicial one to the interest of the Revenue. There is no dispute that the CIT’s detailed discussion holds in Section 263 (of Income Tax Act, 1961) order in paras 7 to 11 inter alia hold that the assessee had derived interest income of Rs.44,84,828/- on the fixed deposits made with the Karur Vysya Bank, Hyderabad followed by its claim of administrative expenditure, financial costs and depreciation etc. to the tune of Rs.1,87,311/-, Rs.2,853/- and Rs.44,46,552/-; respectively totalling to Rs.46,36,716/-. The PCIT holds that the said three heads of expenses are in the nature of pre-operative expenditure which could not be set-off against the assessee’s foregoing interest income. And that the Assessing Officer’s action allowing the assessee’s claim in a very casual and mechanical manner deserves to be revised for want of proper enquiry rendering the impugned assessment as both erroneous as well as prejudicial to interest of the Revenue.

4. We have given our thoughtful consideration to rival pleadings and find no reason to sustain the impugned revision action. This is for the reason that the assessee’s administrative expenses are in the nature of compulsorily office expenditure which have been held eligible for intra-head set-off against income from other sources than u/s.57(iii) (of Income Tax Act, 1961) by the Assessing Officer. The factual position is hardly different qua its latter two heads of financial costs; including that directly paid to the bank of Rs.2,8,53/- (supra) pertains to the very account only as well as the fact that the impugned depreciation/ amortization has been a continuing relief granted very well from the preceding assessment years, whose facts and figures are nowhere in dispute.

Coupled with this, the assessee has also filed on record the necessary correspondence/show cause notice issued by the Assessing Officer in Section 143(2) (of Income Tax Act, 1961) & 142(1) notices dt.13- 05-2014 and 24-02-2015 followed by its detailed reply on 02- 12-2015. We therefore hold that the PCIT has erred in law and on facts in assuming Section 263 (of Income Tax Act, 1961) revision jurisdiction. We quote hon'ble apex court’s landmark decision in Malabar Industrial Co. Vs. CIT [243 ITR 83] (SC) wherein it was held that an assessment has to be both erroneous as well as causing prejudice to the interest of the Revenue; simultaneously, before it is sought to be subjected to exercise of revision jurisdiction u/s.263 (of Income Tax Act, 1961). Their lordships further make it clear that it is not each and every assessment which attracts Section 263 (of Income Tax Act, 1961) revision but only wherein the Assessing Officer has not taken one of the two possible views; as the case may be. We draw strong support therefrom and reverse the learned PCIT’s action exercising Section 263 (of Income Tax Act, 1961) revision jurisdiction. The impugned Section 143(3) (of Income Tax Act, 1961) regular assessment dt.16-03-2015 stands revived as the necessary corollary therefore. The assessee’s instant Section 263 (of Income Tax Act, 1961) appeal ITA No.557/Hyd/2018 is accepted.

No other ground has been pressed before us.

6. These assessee’s two appeals are allowed in above terms. A copy of this common order be placed in the respective case files.

Order pronounced in the open court on 8th October, 2021

Sd/- Sd/-

(LAXMI PRASAD SAHU) (S.S.GODARA)

ACCOUNTANT MEMBER JUDICIAL MEMBER

Hyderabad,

Dated: 08-10-2021

LEGAL REFERENCES

Section 10 Form 16 Section 6 Section 1 Section 2 Section 7 Income Tax Act Section 44 Section 143(3) Section 263 Section 46 Section 143(2) Section 57(iii)

CONCEPTS

AS Income Tax Rules

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An assessment has to be both erroneous as well as causing prejudice to the interest of the Revenue simultaneously, before it is sought to be subjected to exercise of revision jurisdiction u/s.263 (of Income Tax Act, 1961).

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Held

There is no reason to sustain impugned revision action. This is for the reason that the assessee's administrative expenses are in the nature of compulsorily office expenditure which have been held eligible for intra-head set-off against income from other sources than u/s.57(iii) (of Income Tax Act, 1961) by the Assessing Officer. The factual position is hardly different qua its latter two heads of financial costs; including that directly paid to the bank of Rs.2,8,53/- (supra) pertains to the very account only as well as the fact that the impugned depreciation/amortization has
been a continuing relief granted very well from the preceding assessment years, whose facts and figures are nowhere in dispute.

Assessee has also filed on record the necessary correspondence/show cause notice issued by the Assessing Officer in Section 143(2) (of Income Tax Act, 1961) & 142(1) notices followed by its detailed reply on 02-12-2015. PCIT has erred in law and on facts in assuming Section 263 (of Income Tax Act, 1961) revision jurisdiction.
An assessment has to be both erroneous as well as causing prejudice to the interest of the Revenue; simultaneously, before it is sought to be subjected to exercise of revision jurisdiction u/s.263 (of Income Tax Act, 1961). Impugned Section 143(3) (of Income Tax Act, 1961) regular assessment dt.16-03-2015 stands revived as the necessary corollary therefore. Assessee's appeals allowed.

