2015 (12) TMI 1609 - AT - Income Tax

Revision u/s 263 - erroneous computation of Book Profit u/s. 115JB - undisclosed claim of donation - whether order passed by the AO as not only erroneous but also prejudicial to the interest of the Revenue? - Held that - We find that vide letter dated 7th December, 2012, the assessee has furnished (a) ledger account of donation u/s. 80G alongwith donation receipts (b) copy of acknowledgement of return of income and balance sheet and profit and loss account of M/s. Shantilal Shanghvi Foundation alongwith all its schedule. This reply is placed at page-20 of the Paper Book and from pages 23 to 38, we find the receipts of donation to M/s. Shantilal Shanghvi Foundation. Thus, it can be seen that in response to a specific query, the assessee has filed all the related details alongwith supporting evidences. Therefore, it cannot be said that the AO has not examined this issue during the course of assessment proceedings. The decisions relied upon by the Ld. DR are altogether on different set of facts. The AO has thoroughly examined the claim and most importantly the ratio laid down by the Hon ble Supreme Court in the case of Apollo Tyres Ltd 2002 (5) TMI 5 - SUPREME Court squarely apply on the facts of the case. We, therefore, set aside the order of the Principal CIT and restored that of the AO made u/s. 143(3) of the Act. - Decided in favour of assessee

Summary

Issues involved:
1. Assessment order set aside by Principal CIT as erroneous and prejudicial to the interest of the Revenue.
2. Computation of Book Profit u/s. 115JB of the Act.
3. Power of Principal CIT under section 263 of the Income Tax Act.
4. Examination of issues during assessment proceedings.

Detailed Analysis:
1. The appeal was against the order of the Principal CIT setting aside the assessment order passed by the AO as erroneous and prejudicial to the Revenue's interest. The Principal CIT found that the donation debited to the Profit & Loss account was not paid in full during the year, affecting the computation of Book Profit u/s. 115JB of the Act. The Principal CIT directed a fresh assessment considering this issue, leading to the appeal by the assessee.

2. The bone of contention was the treatment of the donation amount in the Profit and Loss Account. The Principal CIT argued that the full donation amount cannot be debited on a payable basis, impacting the Book Profit calculation. The assessee had paid only a portion of the donation during the year, with the rest shown as a liability. This discrepancy led to the Principal CIT deeming the assessment order erroneous and prejudicial to Revenue's interest.

3. The Tribunal analyzed the power of the Principal CIT under section 263 of the Income Tax Act, citing the prerequisite that the order of the AO must be erroneous and prejudicial to Revenue's interest for the Principal CIT to intervene. Referring to legal precedents, the Tribunal emphasized that the Principal CIT's power is limited to cases where the AO's order is based on incorrect facts or law application. In this case, the Tribunal found that the Principal CIT's observations did not align with the legal standards set by previous judgments.

4. Regarding the examination of issues during assessment proceedings, the Tribunal noted that the assessee had provided detailed responses and supporting evidence to queries raised by the AO. The Tribunal found that the AO had thoroughly examined the donation claim, contrary to the Principal CIT's assertion. Drawing distinctions from other cases cited by the parties, the Tribunal concluded that the AO's assessment was conducted diligently, and the principles laid down by higher courts supported the assessee's position. Consequently, the Tribunal set aside the Principal CIT's order and upheld the AO's assessment made u/s. 143(3) of the Act, allowing the appeal filed by the assessee.