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2013 (11) TMI 115 - AT - Income TaxRevision of Order u/s 263 Held that - Following CIT v. Max India Ltd. 2007 (11) TMI 12 - Supreme Court of India - The order of the Assessing Officer allowing the claim of the assessee was based on a plausible view and the said view is not open for review by the Commissioner of Income-tax by way of invoking the jurisdiction under section 263 of the Act - Decided in favour of the assesse. Keyman Insurance Premium paid on lives of Partner - Held that - Following CIT v. B. N. Exports 2010 (3) TMI 186 - BOMBAY HIGH COURT - The assessee has no control over the way an assessment order is drafted and since, generally, the issues which are accepted by the Assessing Officer do not find mention in the assessment order and only those points are taken note of on which the assessee s explanations are rejected and additions/disallowances are made - No merit in exercise of jurisdiction by the Commissioner of Income-tax under section 263.
Issues Involved:
1. Validity of the order passed by the Commissioner of Income-tax under section 263 of the Income-tax Act. 2. Allowability of insurance expenses, specifically keyman insurance policy premiums, as business expenditure. 3. Jurisdiction of the Commissioner of Income-tax under section 263 of the Income-tax Act. Issue-wise Detailed Analysis: 1. Validity of the Order Passed by the Commissioner of Income-tax under Section 263 of the Income-tax Act: The primary issue in the appeal was the validity of the order passed by the Commissioner of Income-tax under section 263 of the Income-tax Act, 1961. The Commissioner of Income-tax invoked section 263, holding that the assessment framed by the Assessing Officer was erroneous and prejudicial to the interests of the Revenue. The Commissioner contended that the insurance expenses claimed by the assessee were not allowable due to violations of IRDA circulars and incorrect application of the mercantile system of accounting. The Tribunal emphasized that for the Commissioner to exercise jurisdiction under section 263, the twin conditions of the order being erroneous and prejudicial to the interests of the Revenue must be satisfied simultaneously. The Tribunal referred to the Supreme Court's decision in Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC), which clarified that an order could be erroneous if it was based on incorrect facts or law. However, if the Assessing Officer adopted a permissible view in law, the Commissioner could not invoke section 263 merely because they disagreed with that view. 2. Allowability of Insurance Expenses, Specifically Keyman Insurance Policy Premiums, as Business Expenditure: The assessee claimed insurance expenses, including a significant amount paid as premiums for keyman insurance policies, as business expenditure. The Assessing Officer allowed these expenses after detailed inquiries during the assessment proceedings under section 143(3). The Commissioner of Income-tax later challenged this allowance, citing IRDA circulars and the mercantile system of accounting. The Tribunal noted that the assessee had provided explanations and supporting documents during the assessment, and the Assessing Officer had accepted the claim based on Circular No. 762 dated February 18, 1998, issued by the Central Board of Direct Taxes. The Tribunal also referred to judicial precedents, including CIT v. B. N. Exports [2010] 323 ITR 178 (Bom), which supported the allowability of keyman insurance premiums as business expenditure. The Tribunal concluded that the Assessing Officer's decision was based on a plausible view and could not be revised by the Commissioner under section 263. 3. Jurisdiction of the Commissioner of Income-tax under Section 263 of the Income-tax Act: The Tribunal examined whether the Commissioner of Income-tax had the jurisdiction to invoke section 263 in this case. The Tribunal reiterated that the Commissioner could only exercise this power if the order was both erroneous and prejudicial to the interests of the Revenue. The Tribunal referred to the Supreme Court's decision in CIT v. Max India Ltd. [2007] 295 ITR 282 (SC), which held that if the Assessing Officer's view was a possible view, the Commissioner could not interfere under section 263. The Tribunal found that the Assessing Officer had taken a permissible view supported by judicial precedents and the facts of the case. Therefore, the Commissioner had no jurisdiction to invoke section 263. The Tribunal set aside the order of the Commissioner of Income-tax and allowed the appeal of the assessee. Conclusion: The Tribunal concluded that the Commissioner of Income-tax had no jurisdiction to invoke section 263 as the Assessing Officer's order was based on a plausible view and was not erroneous or prejudicial to the interests of the Revenue. The Tribunal allowed the appeal of the assessee and set aside the order passed under section 263 of the Income-tax Act. The order was pronounced in the open court on April 30, 2012.
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