2014 (12) TMI 679 - AT - Income Tax

Validity of revision u/s 263 Invocation of section by Commissioner Held that - The AO has made an enquiry regarding the claim of depreciation on tangible asset and after considering the relevant agreement under which the assessee had acquired the right for revival of dormant subscribers of RCOM Ltd. - it is not a case of complete lack of enquiry on the part of the AO on the issue of allowing depreciation on intangible asset being business or commercial rights acquired under the agreement for revival of dormant subscribers of RCOM - once the AO has conducted the enquiry and after examination of relevant record as well as contention of the assessee has given a finding then the provisions of section 263 can be invoked by the Commissioner only if the view taken by the AO is not permissible under the law - when the matter was restored back to the file of AO for a fresh consideration after giving reasonable opportunity of hearing to the assessee then it is apparent that the Commissioner has not arrived to a concluding finding that the view taken by the AO is not permissible under the law. The issue of tangible asset being business or commercial right as per section 32(1)(ii) of the Act is a debatable issue - any business or commercial right which is obtained for carry on business with effectiveness is likely to fall or comes within the sweep meaning of tangible asset in AREVA T & D INDIA LTD. Versus THE DEPUTY COMMISSIONER OF INCOME-TAX 2012 (4) TMI 79 - DELHI HIGH COURT it has been held that the term business or commercial right of similar nature has been additionally used under the category of intangible asset referred to section 32(1)(ii) clearly demonstrates that the legislature did not intend to provide for depreciation only in respect of specified intangible asset but also to other categories of intangible assets which were neither feasible nor possible to exhaustively enumerate - the expression any business or commercial rights cannot be restricted to only the six categories of the assets as mentioned in section 32(1)(ii) - it cannot be said that the claim of the assessee and view of the AO is absolutely contrary to law but the issue of allowability of depreciation on intangible asset being business or commercial rights is a debatable issue - once the AO has taken a possible view then the Commissioner is not permitted to invoke the provisions of section 263 merely because he did not agree with the view taken by the AO. Share application money and unsecured loan Held that - The AO called for financial details of these companies and also examine the parties in order to satisfy himself about the genuineness of the transaction - on the basis of the record available before him, the Assessing Officer accepted the claim of the assessee the Commissioner has not found any fault with the details and records filed by the assessee in support of the claim but has cited the reasons that the Assessing Officer has not conducted the proper enquiry - the assessee has also filed the bank statements of these companies showing the transaction of payment of share premium as well as loans to the assessee - the Commissioner has travelled beyond the jurisdiction as prescribed u/s 263 and the revision order is not sustainable and is set aside Decided in favour of assessee.

Issues Involved:
1. Validity of the revision order issued under section 263 in the name of a dissolved company.
2. Legitimacy of the assessment of Elder Infotech Pvt. Ltd. for A.Y. 2009-10.
3. Invocation of section 263 by the CIT for setting aside the assessment order under section 143(3).
4. Examination of the nature of rights acquired by the assessee and whether they qualify as intangible assets for depreciation under section 32(1).
5. Adequacy of examination of amounts received through preference shares and unsecured loans.

Detailed Analysis:

Issue 1: Validity of the Revision Order Issued in the Name of a Dissolved Company
The assessee argued that the revision order under section 263 was issued in the name of Elder Infotech Pvt. Ltd., which had been dissolved upon its amalgamation with the appellant company. The appellant contended that the order should be annulled as it was passed in the name of a non-existent entity. However, the tribunal found no error or illegality in the Commissioner writing the name of the assessee along with the erstwhile company being merged with the assessee. Therefore, this ground of the assessee's appeal was dismissed.

Issue 2: Legitimacy of the Assessment of Elder Infotech Pvt. Ltd. for A.Y. 2009-10
The appellant argued that the assessment of Elder Infotech Pvt. Ltd. for A.Y. 2009-10 could not be made on any person, including the appellant, as there were no provisions in the Income Tax Act permitting such an assessment. The tribunal noted that the company had been dissolved on August 23, 2011, with effect from April 1, 2010, and therefore, no proceedings relating to the determination of tax liability could be commenced on Elder Infotech Pvt. Ltd. or any other person including the appellant.

Issue 3: Invocation of Section 263 by the CIT
The CIT invoked section 263, arguing that the assessment order was erroneous and prejudicial to the interest of revenue. The tribunal noted that the CIT raised concerns about the adequacy of the Assessing Officer's examination of the issues related to depreciation on intangible assets and the amounts received through preference shares and unsecured loans. The tribunal held that the CIT could not invoke section 263 merely because he disagreed with the view taken by the Assessing Officer, especially when the Assessing Officer had conducted an inquiry and taken a possible view.

Issue 4: Examination of the Nature of Rights Acquired by the Assessee
The CIT questioned whether the rights acquired by the assessee under an agreement with Reliance Communications Ltd. qualified as intangible assets for depreciation under section 32(1). The tribunal noted that the Assessing Officer had examined the issue and restricted the claim of depreciation. The tribunal referred to various judgments, including those of the Hon'ble Supreme Court and High Courts, which supported the view that business or commercial rights acquired for carrying on business effectively could qualify as intangible assets. Therefore, the tribunal concluded that the issue was debatable, and the CIT could not invoke section 263 merely because he did not agree with the view taken by the Assessing Officer.

Issue 5: Adequacy of Examination of Amounts Received Through Preference Shares and Unsecured Loans
The CIT argued that the Assessing Officer had not adequately examined the amounts received through preference shares and unsecured loans. The tribunal noted that the Assessing Officer had called for financial details and examined the parties. The tribunal held that the CIT could not initiate proceedings under section 263 with a view to start fishing and roving enquiries in matters or orders already concluded. The tribunal referred to various judgments supporting the view that if the Assessing Officer had conducted an inquiry and taken a possible view, the CIT could not invoke section 263 merely because he did not agree with the view taken by the Assessing Officer.

Conclusion:
The tribunal concluded that the CIT had traveled beyond the jurisdiction prescribed under section 263. Therefore, the impugned revision order was set aside, and the appeal of the assessee was allowed. The tribunal also dismissed the ground regarding the validity of the revision order passed in the name of a non-existent entity, as it found no error or illegality in the Commissioner writing the name of the assessee along with the erstwhile company being merged with the assessee.

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