2016 (3) TMI 273 - AT - Income Tax

Revision u/s 263 - failure to apply provisions of Sec.14A of Rule 8D by AO - Assessee has raised additional grounds that the matter is a subject matter of appeal before CIT and that the CIT cannot exercise jurisdiction u/s.263 - Held that - Though Rule 8D came into effect from 24.03.2008 and non applicability of provisions is erroneous and omitted by the Assessing Officer and it is prejudicial to the interest of the Revenue and we do not find any merits in the argument of the ld. Authorised Representative as order under Sec.263 is bad in law. We are of the opinion that the argument of the ld. Authorised Representative is not correct where the notice u/s.263 was issued with reference to Rule 8D further doctrine of merger cannot be applied on this issue as the issue before CIT is with regard to disallowance u/s.14A and not relating to Rule 8D which is applicable from 2008- 2009 onwards. Further CIT can suo-motU initiated proceedings were Assessing Officer takes a wrong decision without considering the material on record or he takes a decision without making a enquiry into matters, where such enquiry prime facie warranted. In the present case, the Assessing Officer has to consider the provisions applicable under Rule 8D effective from assessment year 2008-09. But the Assessing Officer made disallowance by following Co-ordinate Bench decision for earlier assessment year. It is apparent from facts and circumstances the order of the Assessing Officer is erroneous and prejudicial to the interest of Revenue and accordingly we uphold the order of CIT - Decided against assessee

Summary

Issues involved:
Appeal against orders of Commissioner of Income Tax, assessment years 2010-2011 and 2011-2012, u/s.263 of the Income Tax Act, 1961.

Detailed Analysis:

1. Assessment Year 2010-2011:
The assessee challenged the order of u/sec.263 of the Act and additional grounds. The Assessing Officer disallowed depreciation on Air and Water pollution control devices, added excess claim of depreciation, disallowed 2% of dividend income, and treated a subsidiary as revenue instead of capital. The Commissioner of Income Tax issued a revision notice based on various issues including non-payment of Dividend Distribution Tax, ROC fees not capitalized, and disallowance u/s.14A not in accordance with Rule 8D. The assessee provided evidence for each issue, but the Commissioner found the assessment erroneous and prejudicial to revenue, cancelling the assessment order and directing a fresh assessment.

2. Assessment Year 2011-2012:
Similar issues arose for this year, with excess depreciation disallowed, disallowance under 14A, and treatment of capital subsidiary as revenue. The Commissioner issued a revision notice, and the assessee provided evidence for each issue. The Commissioner cancelled the assessment order and directed a fresh assessment. The assessee appealed against these orders before the Tribunal.

3. Tribunal Proceedings:
The assessee raised grounds on lack of jurisdiction of CIT under section 263, cancellation of Assessing Officer's order, and additional grounds on disallowance under 14A. The Tribunal considered arguments from both parties. The Commissioner's power to revise orders was discussed, focusing on the non-application of Rule 8D for the assessment years. The Tribunal upheld the order of the CIT, dismissing the grounds of the assessee and stating that the Assessing Officer's order was erroneous and prejudicial to revenue.

In conclusion, the Tribunal dismissed the appeals of the assessee for both assessment years, upholding the Commissioner's revision orders. The Tribunal's decision was pronounced on 28th January, 2016, in Chennai.