2012 (8) TMI 583 - AT - Income Tax

Assuming jurisdiction u/s. 263 by CIT(A) - deduction u/s.10A allowed by AO which includes deduction on unrealised export proceeds - Held that - As decided in Morgan Stanley Advantage Services (P.) Ltd. Versus Income-tax Officer, 15(3)(2), Mumbai 2009 (3) TMI 640 - ITAT MUMBAI the case in favour of the assessee in which the assessee had applied for extension of time for remittance of foreign exchange but no formal approval from RBI was received for the purpose of section 10A - As no dispute to the fact that the assessee had applied to the RBI vide letter dated 11-09- 2006 requesting for extension of time for realisation of export proceeds and after receiving a reply from the RBI directing the assessee to approach the authorised dealer in this regard the assessee vide letter dated 06-11-2006 applied to ICICI Bank Ltd. for extension of time for realisation of export proceeds - Since in the instant case the AO has allowed deduction u/s.10A on the basis of the report of the Auditors as well as the various documents furnished before him, therefore the same is a possible view and cannot be termed as erroneous for invoking jurisdiction u/s. 263 by CIT(A)- in favour of assessee.

Summary

Issues:
Assessment of deduction u/s.10A for AY 2006-07; Jurisdiction of CIT under section 263.

Analysis:
1. The appeal challenged the CIT's order dated 01-03-2011 regarding the Assessment Year 2006-07, specifically focusing on the deduction u/s.10A of the Income Tax Act.
2. The assessee initially claimed deduction u/s.10A amounting to Rs. 3,57,70,951, including unrealised export proceeds of Rs. 93,88,653. The CIT found this deduction erroneous due to pending approval and unrealised foreign exchange of Rs. 3,67,35,179.
3. The CIT issued a notice under section 263, questioning the AO's order and directing a reassessment. The assessee argued that all required documents were submitted, and the AO's decision was based on valid grounds, citing a similar case precedent.
4. The dispute revolved around whether the AO's decision was erroneous and prejudicial to revenue, as required for CIT's jurisdiction under section 263.
5. The Tribunal analyzed the facts, noting the documents submitted by the assessee and the absence of formal approval for the extension of time for export proceeds realization. The Tribunal referenced a similar case where the Tribunal ruled in favor of the assessee under comparable circumstances.
6. Ultimately, the Tribunal found that while the AO's decision might be prejudicial to revenue, it was not erroneous as a possible view was taken based on available information and documents. As both conditions for CIT's jurisdiction under section 263 were not met, the Tribunal set aside the CIT's order and allowed the appeal filed by the assessee.
7. The judgment highlighted the importance of meeting both conditions of error and prejudice to revenue for CIT to assume jurisdiction under section 263, emphasizing that a possible view taken by the AO based on available evidence does not constitute an error, even if it may be prejudicial to revenue.