2016 (3) TMI 536 - AT - Income Tax

Revision u/s 263 - claim of bad debts or loss arising on theft of jewellery stock allowed by AO - CIT took the view that the assessing officer has failed to examine the claim in a proper perspective by duly considering the reasons for rejection of the insurance claim - Held that - A perusal of the assessment order relating to AY 2006-07 would show that the assessing officer has examined the claim of the assessee in that year and has taken the view that the same is not allowable in that year. He has expressed the view specifically that the said claim is allowable either in AY 2000-01 or 2001-02 or in AY 2007-08, meaning thereby, the assessing officer was satisfied with the claim made by the assessee and he was only expressing a doubt about the year in which the same is allowable. We further notice that the assessee has filed a revised statement of total income by making the above said claim, subsequent to filing of return of income u/s 139(1) of the Act. We also notice from the assessment order relating to AY 2007-08 that the assessing officer has proceeded to compute the total income by considering the total income as disclosed by the assessee in the revised computation of income, which shows that the assessing officer has duly recognized and accepted the revised computation of total income. There is no dispute that the revised computation of income was filed by the assessee only to make the claim of bad debts or loss arising on theft of jewellery stock. Thus, we notice that the assessing officer was very much aware of the claim put forth by the assessee, which shows that he has duly applied his mind on this issue. We further notice that the assessee has again furnished relevant details relating to the impugned claim in the assessment proceedings relating to AY 2007-08 through a letter dated 10-10-2009 filed before the AO. All these discussions would show that the assessing officer was seized of the matter relating to the claim and has allowed the same by applying his mind on due examination of the relevant details. It is well settled principle that the assessment order would not be rendered erroneous merely because the assessing officer has taken one of the possible views. We are of the considered view that the decision of the AO to allow the claim of the assessee is one of the possible views. Further, the Ld CIT would get jurisdiction to revised the assessment order only if both the conditions prescribed in sec. 263 of the Act, viz., (a) the order should be erroneous and (b) it should be prejudicial to the interests of the revenue. In the instant case, the assessment order cannot be considered to be erroneous for the reasons discussed above, in which case, we are of the view that the Ld CIT should not have exercised his revisional jurisdiction u/s 263 of the Act. - Decided in favour of assessee

Summary

Issues:
Validity of assuming jurisdiction for revision of assessment order due to claimed deduction of bad debts related to insurance claim rejection.

Analysis:
1. The appeal challenged the validity of jurisdiction assumed for revision of the assessment order passed by the assessing officer for the assessment year 2007-08. The dispute centered around the deduction of bad debts amounting to &8377;30,79,230 claimed by the assessee, related to an insurance claim rejected by the insurance company due to failure in proving the claim of loss by theft. The CIT set aside the assessment order, directing the AO to reassess, leading to the appeal.

2. The main contention was that the theft occurred in 1999, the insurance claim was rejected in 2002, and the court dismissed the petition in 2006. The assessee wrote off the amount as bad debts in the accounts for the assessment year 2006-07. The AO disallowed the claim in 2006-07 but allowed it in 2007-08 after due consideration of additional details provided by the assessee. The assessing officer's decision was based on a possible view of the matter, per the appellant's argument.

3. The dispute also involved the assessing officer's alleged failure to properly examine the claim, as pointed out by the CIT. The CIT argued that the claim of theft was not adequately established, and the assessing officer allowed the claim without thorough examination. However, the assessing officer had considered the claim in the assessment for 2006-07 and 2007-08, expressing doubts about the year of allowance but ultimately accepting the claim after the assessee provided relevant details in a revised computation of income.

4. The ITAT emphasized the legal position regarding revision proceedings under section 263 of the Income-tax Act, citing relevant judgments. The key requirement for invoking revision proceedings is that the order must be considered erroneous and prejudicial to the interests of revenue. The assessing officer's decision to allow the claim was considered as one of the possible views, and the ITAT concluded that the assessment order was not erroneous based on the assessing officer's consideration and acceptance of the claim after due examination.

5. The ITAT held that the CIT should not have exercised revisional jurisdiction under section 263 of the Act as the assessment order was not erroneous. Consequently, the impugned revision order was set aside, and the appeal filed by the assessee was allowed. The judgment was pronounced on 3rd February 2016.