2017 (10) TMI 630 - AT - Income Tax

Revision u/s 263 - Held that - It is not permissible for the Pr CIT to disturb a concluded assessment on the ground that the AO has not dealt with or discussed in the assessment order the issues examined by him during the assessment proceedings. It is enough if the AO has elicited information/explanations from the assessee and the assessee has filed the same before the AO so long as there is no incorrect appreciation of facts or the assessment is not contrary to or not in accordance with law. We are of the considered opinion that in the present case the AO has specifically called for explanation from the assessee on all points during the course of assessment proceeding and thereafter has taken a possible view. Moreover, it is not necessary for the AO to give detailed findings or elaborate in the assessment order on each and every issue which has been examined during the course of scrutiny proceedings. Besides, the case of the assessee is squarely covered by the ratio laid down in the various case laws referred to by the ld AR discussed briefly hereinabove while a series of cases relied upon by the revenue have been carefully perused and are found to be distinguishable on facts and are not applicable. The amendment to section 263 is also prospective. Thus, the reversionary proceedings u/s 263 are not validly initiated in view of the facts that the issues raked up by the Pr,IT stand examined by the AO in the assessment proceedings and the ld Pr CIT has failed to state as to how the order of AO is erroneous and not in accordance with law or settled legal position. Even on merit, the assessee is entitled to all the deductions/claims as per the provisions of the Act. Considering all these facts in totality and respectfully following the ratio laid down in the various decisions of the Jurisdictional and other High Courts e are of the considered view that the jurisdiction by the Pr,IT u/s 263 of the Act was invalidly assumed. Accordingly we set aside the proceedings u/s 263 of the Act as being invalid and also consequent order of PCIT u/s 263 of the Act. Appeal of the assessee is allowed.

Issues Involved:
1. Validity of order passed under Section 263 of the Income Tax Act, 1961.
2. Claim of depreciation.
3. Deduction on account of incentive paid.
4. Profit on sale of assets.
5. Hedging and transportation cost.
6. Purchase of equity share capital.
7. Claim of deduction for demerger expenses.
8. Claim of deduction for excess payment of incentive.
9. Authority to consider any other issue during fresh assessment proceedings.

Issue-wise Detailed Analysis:

1. Validity of Order Passed Under Section 263 of the Income Tax Act, 1961:
The primary issue raised was the improper exercise of revisionary jurisdiction under Section 263 by the Principal Commissioner of Income Tax (PCIT). The Tribunal examined whether the assessment order was erroneous and prejudicial to the interest of the revenue. The Tribunal noted that the Assessing Officer (AO) had conducted inquiries and received detailed responses from the assessee on all points raised by the PCIT. It was highlighted that the AO had framed the assessment after considering the revised computation and various details provided by the assessee. The Tribunal concluded that the PCIT failed to demonstrate how the AO's order was erroneous and prejudicial to the interest of the revenue, thus invalidating the exercise of jurisdiction under Section 263.

2. Claim of Depreciation:
The PCIT questioned the revised claim of lower depreciation made during the assessment proceedings. The Tribunal found that the reduction in depreciation was due to an inadvertent mistake in the opening Written Down Value (WDV) and the non-deduction of profit on the sale of assets from the WDV. The Tribunal held that the reduction in depreciation did not cause any prejudice to the revenue as it resulted in a reduction of loss (increase in income). The Tribunal also noted that the AO had made sufficient inquiries and accepted the revised claim after due consideration.

3. Deduction on Account of Incentive Paid:
The PCIT set aside the assessment order regarding the addition of incentive paid during the course of assessment proceedings. The Tribunal observed that the assessee had correctly added back the incentive amount in the revised computation, which was inadvertently not added back in the original computation. The Tribunal held that the action of the AO in accepting the revised computation was not erroneous or prejudicial to the interest of the revenue.

4. Profit on Sale of Assets:
The PCIT questioned the reduction of profit on the sale of assets in the updated computation of income. The Tribunal noted that the assessee had reduced the profit on the sale of fixed assets from the computation of income as per the provisions of Section 50 of the Act. The Tribunal held that the AO had correctly applied the provisions of the Act and the order was not erroneous or prejudicial to the revenue.

5. Hedging and Transportation Cost:
The PCIT set aside the assessment order regarding the allowance of hedging and transportation cost without examining the nexus with business and applicability of relevant provisions. The Tribunal found that the AO had made specific inquiries regarding the hedging cost, including the mark-to-market loss, and had accepted the details provided by the assessee. The Tribunal held that the AO had taken a possible view supported by legal precedents and the order was not erroneous.

6. Purchase of Equity Share Capital:
The PCIT questioned the AO's failure to verify the purchase of equity share capital of Reliance Infrastructure Finance Pvt. Ltd. The Tribunal noted that the AO had inquired about the purchase and the assessee had provided necessary details. The Tribunal held that the observations of the PCIT were based on incorrect facts and the AO's order was not erroneous or prejudicial to the revenue.

7. Claim of Deduction for Demerger Expenses:
The PCIT set aside the assessment order regarding the deduction of demerger expenses under Section 35DD of the Act. The Tribunal observed that the demerger expenses were correctly claimed by the assessee as per the provisions of the Act and the AO had allowed the claim after due verification. The Tribunal held that the AO's order was not erroneous.

8. Claim of Deduction for Excess Payment of Incentive:
The PCIT questioned the deduction for excess payment of incentive over provision. The Tribunal found that the excess payment of incentive was correctly claimed by the assessee as per the provisions of Section 43B(c) of the Act. The Tribunal held that the AO had correctly allowed the claim and the order was not erroneous.

9. Authority to Consider Any Other Issue During Fresh Assessment Proceedings:
The PCIT directed the AO to consider any other issue that may arise during fresh assessment proceedings. The Tribunal held that such a direction was beyond the scope of the show cause notice and was not permissible. The Tribunal emphasized that the PCIT must point out specific errors and cannot direct roving inquiries.

Conclusion:
The Tribunal concluded that the AO had conducted proper inquiries and the assessment order was neither erroneous nor prejudicial to the interest of the revenue. The Tribunal set aside the order of the PCIT under Section 263 of the Act, thereby allowing the appeal of the assessee.

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