2010 (12) TMI 1283 - AT - Income Tax

Summary

Issues Involved:
1. Error in canceling the assessment order under section 143(3) of the Income-tax Act, 1961.
2. Failure to appreciate the verification and examination done by the Assessing Officer (AO).
3. Incorrect assumption about the payment of commission to a foreign agent.
4. Disregard of a jurisdictional Tribunal decision in a similar case.

Detailed Analysis:

1. Error in Canceling the Assessment Order Under Section 143(3):
The assessee contended that the Commissioner of Income Tax (CIT) erred in canceling the assessment order passed under section 143(3) of the Act. The CIT directed a fresh assessment after detailed inquiries and verification of transactions with Golden Cover Trading (GCT). The Tribunal noted that the CIT found the AO's order erroneous and prejudicial to the interests of the Revenue due to inadequate inquiries regarding the commission paid to GCT. The Tribunal highlighted that the AO had issued a show-cause notice and received detailed submissions from the assessee, which were considered before accepting the claim. The Tribunal emphasized that the CIT's power to revise under section 263 requires the order to be both erroneous and prejudicial to the Revenue, as established in Malabar Industrial Co. Ltd. vs. CIT, 243 ITR 83 (SC).

2. Failure to Appreciate the Verification and Examination Done by the AO:
The Tribunal observed that the AO had made inquiries and obtained compliance from the assessee regarding the commission payment. The AO had accepted the claim after examining the relevant agreement and material evidence. The Tribunal referred to CIT vs. Gabriel India Ltd., (1993) 203 ITR 108 (Bombay), which clarified that an order cannot be termed erroneous unless it is not in accordance with law. The Tribunal concluded that the AO's decision, made after due inquiry, cannot be deemed erroneous merely because the CIT had a different opinion.

3. Incorrect Assumption About the Payment of Commission to a Foreign Agent:
The Tribunal noted that the CIT assumed the assessee paid commission to GCT, which was not debited in the Profit & Loss account but deducted from the export sale invoice. The CIT considered GCT as the assessee's overseas customer rather than a commission agent. The Tribunal emphasized that the AO had accepted the commission payment based on the agreement and submissions provided by the assessee. The Tribunal reiterated that the CIT cannot exercise revisional jurisdiction merely due to a difference in opinion or inadequate inquiry, as established in CIT vs. Sunbeam Auto Ltd. [2010] 189 Taxman 436 (Del).

4. Disregard of a Jurisdictional Tribunal Decision in a Similar Case:
The assessee argued that the CIT disregarded a jurisdictional Tribunal decision in a similar case involving Shri Samir A. Batra. The Tribunal noted that the CIT dismissed the relevance of the cited case, stating that the facts were not exactly the same and the decision was not accepted by the Department. The Tribunal emphasized that the AO had made inquiries and accepted the claim based on the evidence provided. The Tribunal concluded that the CIT's assumption of jurisdiction under section 263 was not justified, as the AO had applied his mind and made a decision based on the material on record.

Conclusion:
The Tribunal set aside the CIT's order under section 263, quashing the same. The Tribunal held that the AO had made proper inquiries and accepted the assessee's claim after due consideration. The Tribunal emphasized that a mere change of opinion or inadequate inquiry does not justify the exercise of revisional jurisdiction by the CIT. Consequently, the appeal was allowed, and the impugned order under section 263 was quashed.