2010 (11) TMI 700 - AT - Income Tax

Revision u/s 263 - Interest on refund u/s 244A - Assesment u/s 143(3) - Rectification of mistakes - Tax credit u/s 115JAA - According to the DIT(IT) because of the MAT credit allowed by the Assessing Officer as a pre-paid tax, the same resulted in excess allowance of interest u/s 244A to the extent of Rs.1763.78 lacs for which the order is erroneous and prejudicial to the interest of revenue - Representations were received to the effect that the tax credit allowed u/s 115JAA is not different from the tax paid in advance and consequently credit for the payment of minimum alternate tax should be allowed - Having regard to the background in which the amendment was brought into force, it must be regarded as being clarificatory in nature - In the I T Form I in Schedule G the tax credit to be allowed u/s 115JAA was to be reckoned after computing the interest liability u/s 234B - Held that various judicial pronouncements that for invoking the provisions of sec. 263, the twin conditions i.e. order must be erroneous and it must be prejudicial to the interest of revenue have to be satisfied - Since in the instant case the Assessing Officer has taken a view which is permissible and which is held to be correct in view of the ratio of the decision of the jurisdictional High Court; therefore, in our considered opinion, the DIT(IT) was not justified in the invoking provisions of sec. 263 of the I T Act

Summary

Issues:
Challenge to order under section 263 of the Income Tax Act for assessment year 2002-03; Challenge to Director of Income Tax (International Taxation) order on merit regarding interest refund under section 244A and MAT credit set off under section 115JAA(5).

Analysis:
The appeal was filed against the order under section 263 of the Income Tax Act for the assessment year 2002-03. The assessee challenged the Director of Income Tax (International Taxation) order invoking section 263 and also on merit regarding interest refund under section 244A and MAT credit set off under section 115JAA(5). The Assessing Officer passed an order under section 154 allowing MAT credit and interest under section 244A. However, the Director of Income Tax (International Taxation) found the interest granted on the refund to be in excess due to the MAT credit, leading to the issuance of a notice under section 263. The assessee contended that MAT credit was correctly set off before advance tax and TDS, thus no prejudice to the revenue interest. The Director, however, found the order erroneous and prejudicial, setting it aside and directing withdrawal of the interest allowed.

The counsel for the assessee cited various court decisions to support the contention that the Assessing Officer's order was permissible in law, thus challenging the Director's jurisdiction under section 263. The Departmental Representative supported the Director's order, emphasizing that even on debatable issues, section 263 can be invoked if the correct provisions of law were not examined. The counsel for the assessee argued against the assumption of jurisdiction under section 263, highlighting the Bombay High Court's order favoring the assessee.

The Tribunal considered the submissions, reviewed the orders, and relevant case laws. It found that the MAT credit was correctly set off, citing the decision of the jurisdictional High Court in a similar case. The Tribunal held that for section 263 to apply, the order must be both erroneous and prejudicial to revenue. Since the Assessing Officer's view was permissible and in line with the court's decision, the Director's invocation of section 263 was deemed unjustified. Consequently, the Tribunal set aside the Director's order, allowing the grounds raised by the assessee.

In conclusion, the Tribunal allowed the appeal filed by the assessee, pronouncing the order on 24.11.2010.