2014 (6) TMI 928 - HC - Income Tax

Revision u/s 263 - whetehr Revenue proceeds in invoking section 263 of the Income Tax Act 1961 although the view taken by the Assessing Officer is a possible view of the matter? - Held that - If the Tribunal s order is perused, the Tribunal merely emphasized on the Commissioner that he could not have invoked section 263 of the Income Tax Act in the given facts and circumstances but the Tribunal emphasized the fact that despite the authoritative pronouncement in the case of Malabar Industrial Co. Ltd. 2000 (2) TMI 10 - SUPREME Court the Commissioner has proceeded to exercise his powers under section 263 of the Income Tax Act to set aside a possible view of the matter. It is not that the Tribunal was emphasizing anything on the merits of the claim or that the view taken in Sulzer s case was the one applicable in its entirety on merits. What the Tribunal was emphasizing is when the Assessing Officer has taken a possible view, then section 263 of the Act could not have been invoked and that is how the Tribunal proceeded to set aside the order impugned in the Assessee s Appeal. No attempt was made to show that the Assessing Officer s view was not a possible one. Even otherwise, there was enough material in law to indicate that the legal position is otherwise. In such circumstances, we would not permit Mr Ahuja to argue before us that the present Appeal should be admitted on questions which were not subject matter of the Tribunal s order. We would not therefore make any observation with regard to the correctness of the view taken by the Tribunal in the Full Bench decision in M/s Sulzer India Ltd. 2010 (11) TMI 728 - ITAT, MUMBAI We agree that the Tribunal could not have invoked section 263 of the Act and the remedy of the Revenue if any, in law lies elsewhere. The order passed by the Assessing Officer has to be restored only on this count. It is only to emphasize and repeatedly that section 263 of the Income Tax Act could not have been invoked, that the Tribunal held that the view taken by the Assessing Officer is a possible view

Summary

Issues:
1. Challenge to the order passed by the Income Tax Appellate Tribunal under section 263 of the Income Tax Act, 1961.
2. Interpretation of the Sales Tax Deferment Scheme 1989 of the Government of Rajasthan.
3. Assessment of surplus arising from prepayment of sales tax loan as a capital or revenue receipt.
4. Invocation of section 263 of the Income Tax Act by the Commissioner of Income Tax.
5. Admissibility of the Appeal under section 260A of the Income Tax Act.

Analysis:
1. The High Court of Bombay heard an Appeal challenging the order passed by the Income Tax Appellate Tribunal under section 263 of the Income Tax Act, 1961 for the Assessment Year 2005-06. The Court noted a recurring trend where the Revenue invoked section 263 despite a possible view taken by the Assessing Officer. The case involved an Assessee, a Company availing benefits under the Sales Tax Deferment Scheme 1989 of the Government of Rajasthan. The Assessee prepaid a sales tax loan, resulting in a surplus credited to the Profit and Loss Account, which the Assessing Officer allowed but was later challenged by the Commissioner of Income Tax.

2. The Commissioner invoked section 263, contending that the surplus from the prepayment could be a capital or revenue receipt. The Assessee argued that the Assessing Officer's view was valid, citing the decision in Sulzer India Ltd. v/s Joint Commissioner of Income Tax. The Assessee also referred to the legal positions in the cases of Malabar Industrial Co. Ltd. v/s CIT and CIT v/s Max India Ltd. to support their case.

3. The Revenue appealed the Tribunal's decision, arguing that the Commissioner was justified in invoking section 263. The Court observed that the Tribunal emphasized that section 263 should not have been invoked as the Assessing Officer's view was a possible one. The Court dismissed the Revenue's Appeal, stating that the Tribunal's decision was correct, and section 263 should not have been invoked. The Court emphasized that the remedy for the Revenue, if any, lies elsewhere, and the Assessing Officer's order should be restored.

4. The Court concluded that the Appeal did not raise any substantial question of law and dismissed it without any order as to costs. The judgment highlighted the importance of considering the possible views taken by the Assessing Officer before invoking section 263 of the Income Tax Act.