2011 (5) TMI 581 - AT - Income Tax

Revision u/s 263 - CIT is required to exercise revisional power within the bounds of the law and has to satisfy the need of fairness in administrative action and fair play with due respect to the principle of audi alteram partem as envisaged in the Constitution of India as well in section 263 regarding the issue of interest on NPA - all points which have been made the basis for revising and coming to the conclusion that the order is erroneous in so far as it is prejudicial to the interests of Revenue cannot survive in the eyes of law in view of our foregoing discussion - assessment order in the given case cannot be revised on the basis of the grounds stated above and which do not make the assessment order erroneous and also prejudicial to the interests of the Revenue - Appeal is allowed

Summary

Issues:
Assessment order set aside by CIT u/s 263 - Errors in assessment for AY 2005-06 - Deduction of bad debts - Treatment of investment in securities - Amortization expenses - Software expenditure - Interest on NPAs.

Analysis:
The appeal pertains to the assessment year 2005-06 and challenges the order of the ld. CIT passed under section 263 of the Income Tax Act, 1961. The ld. CIT observed deficiencies in the assessment order, including the deduction claimed for bad debts written off, treatment of investment in securities, amortization expenses, software expenditure, and treatment of interest on NPAs. The CIT issued a notice to the assessee under section 263, prompting a written submission from the assessee. Subsequently, the ld. CIT set aside the assessment order, directing a fresh assessment in compliance with the Act, case laws, circulars, and Board instructions.

In response to the appeal, the Tribunal considered the grounds raised, which included issues such as the deduction under section 36(1)(vii), treatment of government securities, amortization expenses, software expenses, and interest on NPAs. The Tribunal highlighted the principles governing revision under section 263, emphasizing the necessity for the CIT to establish both error in the order and prejudice to the revenue for invoking revisionary powers. The Tribunal outlined various factors indicating an order as erroneous, including incorrect assumptions of facts or law, orders passed without due consideration, or in violation of laws.

Upon detailed examination, the Tribunal found that certain grounds raised by the assessee were covered by previous Tribunal orders and decisions of the Hon'ble Madras High Court in favor of the assessee. The Tribunal concluded that the Assessing Officer's decisions were in accordance with legal precedents and did not warrant revision under section 263. Specifically, the Tribunal noted that the issues related to deduction of bad debts, treatment of government securities, amortization expenses, software expenses, and interest on NPAs were correctly addressed by the Assessing Officer, and there was no error prejudicial to the revenue.

In light of the foregoing analysis, the Tribunal set aside the ld. CIT's order passed under section 263 and allowed the appeal of the assessee, upholding the original assessment order for the assessment year 2005-06. The Tribunal pronounced the order in open court on 6th May 2011, thereby resolving the issues raised in the appeal.