Case Note & Summary
The appellant-assessee, Mirum Digital Pvt. Ltd., is engaged in digital marketing and buys media space from online platforms like LinkedIn, Google, etc., on behalf of clients. It recovers advertisement costs from clients and charges a campaign management fee of 4% to 7%. For A.Y. 2017-18, the assessee filed its return of income, which was processed under Section 143(1) of the Income Tax Act, 1961. Subsequently, the case was selected for scrutiny under CASS, and the Assessing Officer (AO) passed an assessment order under Section 143(3) of the Act. The Principal Commissioner of Income Tax (PCIT), Mumbai, invoked revision jurisdiction under Section 263 of the Act, holding that the AO did not examine the issue of revenue reconciliation and reimbursement of expenses. The PCIT set aside the assessment order and directed the AO to pass a fresh assessment order after proper inquiry. The assessee appealed to the Income Tax Appellate Tribunal (ITAT), which dismissed the appeal, upholding the PCIT's order. The assessee then filed an appeal under Section 260A of the Act before the Bombay High Court. The High Court framed four questions of law, including whether the ITAT was justified in upholding the revision order, whether the AO had examined the issues, and whether the revision order was sustainable despite the assessee's non-appearance before the PCIT. The High Court noted that the AO had not made any inquiry regarding revenue reconciliation and reimbursement of expenses, and the assessment order was passed without proper examination. The court held that the PCIT correctly exercised revision jurisdiction as the assessment order was erroneous and prejudicial to the interests of the Revenue. The court also held that the non-appearance of the assessee before the PCIT did not vitiate the proceedings. The High Court dismissed the appeal, upholding the ITAT's order.
Headnote
A) Income Tax - Revision under Section 263 - Lack of Inquiry - The Principal Commissioner of Income Tax (PCIT) invoked revision jurisdiction under Section 263 of the Income Tax Act, 1961, on the ground that the Assessing Officer (AO) failed to examine the issue of revenue reconciliation and reimbursement of expenses during the assessment proceedings. The assessee did not appear before the PCIT despite notice. The PCIT set aside the assessment order and directed the AO to pass a fresh assessment order after proper inquiry. The ITAT upheld the revision order. The High Court held that the AO did not make any inquiry on the said issues, and therefore, the assessment order was erroneous and prejudicial to the interests of the Revenue. The revision order was sustainable. (Paras 1-27) B) Income Tax - Revision under Section 263 - Non-appearance of Assessee - The assessee did not appear before the PCIT during the revision proceedings. The PCIT relied on the assessment records. The High Court held that the non-appearance of the assessee does not vitiate the revision proceedings, as the PCIT can rely on the records available. The revision order was not arbitrary or perverse. (Paras 1-27)
Issue of Consideration
Whether the Income Tax Appellate Tribunal was justified in upholding the order passed by the Principal Commissioner of Income Tax under Section 263 of the Income Tax Act, 1961, revising the assessment order for A.Y. 2017-18 on the ground that the Assessing Officer did not examine the issue of revenue reconciliation and reimbursement of expenses.
Final Decision
The Bombay High Court dismissed the appeal, holding that the ITAT was justified in upholding the revision order passed by the PCIT under Section 263 of the Income Tax Act, 1961. The court found that the Assessing Officer did not examine the issue of revenue reconciliation and reimbursement of expenses, and therefore, the assessment order was erroneous and prejudicial to the interests of the Revenue. The revision order was sustainable.
Law Points
- Revision under Section 263 of Income Tax Act
- 1961
- Lack of inquiry by Assessing Officer
- Sustainability of revision order
- Non-appearance of assessee before PCIT
