2014 (4) TMI 384 - AT - Income Tax

Validity of order u/s 263 of the Act Revision - Disallowance of proportionate expenses under Rule 8D of the Rules Evidenced not furnished for Rebate of STT Held that - Revenue rightly contended that Rule 8D has a specific mechanism and methodology to arrive at the proportionate disallowance based on cost of average investment and assets - the benefit of security transaction tax issue cannot be given unless the assessee produces relevant evidence - Any relief without bringing evidence on record and due verification thereof, also becomes illegal and erroneous - The assessee could not demonstrate any average investment and as mandated by Rule 8D in specific terms besides, the security transaction tax issue also, the relief appears to have been given without there being any evidence on record which is not produced also despite specific query thus, there was no infirmity in the order of CIT(A) u/s 263 Decided against Assessee.

Summary

Issues involved:
1. Challenge to the order passed by the Commissioner of Income Tax under section 263.
2. Recalculation of disallowance of proportionate expenses as per Rule 8D.
3. Disallowance of rebate of securities transaction tax due to lack of evidence.

Analysis:
1. The appeal challenges the Commissioner's order under section 263 deeming the assessment as erroneous and prejudicial to revenue. The Assessing Officer initially made a net addition after verifying the suo moto disallowance by the assessee under section 14A. The appellant argued that the Assessing Officer applied his mind during assessment, as evidenced by the details provided and the addition made. However, the appellant failed to demonstrate the working of average investment and assets as per Rule 8D, and lacked evidence of payment of security transaction tax. Citing various judgments, the appellant contended that the Assessing Officer's view should not be deemed erroneous when one of the possible views is taken.

2. The Departmental Representative argued that Rule 8D provides a specific methodology for calculating proportionate disallowance based on average investment and assets. The appellant's failure to provide the working of Rule 8D led to an erroneous view by the Assessing Officer. Similarly, the absence of evidence for the security transaction tax disallowance rendered the relief illegal. The Departmental Representative asserted that the Commissioner's action under section 263 was justified, as the Assessing Officer's views were against the express provisions of Rule 8D and prejudicial to revenue. The Commissioner did not reverse the Assessing Officer's order but directed a re-decision after proper verification.

3. The Tribunal upheld the Commissioner's order under section 263, finding merit in the Departmental Representative's argument. The appellant's inability to demonstrate the average investment as per Rule 8D and the lack of evidence for the security transaction tax disallowance supported the Commissioner's decision. The Tribunal dismissed the assessee's appeal, affirming the Commissioner's order.

This detailed analysis highlights the key arguments, legal provisions, and reasoning behind the judgment, emphasizing the importance of compliance with statutory rules and the requirement for proper evidence in tax assessments.