2014 (11) TMI 1179 - HC - Income Tax

Orders prejudicial to the interest of revenue u/s 263 - Held that - where two views are possible, and merely because the revisional authority did not like the view taken by the assessing authority, there is no ground for interfering u/s 263 - also where the order passed by AO is not prejudicial to the interest of the revenue, the question of exercising the power under section 263 does not arise - Decided in favor of assessee.

Summary

Issues:
Appeal against tribunal's order under Section 263 of the Income Tax Act.

Analysis:
The High Court of Karnataka heard an appeal filed by the revenue challenging a tribunal's order under Section 263 of the Income Tax Act. The tribunal had found that the Commissioner of Income Tax failed to establish errors prejudicial to the revenue in his order. The High Court reiterated the two conditions necessary for invoking power under Section 263: the order must be erroneous and prejudicial to the revenue. The tribunal had determined that the assessing authority's view was a valid one and that the order was not prejudicial to the revenue. The High Court emphasized that if two views are possible and the revisional authority disagrees with the assessing authority's view, it does not warrant interference under Section 263. The court further stated that when the assessing authority's order is not prejudicial to the revenue, there is no basis for exercising power under Section 263.

The High Court concluded that there was no merit in the revenue's appeal. It held that the substantial questions of law favored the assessee and not the revenue. Consequently, the appeal was dismissed.