9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (12) TMI 1349 - AT - Income TaxRevision u/s 263 - proof of AO s order to be erroneous or prejudicial - Held that - Notice under section 263 was issued by the ld. Principal CIT pointing out the error in the order of the Assessing Officer in treating the derivative loss as non speculation loss and in a reply filed by the assessee to the said notice, a detailed submission was made by the assessee to show as to how its claim for derivative loss as non-speculation loss was rightly accepted by the Assessing Officer on merits. CIT however passed the impugned order under section 263 without giving any finding or conclusion as to how the order of the Assessing Officer was erroneous on merits in respect of the issue raised in the notice issued under section 263 and set aside the same on the ground of lack of enquiry by the Assessing Officer without even putting the assessee on notice. In our opinion, the ratio of the decision rendered by the Coordinate Bench of this Tribunal in the case of Infinite Infotech Park Ltd. (2017 (6) TMI 294 - ITAT KOLKATA) thus is squarely applicable in the present case and applying the same, we hold that the impugned order passed by the ld. Principal CIT under section 263 is liable to be quashed - Decided in favour of assessee.
Issues Involved:
1. Whether the order of the Assessing Officer (AO) under section 143(3) accepting the assessee's claim of derivative loss as non-speculative loss was erroneous and prejudicial to the interest of the revenue. 2. Whether the Principal Commissioner of Income Tax (CIT) was justified in invoking section 263 to revise the AO's order on the ground of lack of enquiry. Issue-wise Detailed Analysis: 1. Erroneous and Prejudicial Order: The Principal CIT examined the AO's order and found it erroneous and prejudicial to the interest of the revenue. The Principal CIT observed that the AO accepted the assessee's derivative loss claim as non-speculative without disallowing it as speculative loss, which was contrary to the decision in CIT vs. DLF Commercial (2013) 35 taxman 280. The Principal CIT issued a show-cause notice under section 263, pointing out that the derivative loss should have been treated as speculative loss and disallowed accordingly. In response, the assessee argued that the AO had correctly allowed the derivative loss as non-speculative based on the provisions of Section 43(5) and various judicial precedents, including the Calcutta High Court decision in Asian Financial Services Limited v. CIT, which held that derivative loss could be set off against other profits. The assessee contended that the AO's decision was supported by existing judgments and therefore not erroneous. 2. Justification for Invoking Section 263: The Principal CIT, however, did not accept the assessee's explanation and proceeded to revise the AO's order under section 263. The Principal CIT reasoned that the AO's order was passed without proper enquiry or verification into the assessee's claim, making it erroneous and prejudicial to the revenue. The Principal CIT emphasized that the power of revision under section 263 is supervisory and can be invoked even in debatable cases if the AO's order shows an incorrect assumption of facts or law, or if the AO fails to make necessary enquiries. The assessee appealed to the Tribunal, arguing that the Principal CIT revised the AO's order on the ground of lack of enquiry without specifying what further enquiry was needed. The assessee cited the Delhi High Court decision in ITO vs. D.G. Housing Projects Limited, which held that the CIT must conduct necessary enquiries and cannot remand the matter to the AO for further verification. The Tribunal observed that the AO had indeed examined the assessee's claim during the assessment proceedings, as evidenced by the AO's query and the assessee's detailed note on derivative loss. The Tribunal noted that the Principal CIT did not provide any findings on the merits of the assessee's claim and set aside the AO's order solely on the ground of lack of enquiry. The Tribunal referred to the Mumbai Bench decision in Sterling Biotech Ltd., which held that the CIT must establish the AO's order as erroneous based on facts and not merely direct further enquiry. The Tribunal also referred to the Delhi High Court decision in D.G. Housing Projects Limited, which emphasized that the CIT must decide on the erroneous nature of the AO's order and cannot remand the matter for fresh decision. The Tribunal highlighted that the Principal CIT did not put the assessee on notice regarding the alleged lack of enquiry, which was necessary before invoking section 263. Conclusion: The Tribunal concluded that the Principal CIT's order under section 263 was not justified as it did not provide specific findings on the erroneous nature of the AO's order and was based on the ground of lack of enquiry without proper notice to the assessee. The Tribunal quashed the Principal CIT's order and allowed the assessee's appeal, holding that the AO's acceptance of the derivative loss as non-speculative was not erroneous or prejudicial to the revenue. The appeal was allowed, and the order was pronounced on 22nd December 2017.
|
