2013 (3) TMI 98 - HC - Income Tax

Revision u/s 263 - erroneous and prejudice to revenue order - held that - Assessing Officer on the basis of a detailed inquiry found that on procurement of orders from various Government Department for the respondent-assessee, Dr. Shashi Kant Gupta had rendered services in his individual capacity, the amount of commission which is alleged tohave been paid to M/s Ratandeep Polymers (P) Ltd., has to be assessed on substantive basis in the hands of Dr. Shashi Kant Garg. There is no question of holding that the Assessing Officer had not made a detailed inquiries in this behalf. The order of Commissioner of Income Tax (Appeals) under Section 263 of the Act has been righly set aside by the Tribunal. - Decided against the revenue.

Summary

Issues:
- Appeal filed under Section 260 (A) of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Delhi Bench.
- Interpretation of Section 263 of the Income Tax Act regarding the assessment of commission paid to a company.
- Validity of the order passed by the Commissioner of Income Tax under Section 263 of the Act.
- Assessment of commission paid to M/s Ratandeep Polymers (P) Ltd. in the hands of an individual.

Analysis:

The judgment pertains to four appeals filed under Section 260 (A) of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Delhi Bench. The substantial question of law in all appeals revolved around the interpretation of Section 263 of the Act. The core issue was whether the Commissioner of Income Tax was justified in invoking the provisions of Section 263 to set aside the order of the Assessing Officer regarding the assessment of commission paid to M/s Ratandeep Polymers (P) Ltd. The Assessing Officer had found that the commission was actually paid to an individual, Dr. Shashi Kant Garg, who had procured orders from various Government Departments on behalf of the assessee. The Tribunal set aside the Commissioner's order under Section 263, leading to the present appeal.

The facts of the case revealed that for the assessment years in question, the Assessing Officer had conducted a detailed inquiry and concluded that the commission allegedly paid to M/s Ratandeep Polymers (P) Ltd. was, in fact, paid to Dr. Shashi Kant Garg. The Commissioner of Income Tax, Meerut, exercising powers under Section 263, set aside the Assessing Officer's order citing manipulated accounts of the company and lack of services rendered. However, the Tribunal overturned the Commissioner's order, emphasizing that Dr. Shashi Kant Garg had indeed provided services in his individual capacity, justifying the assessment of the commission in his hands.

During the proceedings, arguments were presented by the Senior Standing Counsel for the Revenue and the counsel representing the respondent-assessee. The High Court, after considering the detailed inquiry conducted by the Assessing Officer and the individual capacity of Dr. Shashi Kant Garg in procuring orders, upheld the Tribunal's decision. The Court found no legal infirmity in the Tribunal's order and dismissed the appeal, affirming the assessment of the commission in the hands of Dr. Shashi Kant Garg.