Revisional powers under Income-tax Act must be exercised based on demonstrable error and prejudice, not mere dissatisfaction with earlier allowances by Assessing Officer.

ORDER

PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER :

1. The assessee has filed appeal against the order of the ld. Principal Commissioner of Income-tax, Delhi-1[“Ld. PCIT”, for short] dated 29.03.2024for the Assessment Year 2018-19.

2. Brief facts of the case are, the case of the assessee was picked up for scrutiny for AY 2018-19 and the assessment under section 143(3) of the Income-tax Act, 1961 (for short ‘the Act’) was completed on 29.10.2021. Ld. PCIT, Delhi–1 on verification of the abovesaid assessment record observed that the order passed by the AO is erroneous insofar as it is prejudicial to the interest of Revenue for the reasons that historically issues on which addition was made in earlier years but no such disallowance/addition was made in this year u/s 35(2AB) of the Act. He observed that assessee had claimed deduction u/s 35(2AB) and AO has allowed the above said deduction claimed by the assessee. However, in AY 2017-18, the erstwhile AO had made the addition on this issue. The AO should have made proper enquiries to verify whether the assessee is entitled for deduction under this section in this year as well. He observed that several other issues were also not verified by the AO as discussed at page 2 of the impugned order and accordingly notice u/s 263 Of the Act was issued to the assessee. Assessee filed its objections. After considering the above objections, ld. PCIT observed that the assessee has submitted basic details, submitted copies of statutory forms and approval etc. and a larger number of section 80G donation receipts. It also submitted various circulars and explanation notes to the provision of Finance Act, 2009. It also filed Form 10DA and audited report as per Rule 18BBB for deduction u/s 80IA was filed. For deduction claimed u/s 35(1) only Form 3CL was filed before the AO. No computation of income or audited financial statement was filed before the AO. Apart from this, for the Transfer Pricing Officer’s proposal, a brief note for making necessary corrections was submitted. After considering the information contained in the assessment records, he was of the view that AO has made identical enquiry and verification of the claim based on the information submitted by the assessee. In response to the above submissions and queries raised by ld.PCIT, assessee submitted as under :-

3. After considering the above submissions, ld. PCIT rejected the same and held that assessment order is erroneous insofar as prejudicial to the interest of Revenue. Further he directed the AO to verify and examine the correctness and admissibility of claim of deduction u/s 80I/80IC.

He directed the AO as under ;-

“1. Verify and examine the correctness and admissibility of claim of deduction 80IA/80IC. AO may conduct following inquiries:

a. The AO may call for books of accounts and accompanying bills and vouchers and also transportation evidences to verify the transfer of each and every items of Plant and Machinery mentioned in column 26(d) of Form 10CCB.

b. AO may verify the correctness of the value of plant and machinery received on transfer and fulfillment of all the conditions including conditions mentioned in section 32 and conditions mentioned in section 80IA(3)(ii) read with Proviso and Explanation 1 and Explanation 2 and other relevant conditions as per Rule 18BBB.

c. AO may call for and examine separate balance sheet and P&L A/c for each of the undertakings as per the requirement of section 80IA/80IC.

The claim may be disallowed if all the conditions as per the Income Tax Act and Rules are not fulfilled or verified to be true.

2. AO may do the verifications regarding duty drawback received, which was one of the CASS reasons was not seen by AO in the assessment proceedings. In case the fi