2017 (11) TMI 794 - AT - Income Tax

Revision u/s 263 - CIT justification in invoking revisionary jurisdiction - non examine the allowability of repairs and maintenance of buildings and whether the same is incurred for the purpose of business of the assessee - whether non-enquiry of an item itself would made the order of the ld AO erroneous and prejudicial to the interest of the revenue? - Held that - We find from the entire paper book filed by the assessee that no query was indeed raised by the ld AO in the course of assessment proceedings with regard to the issue of repairs and maintenance of buildings. There was no occasion for the ld AO to examine the allowability of repairs and maintenance of buildings and whether the same is incurred for the purpose of business of the assessee or whether the same is capital or revenue in nature. We find that absolutely no query was raised or any enquiry was carried out by the AO in this regard. Hence this is a clear case of lack of enquiry on the part of the ld AO for which the revisionary jurisdiction u/s 263 could be invoked by the ld CIT. It has already been held that mere non-enquiry of an item itself would made the order of the ld AO erroneous and prejudicial to the interest of the revenue as has been held by the Hon ble Supreme Court in the case of Rampriya Devi Saraogi vs CIT (1967 (5) TMI 10 - SUPREME Court) and Tara Devi Aggarwal vs CIT (1972 (11) TMI 2 - SUPREME Court ). When the requisite enquiry that is warranted in the facts of the instant case was not made, then that itself would make the order of the ld AO erroneous and prejudicial to the interest of the revenue. - Decided against assessee.

Summary

Issues:
1. Jurisdiction of the Ld CIT under section 263 of the Income-tax Act, 1961.

Analysis:
The appeal before the Appellate Tribunal ITAT Kolkata arose from the order of the Principal Commissioner of Income Tax, Kolkata, invoking revisionary jurisdiction under section 263 of the Act against the order passed by the Deputy Commissioner of Income Tax, Kolkata. The primary issue to be decided was whether the Ld CIT was justified in invoking revisionary jurisdiction in the case. The assessee, engaged in providing management consultancy and accounting services, had filed its return of income for the Assessment Year 2010-11, declaring taxable income. The Ld CIT issued a show cause notice under section 263, considering certain expenditure debited in the profit and loss account as capital expenditure. The assessee contended that the expenditure was necessary for the efficient running of the business and should be treated as revenue expenditure. The Ld CIT observed that the Ld AO had not examined the eligibility of certain expenses, leading to the order being considered erroneous and prejudicial to revenue interests.

The Ld CIT set aside the assessment order, directing a fresh assessment after considering the observations made. The assessee appealed, challenging the Ld CIT's jurisdiction under section 263, arguing that the AO had duly examined the expenditure in question. The Appellate Tribunal noted that the AO did not raise any queries regarding the repairs and maintenance of buildings during the assessment proceedings. The Tribunal found that the AO's lack of inquiry into the allowability of the expenditure made the order erroneous and prejudicial to revenue interests. Citing relevant case law, the Tribunal upheld the Ld CIT's revision order under section 263, emphasizing the importance of conducting necessary inquiries in such matters. Consequently, the Tribunal dismissed the appeal of the assessee, affirming the revision order passed by the Ld CIT.

In conclusion, the Appellate Tribunal upheld the Ld CIT's jurisdiction under section 263, emphasizing the necessity of proper inquiry into expenditure matters during assessment proceedings to avoid errors that could be prejudicial to revenue interests. The decision highlighted the significance of thorough examination by tax authorities to ensure accurate assessments and compliance with tax laws.