Section 263 of the Income-tax Act, 1961—Revision — Failure on part of AO to apply or at least even examine the applicability of section 184(5) certainly makes the assessment order erroneous and prejudicial to the interests of Revenue, therefore, the exercise of power under section 263 to revise the assessment order is valid.

Facts: Due to failure on the part of the assessee in furnishing the required details, AO proceeded to complete the assessment under section 144 r/w section 147 to the best of his judgment. Subsequently,he has wrongly allowed deduction towards interest and remuneration paid to partners completely overlooking the provisions of section 184(5). Therefore, he issued a show cause notice to the assessee requiring it to explain as to why the assessment should not be revised under section 263. Being aggrieved, assessee went on appeal before Tribunal.

Held, that once the assessment is completed under section 144, the provision of section 184(5) gets triggered automatically and it will override all other provisions of the Act. In the facts of the present case, by the very reason of the Assessing Officer completing assessment under section 144 of the Act, the provision of section 184(5) would automatically come into play. However, while completing the assessment, the AO completely overlooking the provisions of section 184(5) has allowed deduction on account of interest/remuneration paid to partners. Even, the facts on record make it clear that the Assessing Officer has never examined the aspect of applicability of section 184(5) . Thus, there is a complete failure on the part of AO in making necessary enquiry with regard to the deduction claimed by assessee qua the statutory provisions. The failure on the part of AO to apply or at least even examine the applicability of section 184(5) certainly makes the assessment order erroneous and prejudicial to the interests of Revenue. Therefore, the exercise of power under section 263 to revise the assessment order is valid. - SAROJ PRINT ARTS V/s PR. CIT - [2020] 181 ITD 502 (ITAT-MUMBAI)