(para 4)

These assessee’s appeals for AY.2012-13 arise against
the Pr.CIT-3 &amp; CIT(A)-6, Hyderabad’s order(s) dated 18-11-
2016 &amp; 13-03-2019 in appeal Nos.10 / Pr.CIT-3 / 263 / 16-17
&amp; 10098 / 2017-18 / A3 / CIT(A)-6, involving proceedings
u/s.143(3) (of Income Tax Act, 1961) (in former appeal) and u/s.143(3) (of Income Tax Act, 1961) r.w.s.263 (of Income Tax Act, 1961) (in
latter appeal) of the Income Tax Act, 1961 [in short, ‘the Act’];
respectively. 
Heard both the parties. Case files perused. 
2. It transpires at the outset that this assessee’s instant
appeal suffers from 85 days delay stated to be attributable to
the reason(s) beyond its control as per condonation
petition/affidavit. No rebuttal has come from the departmental
side. The impugned delay is condoned therefore. 
3. We advert to the assessee’s former appeal ITA
No.557/Hyd/2018 challenging correctness of the PCIT’s action
assuming Section 263 (of Income Tax Act, 1961) revision jurisdiction thereby terming the
corresponding regular assessment dt.16-03-2015 as an
erroneous and prejudicial one to the interest of the Revenue.
There is no dispute that the CIT’s detailed discussion holds in
Section 263 (of Income Tax Act, 1961) order in paras 7 to 11 inter alia hold that the
assessee had derived interest income of Rs.44,84,828/- on the
fixed deposits made with the Karur Vysya Bank, Hyderabad
followed by its claim of administrative expenditure, financial
costs and depreciation etc. to the tune of Rs.1,87,311/-,
Rs.2,853/- and Rs.44,46,552/-; respectively totalling to
Rs.46,36,716/-. The PCIT holds that the said three heads of
expenses are in the nature of pre-operative expenditure which
could not be set-off against the assessee’s foregoing interest
income. And that the Assessing Officer’s action allowing the
assessee’s claim in a very casual and mechanical manner
deserves to be revised for want of proper enquiry rendering the
impugned assessment as both erroneous as well as prejudicial
to interest of the Revenue. 
4. We have given our thoughtful consideration to rival
pleadings and find no reason to sustain the impugned revision
action. This is for the reason that the assessee’s administrative
expenses are in the nature of compulsorily office expenditure
which have been held eligible for intra-head set-off against
income from other sources than u/s.57(iii) (of Income Tax Act, 1961) by the Assessing
Officer. The factual position is hardly different qua its latter
two heads of financial costs; including that directly paid to the
bank of Rs.2,8,53/- (supra) pertains to the very account only
as well as the fact that the impugned depreciation/ amortization has been a continuing relief granted very well from the preceding assessment years, whose facts and figures are nowhere in dispute. 
Coupled with this, the assessee has also filed on record
the necessary correspondence/show cause notice issued by
the Assessing Officer in Section 143(2) (of Income Tax Act, 1961) &amp; 142(1) notices dt.13-
05-2014 and 24-02-2015 followed by its detailed reply on 02-
12-2015. We therefore hold that the PCIT has erred in law and
on facts in assuming Section 263 (of Income Tax Act, 1961) revision jurisdiction. We
quote hon'ble apex court’s landmark decision in Malabar
Industrial Co. Vs. CIT [243 ITR 83] (SC) wherein it was held
that an assessment has to be both erroneous as well as causing
prejudice to the interest of the Revenue; simultaneously, before
it is sought to be subjected to exercise of revision jurisdiction
u/s.263 (of Income Tax Act, 1961). Their lordships further make it clear that it
is not each and every assessment which attracts Section 263 (of Income Tax Act, 1961)
revision but only wherein the Assessing Officer has not taken
one of the two possible views; as the case may be. We draw
strong support therefrom and reverse the learned PCIT’s action
exercising Section 263 (of Income Tax Act, 1961) revision jurisdiction. The impugned
Section 143(3) (of Income Tax Act, 1961) regular assessment dt.16-03-2015 stands
revived as the necessary corollary therefore.
The assessee’s instant Section 263 (of Income Tax Act, 1961) appeal ITA
No.557/Hyd/2018 is accepted.

