2016 (9) TMI 554 - HC - Income Tax

Revision u/s 263 - Held that - It is a settled position of law that the Commissioner of Income Tax can exercise his power under Section 263 of the Act only on satisfaction of twin conditions i.e. the order being erroneous and also prejudicial to the interest of the Revenue. In the present facts, the view taken by the Assessing Officer on detailed examination of the issues, as is evident from the questionnaire posed to the respondent assessee and the response thereto during the assessment proceedings, on facts is a possible view. The view taken by the Assessing Officer does not became erroneous merely because the view of the Commissioner of Income Tax is different from the view taken by the Assessing Officer. In this case, moreover it is evident from the order dated 28th August, 2011 of the Commissioner of Income Tax that enquiry into both the issues were conducted by the Assessing Officer before passing the assessment order dated 28th October, 2009. Thus, it is not a case of no enquiry which could make the order erroneous. An inadequate enquiry would not make the assessment order vulnerable as being erroneous. The view taken by the Assessing Officer is a possible view and nothing has been shown to us which would even remotely suggest that the conclusion reached by the Assessing Officer was perverse and / or arbitrary on the basis of the evidence available before him. No substantial question of law

Summary

Issues:
Challenge to order under Section 260A of the Income Tax Act, 1961 regarding Assessment Year 2007-08. Question of law on setting aside the order under Section 263 of the I.T. Act, 1961.

Analysis:
The respondent, an Insurance Advisor, disclosed commission income and expenses during the relevant year. The Assessing Officer disallowed a portion of expenses on an adhoc basis, resulting in a total income determination. The Commissioner revised the assessment order, disallowing a significant amount of commission and conveyance expenses, leading to an income increase. The Tribunal found that both issues were examined during assessment proceedings, and the Assessing Officer's view was based on facts and inquiry, thus setting aside the Commissioner's order.

The Revenue contested that the Commissioner's order should not have been disturbed, but did not challenge the Tribunal's decision. The High Court emphasized that the Commissioner can revise an order only if it is both erroneous and prejudicial to revenue. The Court cited precedent to explain that an order is not erroneous simply because the Commissioner disagrees with it, as long as the Assessing Officer's decision is based on examination and application of mind to the facts. In this case, the Assessing Officer's view was reasonable, as evidenced by the inquiry conducted before the assessment order.

The Court concluded that the Tribunal's order did not raise any substantial legal question and dismissed the appeal, with no costs awarded.

This judgment clarifies the Commissioner's power to revise orders under Section 263, emphasizing the need for errors and prejudice to revenue for such revisions. It underscores the importance of the Assessing Officer's reasoned decision-making based on facts and inquiries, protecting against arbitrary revisions by higher authorities.