2017 (4) TMI 1028 - AT - Income Tax

Revision u/s 263 - order prejudicial to the interest of Revenue or not - Held that - As seen the paper book filed by the assessee and the documents/papers contained/mentioned therein were duly made available before the Assessing Officer, before framing the assessment u/s. 143(3) of the Act and are satisfied that he asked the assessee to furnish the necessary details, therefore, the observation made by the ld. Commissioner is not substantiated as has been alleged in the revisional order. Admittedly, an incorrect assumption of fact or an incorrect application of law would satisfy the requirement of order being erroneous u/s. 263 of the Act. The phrase prejudicial to the interest of the Revenue u/s. 263 of the Act, has to be read in conjunction with the expression erroneous order by the Assessing Officer. Every loss of Revenue as a consequence of assessment order cannot be termed as prejudicial to the interest of Revenue , meaning thereby, prejudice must be prejudice to the Revenue administration. At the same time, if another view is possible revision is not permissible. Totality of facts, clearly indicates that assessment u/s. 143(3) of the Act was framed by the Assessing Officer after obtaining necessary details from the assessee and further the same were examined by him. Therefore, even if, the same has not been spelt elaborately in the assessment order it cannot be said that there is a lack of enquiry or prejudice has been caused to the Revenue, as we have discussed various case laws in earlier part of this order which are identical to the facts before us. Our view is further fortified by the decision of Mumbai Bench of the Tribunal (wherein one of us i.e. JM is signatory to the order ) in the case of Mehta Trading Company (2014 (11) TMI 292 - ITAT MUMBAI) which is also on identical facts/issue. The Commissioner invoked revisional jurisdiction u/s 263 with respect to commission of ₹ 2,12,136/- at the rate of ₹ 25 per piece to Rajendra Jain and Kiran Jain by observing that no such commission was paid in earlier year for similar sales. The assessee explained that commission was paid to these parties for looking after the logistic issue. We find that the assessee vide letter dated 11/07/2011, addressed to the Ld. DCIT, in response to notice u/s 142(1) clarified the factual matrix and again vide letter dated 26/07/2011 addressed to Ld. DCIT duly furnished the partywise details of commission paid with name, address and purpose (all these documents are available in the paper book of the assessee). The zerox copy of agreement and credit note was also enclosed along with the memorandum of understanding dated 10/04/2008. Thus, we are satisfied that the assessment was framed after making due enquiry and on perusal/examination of documentary evidence. In such a situation, invoking revisional jurisdiction u/s 263 cannot be said to be justified. - Decided in favour of assessee

Summary

Issues Involved:
1. Invocation of revisional jurisdiction under Section 263 of the Income Tax Act, 1961.
2. Determination of whether the original assessment order was erroneous and prejudicial to the interest of the Revenue.
3. Examination of the adequacy of enquiry conducted by the Assessing Officer.
4. Justification of commission payments and their treatment in the assessment.

Issue-Wise Detailed Analysis:

1. Invocation of Revisional Jurisdiction under Section 263 of the Income Tax Act, 1961:
The assessee challenged the order dated 19/02/2013 by the Commissioner of Income Tax, Mumbai, invoking revisional jurisdiction under Section 263 of the Income Tax Act, 1961. The Commissioner held that the original assessment made under Section 143(3) was erroneous and prejudicial to the interest of the Revenue. The assessee argued that the assessment was framed after due consideration of all relevant details and was neither erroneous nor prejudicial to the Revenue.

2. Determination of Whether the Original Assessment Order was Erroneous and Prejudicial to the Interest of the Revenue:
The Tribunal considered the submissions and material on record. The facts revealed that the assessee, engaged in manufacturing feeding bottles and accessories, showed a total turnover of ?2,40,72,048 and offered a gross profit of ?99,20,394. The assessee claimed a deduction under Section 80IB at 25% of the total profit after reducing brought forward losses. The case was selected for scrutiny, and notices under Sections 143(2) and 142(1) were issued. After examining the details, the Assessing Officer made certain disallowances and framed the assessment under Section 143(3). The Tribunal found that the assessment order was neither erroneous nor prejudicial to the interest of the Revenue, as it was framed after due application of mind and consideration of the factual matrix.

3. Examination of the Adequacy of Enquiry Conducted by the Assessing Officer:
The Tribunal emphasized the distinction between "lack of enquiry" and "inadequate enquiry." It noted that the Assessing Officer collected necessary details, examined them, and then framed the assessment. The Tribunal referred to several judicial precedents, including the Hon'ble Delhi High Court's decision in CIT vs. Anil Kumar Sharma, which held that even if the enquiry was inadequate, it would not constitute "lack of enquiry." The Tribunal concluded that the Assessing Officer had indeed examined the details and applied his mind, thus, it was not a case of lack of enquiry.

4. Justification of Commission Payments and Their Treatment in the Assessment:
The Commissioner invoked revisional jurisdiction concerning the commission of ?2,12,136 paid to Rajendra Jain and Kiran Jain, noting that no such commission was paid in the previous year for similar sales. The assessee explained that the commission was for handling logistics issues. The Tribunal found that the assessee had provided detailed explanations and documentary evidence, including party-wise details, agreements, and credit notes. The assessment was framed after due enquiry and examination of these documents. The Tribunal held that invoking revisional jurisdiction under Section 263 was not justified in this context.

Conclusion:
The Tribunal set aside the order of the Commissioner, concluding that the original assessment order was not erroneous or prejudicial to the interest of the Revenue. The appeal of the assessee was allowed, and the Tribunal pronounced the order in the open court on 23/02/2017.