2012 (10) TMI 389 - HC - Income Tax

Revision u/s 263 - Order Passed being erroneous and prejudicial to interest of Revenue - Held that - omission on the part of AO in not including the amount of Rs.8 lacs to the income of the assessee without making appropriate inquiry, while passing the assessment order in the case of assessee for the relevant assessment year was undoubtedly erroneous and prejudicial to the interest of the revenue. The matter relates only to the amount of Excise Duty to be reimbursed by the assessee s sister concern M/s. Plasto Packs International Pvt. Ltd. in regard to job work and not with regard to any liability of Excise Duty borne by the assessee on other manufacturing activities undertaken by it. Regarding the amount of double addition and double taxation, suffice it to say that these are the matters to be gone into by the AO while passing the assessment order afresh after due consideration of the material on record. - remand order as passed by ITAT sustained.

Issues:
Appeal against ITAT order under Section 260 A of Income Tax Act, 1961 - Assessment year 1992-93 - CIT's order under Section 263 - Erroneous assessment - Prejudicial to revenue - Non-inclusion of income - Job work agreement - Excise Duty liability - Reimbursement dispute - Fresh assessment order - Double addition concern - Jurisdictional error.

Detailed Analysis:

1. Background and Assessment:
The appeal under Section 260 A of the Income Tax Act, 1961 was directed against the ITAT order dismissing the appellant-assessee's appeal against the CIT's order under Section 263 for the assessment year 1992-93. The CIT found the assessment order by the AO under Section 143(3) as erroneous and prejudicial to the revenue due to non-inclusion of income related to a job work agreement with a sister concern.

2. Job Work Agreement and Excise Duty Liability:
The CIT observed that the assessee was engaged in job work for its sister concern under an agreement. The CIT noted discrepancies in the treatment of Excise Duty liabilities between the two companies and found that the AO failed to include the reimbursed Excise Duty amount in the assessee's income. The CIT initiated revision proceedings under Section 263 based on the non-inclusion of income.

3. Dispute and Explanation by Assessee:
The assessee contended that no debit note was issued to the sister concern for the disputed amount, citing an undertaking that prevented such demands. The assessee argued that the demand letter was an intimation, not a claim, and the amount was related to prior years, not the assessment year in question.

4. CIT's Decision and ITAT's Dismissal:
The CIT, after considering the explanations, found the AO's omission to include the amount as erroneous and prejudicial to revenue. The ITAT upheld the CIT's order, leading to the current appeal by the appellant.

5. Legal Analysis and Conclusion:
The High Court analyzed the legal provisions under Section 263, emphasizing the CIT's power to revise erroneous orders prejudicial to revenue. The Court found the AO's failure to inquire into the Excise Duty reimbursement issue as a clear error, justifying revision. The Court dismissed the appellant's arguments regarding double addition and taxation, stating these concerns should be addressed in the fresh assessment.

6. Final Decision:
The High Court concluded that no substantial question of law arose in the appeal, affirming the dismissal of the appeal against the CIT's order. The Court upheld the CIT's decision to direct a fresh assessment to include the disputed income, emphasizing the necessity for proper inquiry and due process in determining tax liabilities.

This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive overview of the facts, arguments, and the court's decision in the case.

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