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2018 (11) TMI 1421 - AT - Income TaxRevision u/s 263 - payment of amount to cricket players - allowable business expenses - as per the payments to cricket players were made on account of fee for displaying of the assessee s company s logo which helped in improving the brand value of the company and, therefore, the AO had erred in allowing the entire expenditure rather than allowing 1/5 of the expenditure - Held that - Relevant details and documents were furnished by the assessee during the assessment proceedings and forms part of the record. No inference can be drawn that the AO has not examined the issue although he has not expressed it in as many terms as may be considered appropriate by his superior authority and even if the same is found to be inadequate the same cannot be a ground for revision. It is clear that an order cannot be termed as erroneous unless it is not in accordance with law. This section does not visualize a case of substitution of the judgment of the Commissioner for that of the AO. Therefore, it cannot be held that in the instant case the AO s order was erroneous and prejudicial to the interest of the revenue within the terms of section 263 of the Act. Once the impugned issue was considered and examined by the AO Commissioner cannot set aside the order without recording a contrary finding. - Decided in favour of assessee.
Issues Involved:
1. Invocation of Section 263 of the Income Tax Act, 1961. 2. Treatment of expenditure on payments made to cricket players. 3. Disallowance of labour and wages charges. 4. Disallowance of gardening expenses. Detailed Analysis: Issue 1: Invocation of Section 263 of the Income Tax Act, 1961 The assessee challenged the invocation of Section 263 by the Commissioner of Income Tax (CIT), Meerut, arguing that the original assessment was not erroneous or prejudicial to the interest of the revenue. The CIT had issued a show cause notice under Section 263 on the grounds that the assessee paid ?25,87,500 to cricket players, which was not of any value to the business and that the Assessing Officer (AO) failed to inquire properly. The Tribunal emphasized that the power under Section 263 is supervisory and requires the CIT to be satisfied that the AO's order is both erroneous and prejudicial to the revenue. It was noted that the AO had indeed made inquiries and the assessee had responded appropriately. The Tribunal concluded that the CIT’s action was based on a difference in opinion rather than a lack of inquiry, thus quashing the proceedings under Section 263. Issue 2: Treatment of Expenditure on Payments Made to Cricket Players The CIT had treated the expenditure on payments to cricket players as deferred revenue expenditure, allowing only 1/5 of the total amount, while disallowing ?20,70,000. The Tribunal observed that the AO had allowed this expenditure as revenue expenditure in previous years without adverse inference. The Tribunal held that the concept of deferred revenue expenditure is alien to the Income Tax Act and that the CIT’s conclusion was arbitrary. Consequently, the Tribunal quashed the CIT’s order on this ground. Issue 3: Disallowance of Labour and Wages Charges Following the CIT’s order under Section 263, the AO disallowed ?25,00,547 out of labour and wages charges. However, the CIT (Appeals) deleted this addition. Since the Tribunal quashed the proceedings under Section 263, this issue became infructuous and was dismissed. Issue 4: Disallowance of Gardening Expenses The AO also disallowed ?98,531 out of gardening expenses, which was upheld by the CIT (Appeals). The Tribunal noted that this was an ad hoc disallowance without specific defects in the books of accounts. Given the quashing of the Section 263 proceedings, this issue also became infructuous and was dismissed. Conclusion: The Tribunal allowed the assessee’s appeal against the invocation of Section 263, quashing the CIT’s order. Consequently, the appeal against the quantum additions sustained by the CIT (Appeals) became infructuous and was dismissed. The final result was that ITA No. 3225/Del/2013 was allowed, and ITA No. 695/Del/2016 was dismissed as infructuous.
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