2011 (9) TMI 1042 - AT - Income Tax

Summary

Issues involved: Appeal against order u/s 263 of the Income-tax Act, 1961 for the assessment year 2005-06.

Grounds of Appeal:
1. Initiation of proceedings u/s 263 by CIT-1 against facts and bad in law.
2. CIT-1 failed to show how the order passed by DCIT is erroneous or prejudicial to revenue.
3. Observations of CIT in setting aside order with directions under Section 14A and rule 8D.
4. Ignored that Addl.CIT passed order after due application of mind.
5. Order of CIT-1 u/s 263 against the law and deserves to be quashed.
6. General ground.

Contentions:
- AR argued AO passed assessment order u/s 143(3) after due application of mind.
- AR cited case laws to support the argument.
- DR contended AO did not consider the issue dealt with by CIT in the order u/s 263.
- DR emphasized applicability of Section 14A to the case.
- DR referred to relevant provisions and case laws to support the argument.

Decision:
- Tribunal found AO did not address the issue raised by CIT u/s 263 in the assessment order.
- Specific query on Section 14A applicability not addressed by AR with evidence.
- CIT issued Show Cause Notice indicating AO's failure to apply mind.
- Tribunal dismissed appeal based on lack of AO's application of mind as per legal precedent.
- CIT set aside assessment order directing fresh assessment under Section 14A.
- AO's ignorance on Section 14A issue led to dismissal of appeal.
- Tribunal pronounced order on 21st September, 2011.