5. Same order to follow in assessee’s consequential latter
appeal ITA No.1429/Hyd/2019 as the impugned assessment
framed in furtherance to the PCIT’s foregoing Section 263 (of Income Tax Act, 1961)
revision directions has no legs to stand. 
No other ground has been pressed before us. 
6. These assessee’s two appeals are allowed in above terms.
A copy of this common order be placed in the respective case
files. 
Order pronounced in the open court on 8th October, 2021

Sd/- Sd/- 
(LAXMI PRASAD SAHU) (S.S.GODARA) 
ACCOUNTANT MEMBER JUDICIAL MEMBER 
Hyderabad, 
Dated: 08-10-2021

These assessee’s appeals for AY.2012-13 arise against
the Pr.CIT-3 & CIT(A)-6, Hyderabad’s order(s) dated 18-11-
2016 & 13-03-2019 in appeal Nos.10 / Pr.CIT-3 / 263 / 16-17
& 10098 / 2017-18 / A3 / CIT(A)-6, involving proceedings
u/s.143(3) (of Income Tax Act, 1961) (in former appeal) and u/s.143(3) (of Income Tax Act, 1961) r.w.s.263 (of Income Tax Act, 1961) (in
latter appeal) of the Income Tax Act, 1961 [in short, ‘the Act’];
respectively. 
Heard both the parties. Case files perused. 
2. It transpires at the outset that this assessee’s instant
appeal suffers from 85 days delay stated to be attributable to
the reason(s) beyond its control as per condonation
petition/affidavit. No rebuttal has come from the departmental
side. The impugned delay is condoned therefore. 
3. We advert to the assessee’s former appeal ITA
No.557/Hyd/2018 challenging correctness of the PCIT’s action
assuming Section 263 (of Income Tax Act, 1961) revision jurisdiction thereby terming the
corresponding regular assessment dt.16-03-2015 as an
erroneous and prejudicial one to the interest of the Revenue.
There is no dispute that the CIT’s detailed discussion holds in
Section 263 (of Income Tax Act, 1961) order in paras 7 to 11 inter alia hold that the
assessee had derived interest income of Rs.44,84,828/- on the
fixed deposits made with the Karur Vysya Bank, Hyderabad
followed by its claim of administrative expenditure, financial
costs and depreciation etc. to the tune of Rs.1,87,311/-,
Rs.2,853/- and Rs.44,46,552/-; respectively totalling to
Rs.46,36,716/-. The PCIT holds that the said three heads of
expenses are in the nature of pre-operative expenditure which
could not be set-off against the assessee’s foregoing interest
income. And that the Assessing Officer’s action allowing the
assessee’s claim in a very casual and mechanical manner
deserves to be revised for want of proper enquiry rendering the
impugned assessment as both erroneous as well as prejudicial
to interest of the Revenue. 
4. We have given our thoughtful consideration to rival
pleadings and find no reason to sustain the impugned revision
action. This is for the reason that the assessee’s administrative
expenses are in the nature of compulsorily office expenditure
which have been held eligible for intra-head set-off against
income from other sources than u/s.57(iii) (of Income Tax Act, 1961) by the Assessing
Officer. The factual position is hardly different qua its latter
two heads of financial costs; including that directly paid to the
bank of Rs.2,8,53/- (supra) pertains to the very account only
as well as the fact that the impugned depreciation/ amortization has been a continuing relief granted very well from the preceding assessment years, whose facts and figures are nowhere in dispute. 
Coupled with this, the assessee has also filed on record
the necessary correspondence/show cause notice issued by
the Assessing Officer in Section 143(2) (of Income Tax Act, 1961) & 142(1) notices dt.13-
05-2014 and 24-02-2015 followed by its detailed reply on 02-
12-2015. We therefore hold that the PCIT has erred in law and
on facts in assuming Section 263 (of Income Tax Act, 1961) revision jurisdiction. We
quote hon'ble apex court’s landmark decision in Malabar
Industrial Co. Vs. CIT [243 ITR 83] (SC) wherein it was held
that an assessment has to be both erroneous as well as causing
prejudice to the interest of the Revenue; simultaneously, before
it is sought to be subjected to exercise of revision jurisdiction
u/s.263 (of Income Tax Act, 1961). Their lordships further make it clear that it
is not each and every assessment which attracts Section 263 (of Income Tax Act, 1961)
revision but only wherein the Assessing Officer has not taken
one of the two possible views; as the case may be. We draw
strong support therefrom and reverse the learned PCIT’s action
exercising Section 263 (of Income Tax Act, 1961) revision jurisdiction. The impugned
Section 143(3) (of Income Tax Act, 1961) regular assessment dt.16-03-2015 stands
revived as the necessary corollary therefore.
The assessee’s instant Section 263 (of Income Tax Act, 1961) appeal ITA
No.557/Hyd/2018 is accepted.

Sd/- Sd/- 
(LAXMI PRASAD SAHU) (S.S.GODARA) 
ACCOUNTANT MEMBER JUDICIAL MEMBER 
Hyderabad, 
Dated: 08-10-2021

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An assessment has to be both erroneous as well as causing prejudice to the interest of the Revenue simultaneously, before it is sought to be subjected to exercise of revision jurisdiction u/s.263 (of Income Tax Act, 1961).