2019 (11) TMI 1712 - AT - Income Tax

Revision u/s 263 by CIT - allowance claimed by assessee on rubber tree plantation under Rule 7A(2) - HELD THAT - Admittedly, Ld.AO at the time of original assessment proceedings did not verify claim of assessee under Rule-7A(2). There is nothing on record to establish that even a query was raised by AO in regards to the claim. From the statement furnished by the assessee, we note that the amount represent opening balance and the same has been capitalized by the assessee. During the year under consideration assessee has incurred expenses of ₹ 8,80,48,770/- out of which a sum of ₹ 89,10,452/- was capitalized. Accordingly, a sum of ₹ 7,91,38,318/- was claimed as expenses under Rule 7A. We notice that Ld. CIT has not appreciated these facts, in proper perspective. We are of the opinion, that CIT(A) should look into the facts once again. Accordingly, we set aside the order passed by Ld. CIT, and restore all issues to his file for examining them afresh - Appeal filed by assessee allowed for statistical purposes.

Summary

Issues:
1. Assessment order under section 263 of the Act for assessment year 2014-15.
2. Alleged failure of the AO to conduct inquiries regarding the allowance claimed by the assessee on rubber tree plantation under Rule 7A(2).
3. Verification of reasons for capitalization of part expenditure by the assessee.

Analysis:
1. The appeal was filed against the order passed by the Ld. CIT under section 263 of the Act for the assessment year 2014-15. The grounds of appeal included contentions that the order was contrary to law, facts, and evidence on record. The appellant argued that there was no loss of revenue, and the order was invalid. The AO had applied his mind to Rule 7A(2), and there was no failure to conduct the inquiry.

2. The Ld. CIT held the order to be erroneous and prejudicial to the revenue due to the allowance claimed by the assessee on rubber tree plantation under Rule 7A(2). The Ld. CIT directed the AO to verify the reasons for capitalization of part expenditure. The Ld. CIT noted that the AO failed to conduct inquiries regarding this issue, leading to the revision of the assessment order.

3. The Ld. AR contended that the details referred to by the Ld. CIT were factually incorrect, as the total deduction claimed was different from the actual addition capitalized by the assessee. The Ld. CIT DR, on the other hand, relied on previous court decisions to support the revision of the assessment order due to the lack of inquiry by the AO.

4. Upon reviewing the submissions and records, it was found that the AO did not verify the claim of the assessee under Rule 7A(2) during the original assessment proceedings. The appellant had capitalized a specific amount out of the total expenses incurred, which was not properly considered by the Ld. CIT. Therefore, the order passed by the Ld. CIT was set aside, and all issues were restored to the file for reexamination.

In conclusion, the appeal filed by the assessee was allowed for statistical purposes, and the order was pronounced in open court on 29-11-2019.