2015 (12) TMI 1377 - AT - Income Tax

Revision u/s 263 - Held that - In order to invoke the provision of section 263 of the Act, the order passed by the AO has to be erroneous and prejudicial to the interest of the revenue. Whereas in the present case the order is not erroneous nor prejudicial. The AO had called for details from the assessee in respect of Manglad Flash Flood claim and after considering the reply filed by the assessee allowed and accepted the treatment given to disputed claim in respect of Manglad Flash Flood which had been accepted for the assessment year 2007-08. The order is also not prejudicial to the interest of the revenue as the assessee itself offered the amount of claim of Manglad Flash Flood in the assessment year 2011-12, when the claim attained finality and thus, no prejudice was caused to the revenue. In the case of CIT Vs. Greenworld Corporation 2009 (5) TMI 14 - SUPREME COURT OF INDIA held that an order of Assessment passed by an ITO should not be interfered with only because another view is possible. Similarly in the case of CIT Vs. Max India Limited 2007 (11) TMI 12 - Supreme Court of India & Malbar Industries Co. Ltd. Vs. CIT (2000 (2) TMI 10 - SUPREME Court ) the Supreme Court has laid down the principle that when the Assessing Officer taken one of the two views permissible in law and which the Commissioner does not agree with and which results in a loss of revenue, it cannot be treated as erroneous order prejudicial to the interest of revenue, unless the view taken by the Assessing Officer is completely unsustainable in law. Considering the facts of the assessee and respectfully following the ratio laid down in various judgemenets (supra) we are of the considered view that the assessment order is neither erroneous nor prejudicial to the interest of the revenue and therefore, the order passed by the CIT u/s 263 is annulled/cancelled. - Decided in favour of assessee

Summary

Issues:
1. Challenge against proceedings u/s263 of the IT Act regarding exclusion of Manglad Flash Flood Claim.

Analysis:
The appeal challenges the order of the Commissioner of Income Tax-29, Mumbai, for the assessment year 2010-11, specifically focusing on the initiation of proceedings u/s263 of the Act. The primary contention revolves around the exclusion of Manglad Flash Flood Claim amounting to Rs. 13,45,47,750 from the income, leading to the assertion that the Assessing Officer's order was erroneous and prejudicial to the revenue's interests. The Commissioner set aside the assessment, directing the Assessing Officer to reframe it after investigating the genuineness of the claim. The appellant argued that the claim was disputed by the client, SJVN Ltd, and was excluded from the income as it was not actually received. The appellant maintained that the claim was offered for taxation in the subsequent year when finality was achieved, emphasizing the absence of revenue loss to the Income Tax Department. Legal precedents were cited to support the argument that the order was neither erroneous nor prejudicial to revenue, as the claim exclusion was justified and later offered for taxation.

The appellant contended that all necessary details regarding the exclusion of the Manglad Flash Flood Claim were provided to the Assessing Officer, and the claim was appropriately excluded due to being disputed by the client. It was highlighted that the claim exclusion was in line with past practices and was accepted in previous assessment years. The appellant emphasized that the order was not prejudicial to revenue as the claim was eventually offered for taxation in the succeeding year when the dispute was resolved. Legal principles were invoked to support the argument that income accrual is contingent upon the right to receive payment, which was not unfettered in this case due to the client's challenge in the High Court. The appellant cited various judicial decisions to illustrate that the Assessing Officer's decision was sustainable in law and not erroneous, thereby justifying the exclusion of the claim and the subsequent appeal against the Commissioner's order under section 263 of the IT Act.

The Tribunal, after considering the submissions and evidence presented, concluded that the Assessing Officer's order was neither erroneous nor prejudicial to the revenue's interests. It was noted that the appellant had excluded the disputed claim from income, following a consistent practice and offering it for taxation in the year of final settlement. The Tribunal relied on legal precedents to support the view that the exclusion of the claim was justified and did not result in revenue loss. The decision was aligned with the principle that an Assessing Officer's order should not be interfered with merely due to a possible alternative view. Consequently, the Tribunal allowed the appellant's appeal, annulling the Commissioner's order under section 263 of the IT Act.

In conclusion, the Tribunal's detailed analysis and application of legal principles established that the exclusion of the Manglad Flash Flood Claim from income was valid and consistent with past practices. The Tribunal's decision to annul the Commissioner's order under section 263 of the IT Act was based on the finding that the Assessing Officer's order was neither erroneous nor prejudicial to the revenue's interests, as the claim was eventually offered for taxation in the year of final settlement, ensuring no revenue loss occurred.