2011 (3) TMI 230 - AT - Income Tax

Revision - The Assessing Officer has considered the decision in the case of Goetze India Ltd. (2006 -TMI - 5171 - SUPREME Court) and his duty is to assess the correct income - He has come to the conclusion that in the assessee s case there is no new item of income or expenditure and correct computation of income from the set of transaction can be done in two ways - Held that - when two views are possible on a subject and the Assessing Officer has adopted one of the views and after deliberating on the facts the ld. CIT cannot impose his views and direct action under section 263 of the Act. - revisionary proceedings cancelled.

Summary

Issues Involved:
1. Verification of income arising from Non-Performing Assets (NPAs).
2. Claim for deduction of Rs. 1,83,16,468 on account of securitization income.

Detailed Analysis:

Issue 1: Verification of Income from NPAs
The CIT invoked section 263 of the Income-tax Act, 1961, to revise the assessment order for the year 2005-06, stating that the order was erroneous and prejudicial to the interests of revenue. The CIT noted that the assessee, following the mercantile system of accounting and RBI prudential norms, did not recognize income from Non-Performing Assets (NPAs) in its statutory and income-tax books. The CIT argued that the Assessing Officer (AO) should have examined whether income from NPAs was omitted and brought it to assessment, as RBI's directions are not binding on the Income-tax Department.

The assessee contended that the AO had already examined this issue, and no income could arise from NPAs. The Tribunal agreed with the assessee, referencing the Hon'ble Madras High Court's decision in CIT v. Elgi Finance Ltd. [2007] 293 ITR 357, which held that income from NPAs should be recognized only when it is actually received. The Tribunal concluded that since the AO had examined the issue in light of this judgment, there was no error in the assessment order, and the CIT's direction to verify the extent of income from NPAs was unwarranted.

Issue 2: Claim for Deduction of Rs. 1,83,16,468
The CIT also noted that the assessee claimed a deduction of Rs. 1,83,16,468 on account of securitization income, which was allowed by the AO without the assessee filing a revised return, contrary to the Supreme Court's decision in Goetze India Ltd. v. CIT [2006] 284 ITR 323. The assessee argued that this was not an issue of revising the return but of correcting the taxable income based on statutory auditors' advice.

The Tribunal held that the AO's duty is to assess the correct income, and the decision in Goetze India Ltd. does not prevent the AO from doing so. The AO had considered the correct computation of income from the given transaction, and since two views were possible, the CIT could not impose his view under section 263. The Tribunal quashed the CIT's revisional order and restored the original assessment order.

Conclusion:
The Tribunal concluded that the CIT's invocation of section 263 was not justified as the AO had duly examined both issues. The assessment order was neither erroneous nor prejudicial to the interests of revenue. The appeal of the assessee was allowed, and the original assessment order was restored.