2009 (12) TMI 27 - HC - Income Tax

Revision of order u/s 263 by CIT computation of profit u/s 44AC The CIT u/s 263 - after considering the submissions made on behalf of the assessee, set aside the assessment order dated 27th April, 1992 with the direction to the Assessing Officer to reframe the assessment by including the amount of Excise Duty of Rs.47,05,008/- in the Purchase Price for working out the profit as per the provisions of Section 44AC of the Act order of CIT cancelled by ITAT - held that - The Tribunal has placed reliance upon a judgment of the Apex Court in the case of Union of India & others versus A Sanyasi Rao & others J.T. 2008 -TMI - 5502 - SUPREME Court , wherein it has been held that inspite of section 44 AC, a regular assessment order has to be framed. This Court has considered the controversy in detail and has held that Nirgam Mulya cannot form part of purchase price for the purposes of deduction under section 44AC of the Act.

Summary

Issues:
1. Interpretation of Section 263 of the Income Tax Act, 1961.
2. Inclusion of Excise Duty in the purchase price for calculating profit under Section 44AC.
3. Validity of the Tribunal's decision in canceling the order passed by the Commissioner of Income Tax.

Analysis:

1. The primary issue in this case pertains to the interpretation of Section 263 of the Income Tax Act, 1961. The Commissioner of Income Tax, Lucknow set aside the original assessment order dated 27th April, 1992, under this section, directing the Assessing Officer to reframe the assessment. The Tribunal was tasked with determining whether the ITAT was justified in canceling this order.

2. The second issue revolves around the inclusion of Excise Duty in the purchase price for calculating profit under Section 44AC of the Act. The CIT observed that the Excise Duty paid by the liquor contractor was not included in the purchase price, leading to an incorrect profit calculation. The Tribunal accepted the assessee's contention, emphasizing a judgment that Nirgam Mulya cannot form part of the purchase price for deduction under Section 44AC.

3. The final issue concerns the validity of the Tribunal's decision to cancel the Commissioner's order. The Tribunal relied on a Supreme Court judgment and a previous High Court decision to support its stance that a regular assessment order must be framed despite Section 44AC. The High Court, after detailed consideration, found no illegality or infirmity in the Tribunal's decision, ultimately ruling in favor of the assessee and against the revenue.

In conclusion, the High Court upheld the Tribunal's decision, affirming that Nirgam Mulya cannot be considered part of the purchase price for calculating profit under Section 44AC. The judgment provides clarity on the interpretation of relevant sections of the Income Tax Act and highlights the importance of accurate assessment procedures in tax matters.