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2013 (12) TMI 20 - AT - Income TaxValidity of order u/s 263 Held that - Following CIT vs. M/s.Excel Industries Ltd. 2013 (10) TMI 324 - SUPREME COURT - Parties are not permitted to begin fresh litigation because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. The ld.CIT has not stated as to how the stand taken by the Revenue for earlier years was not correct and the AO taking a consistent view and order so passed was erroneous The ld.CIT has not exercised his jurisdiction u/s. 263 in accordance with the settled principle of law - He has failed to consider the submissions of the assessee on both the aspects and has merely based its order on the basis that the AO has not made any enquiry - Following ITO vs. D.G. Housing Projects Ltd 2012 (3) TMI 227 - DELHI HIGH COURT - a distinction must be drawn in the cases where the AO did not conduct an enquiry; as lack of enquiry by itself renders the order being erroneous and prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue - In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not - The assessee has been consistently claiming the income earned by way of interest as business income, the AO has made enquiry by way of questionnaire and assessee has given reply thereof - The AO has applied his mind under the facts and circumstances Decided in favour of assessee.
Issues Involved:
1. Validity of the CIT's order under Section 263 of the Income Tax Act. 2. Whether the CIT correctly invoked Section 263 by setting aside the AO's order and directing a reassessment. 3. Determination of interest income as business income or income from other sources. 4. Set-off of unabsorbed depreciation and business loss against income from other sources. 5. Examination of whether the CIT's action constitutes a change of opinion. 6. Whether the CIT's direction for reassessment was justified. Detailed Analysis: 1. Validity of the CIT's Order under Section 263: The Assessee contested that the CIT's order under Section 263 was void ab-initio, against law, facts, and evidence on record. The Tribunal noted that for Section 263 to be invoked, the CIT must be satisfied that the assessment order is both erroneous and prejudicial to the interests of the Revenue. The Tribunal concluded that the CIT failed to demonstrate these twin conditions, rendering the invocation of Section 263 unjustified. 2. Invocation of Section 263 and Direction for Reassessment: The CIT set aside the AO's order under Section 143(3), directing a reassessment after conducting necessary inquiries. The Tribunal observed that the AO had made specific inquiries regarding the interest income and received detailed replies from the Assessee. The Tribunal found that the CIT did not consider these submissions and merely based the order on the alleged lack of inquiry by the AO. Therefore, the Tribunal held that the CIT's direction for reassessment was not justified. 3. Determination of Interest Income: The Assessee claimed that the interest income was part of the business income, as it was earned from loans and advances made for business purposes. The Tribunal noted that the AO had accepted this claim after due inquiry. The Tribunal referenced past assessments where the interest income was treated as business income and found no reason for the CIT to change this consistent treatment. The Tribunal emphasized that the CIT did not provide a valid reason for treating the interest income as income from other sources. 4. Set-off of Unabsorbed Depreciation and Business Loss: The CIT contended that unabsorbed depreciation and business loss could not be set off against income from other sources. The Assessee argued, citing judicial precedents, that unabsorbed depreciation could be carried forward and set off against any income, including income from other sources. The Tribunal agreed with the Assessee, referencing decisions from the Supreme Court and the Gujarat High Court, which supported the Assessee's position on the set-off of unabsorbed depreciation and business loss. 5. Change of Opinion: The Assessee argued that the CIT's action constituted a change of opinion, which is not permissible under Section 263. The Tribunal supported this view, noting that the AO had made inquiries and formed an opinion based on the Assessee's submissions. The Tribunal cited the Delhi High Court's decision in ITO vs. D.G. Housing Projects Ltd., which distinguished between cases where no inquiry was made and cases where an inquiry was made but the findings were allegedly erroneous. The Tribunal concluded that the CIT's action was a change of opinion and not a valid ground for invoking Section 263. 6. Justification for Reassessment: The Tribunal found that the CIT did not justify the need for reassessment. The AO had made inquiries, and the Assessee had provided detailed responses, which the AO accepted. The Tribunal held that the CIT's order lacked consideration of these facts and was based on an incorrect premise that no inquiry was made. Consequently, the Tribunal quashed the CIT's order directing reassessment. Conclusion: The Tribunal allowed the Assessee's appeal, quashing the CIT's order under Section 263. The Tribunal held that the CIT's invocation of Section 263 was unjustified, as the AO had made due inquiries and the CIT's action constituted a change of opinion. The Tribunal also supported the Assessee's treatment of interest income as business income and the set-off of unabsorbed depreciation and business loss against income from other sources.
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