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2014 (12) TMI 1370 - AT - Income TaxRevision u/s 263 - HELD THAT - The section starts from the wordings, The Commissioner may call for and examine the record of any proceeding under the Act . Here we have to make a distinction between record and order, because, both these terms have distinct connotations. An order is the mind of the AO/Officer to incorporate or not to incorporate any point in the order, whereas the record forms the basis for formation and construction of the order. It is the record of the case, from which, one can ascertain, as to whether the AO had conducted adequate enquiry to form a legally correct inference. It is, then upto the AO/revenue authorities to incorporate his inference drawn in the order. DR could neither elaborate nor assist us to convince us that the inference drawn by the AO, after conducting exhaustive enquiry was an erroneous view. We also find that the CIT did not initiate the proceedings himself but initiated the proceedings on the proposal received from the AO. This in our opinion, too is against the legislative spirit, because, the provision contemplates independent application of mind by the CIT, because the section says Commissioner may call for and examine the records of any proceedings under the Act and if he considers , which means that the proposal for initiation of revision proceedings must be initiated by the CIT, because, it is the CIT who has to call for examine the record , as held by the Coordinate Bench in the case of Ashok Kumar Shivpuri 2014 (11) TMI 1176 - ITAT MUMBAI Looking at the issue from this angle also, the initiation of revision proceeding become infirm and illegal. - Decided in favour of assessee.
Issues Involved:
1. Legality of invoking Section 263 of the Income Tax Act, 1961. 2. Disallowance of deduction under Section 35D for amortization of IPO expenses. 3. Procedural correctness of the Commissioner of Income Tax (CIT) initiating revision proceedings. Detailed Analysis: 1. Legality of invoking Section 263 of the Income Tax Act, 1961: The primary issue is whether the CIT was justified in invoking Section 263, which allows for the revision of an assessment order if it is considered "erroneous and prejudicial to the interest of the revenue." The assessee argued that the CIT erred in invoking this provision because the Assessing Officer (AO) had already conducted a detailed enquiry during the assessment proceedings. The AO had raised specific queries regarding the deduction under Section 35D, and the assessee had provided satisfactory responses. The AO's decision not to mention the issue in the assessment order was not indicative of a lack of enquiry or application of mind. 2. Disallowance of deduction under Section 35D for amortization of IPO expenses: The assessee, a bank, claimed a deduction of Rs. 3.28 crores under Section 35D, which allows for the amortization of certain preliminary expenses over five years. The CIT contended that this deduction was not available to the assessee because Section 35D specifically mentions that the deduction is available to an "industrial undertaking," which the CIT argued does not include banks. The assessee countered this by citing judicial precedents, including the Bombay High Court's decision in CIT vs Emirates Commercial Bank Ltd., which held that banks could be considered industrial undertakings for the purposes of certain deductions. The assessee also referenced the case of HSBC Securities and Capital Markets (India) Pvt Ltd, where a share broking entity was considered an industrial undertaking for the purposes of Section 35D. 3. Procedural correctness of the Commissioner of Income Tax (CIT) initiating revision proceedings: The Tribunal examined whether the CIT followed the correct procedure in initiating revision proceedings. It was noted that the CIT initiated the proceedings based on a proposal from the AO, rather than independently examining the records as required by Section 263. The Tribunal emphasized that the CIT must independently call for and examine the records to form a prima facie view that the assessment order is erroneous and prejudicial to the interests of the revenue. The Tribunal found that this independent application of mind was lacking in the CIT's initiation of the proceedings. Conclusion: The Tribunal concluded that the CIT's invocation of Section 263 was not justified. The AO had conducted a proper enquiry into the deduction under Section 35D, and the mere absence of a mention in the assessment order did not render the order erroneous. The Tribunal also found procedural infirmities in the CIT's initiation of the revision proceedings, as it was based on a proposal from the AO rather than an independent examination of records. Consequently, the Tribunal cancelled the CIT's order and restored the original assessment order dated 31.10.2009. Judgment: The appeal filed by the assessee was allowed, and the order of the CIT under Section 263 was cancelled. The Tribunal restored the regular assessment order dated 31.10.2009.
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