The revisional power under Section 263 of the Income Tax Act cannot be invoked when the Assessing Officer (AO) allows a deduction under Section 32AC after a proper inquiry, the Kerala High Court stated.
Justices A. Muhamed Mustaque and Harisankar V. Menon cited that only for the reason that AO extended the deduction claimed after performing investigations, the exercise of the power u/s 263 of the Act is not needed. The revisional authority can correct the error, if any, executed by the AO, by learning that the extension of the benefit of deduction was incorrect, with reference to the purchase of the assets during the previous years.
U/s 32AC of the Income Tax Act, the taxpayer had claimed benefits. Section 32AC delivers for deductions for investments made by a company in “new plant or machinery” after 31.03.2013 but before 01.04.2015, provided the aggregate amount of actual cost of new assets surpassing Rs 100 Crores, in the specified manner.
The taxpayer argues that the Assessing Officer (AO) raised several queries regarding the claims made in the tax returns, one of which concerned the eligibility for a deduction u/s 32AC of the Act. The taxpayer provided clarifications addressing this query, and based on those clarifications, the Assessing Officer approved the Section 32AC deduction.
U/s 263 of the Act, the respondent/Principal Commissioner of Income Tax thereafter sought to invoke the suo motu revisional power since, according to him, a major part of the assets purchased were before 01.04.2013, which was omitted to be noticed by the AO while permitting the claim made by the taxpayer. The respondent/Principal Commissioner of Income Tax, while rejecting the taxpayer’s claim, issued an order concluding that the AO had wrongly assumed the facts of the case and had wrongly applied the law to the case.
The bench considered with the taxpayer that the suo motu measure had started as noticed previously, as a major part of the purchases entitling the deduction were made before the cut-off date (01.04.2013). But, the proviso to Section 32AC(1A) of the Act provided for extension of the advantages for the year in which the “installation” has taken place.
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As to the applicability of the proviso to Section 32AC(1A), the authority can acknowledge the issue rolled out by the Finance Act, 2016, with only a prospective effect, as not applicable for the year under assessment, the bench cited. The tribunal erred in confirming the exercise of suo motu revisional power in this case, the bench held.
The bench for the above has permitted the appeal and remitted the case to the revisional authority for de novo disposal.
| Case Title | M/s Apollo Tyres Ltd. v. The Principal Commissioner of Income Tax |
| Case No. | ITA NO. 63 OF 2024 |
| For Petitioner | Abraham Joseph Markos |
| For Respondent | Jose Joseph |
| Kerala High Court | Read Order |
