2013 (7) TMI 992 - AT - Income Tax

Summary

Issues Involved:

1. Initiation of revision proceedings u/s 263 in respect of relief u/s 10A.
2. Extension of revision proceedings to deductions claimed on specific heads.
3. Direction by CIT to AO not to allow setting off of brought forward losses.

Summary:

1. Initiation of Revision Proceedings u/s 263 in Respect of Relief u/s 10A:
The CIT initiated revision proceedings u/s 263, questioning the AO's decision to allow the deduction u/s 10A without proper inquiries. The assessee argued that the AO had made sufficient inquiries and that the CIT's disagreement did not justify invoking section 263. The Tribunal held that the AO's order, based on detailed inquiries and following the Tribunal's earlier decisions in favor of the assessee, could not be deemed erroneous or prejudicial to the interests of revenue. The Tribunal emphasized that the CIT cannot assume jurisdiction u/s 263 merely due to a difference in opinion or for conducting further inquiries.

2. Extension of Revision Proceedings to Deductions Claimed on Specific Heads:
The CIT extended the revision proceedings to examine deductions claimed under various heads (repairs and maintenance, bad debts, CENVAT credit, club membership expenditure, doubtful advances, and disallowance u/s 40(a)(i)/40(a)(ia)). The Tribunal noted that the AO had already considered these deductions during the assessment. It was held that the CIT's action of initiating further inquiries and calling for additional documents during the revision proceedings was not permissible under section 263. The Tribunal reiterated that the CIT cannot make a roving inquiry or substitute the AO's judgment with his own unless the AO's order is shown to be erroneous and prejudicial to the interests of revenue.

3. Direction by CIT to AO Not to Allow Setting Off of Brought Forward Losses:
The CIT directed the AO to withdraw the set-off of brought forward losses, arguing that the AO had wrongly allowed them. The Tribunal observed that the issue of carry forward and set-off of losses was consequential and had already been addressed in the assessee's favor in earlier appellate orders. It was held that the CIT's exercise of jurisdiction u/s 263 on this ground was not justified, as the AO's decision was based on the Tribunal's binding orders. The Tribunal concluded that the CIT's order u/s 263 was without jurisdiction and bad in law.

Conclusion:
The Tribunal quashed the CIT's order u/s 263, holding that the AO's assessment was neither erroneous nor prejudicial to the interests of revenue. The Tribunal emphasized that the CIT cannot invoke section 263 to correct every mistake or error by the AO, especially when the AO's order is based on permissible views and detailed inquiries. Consequently, the assessee's appeal was allowed.