2019 (1) TMI 205 - AT - Income Tax

Revision u/s 263 - enhanced deduction of section 80P - provision for bad and doubtful debts and provision for gratuity fund are to be disallowed in computing the total income of the assessee - Held that - Referring to CBDT vide circular no. 37/2016 dated 02.11.2016 in the context of enhanced claim of deduction u/s 80IA any disallowance even if it is to be made towards provision for gratuity fund and provision for bad and doubtful debts would only go to increase the business income of the assessee society and in turn, automatically result in enhanced claim of deduction u/s 80P of the Act. Hence it becomes revenue neutral. Accordingly, it could be safely concluded that there is no prejudice that is caused to the interests of the revenue. Even if the order of the ld. AO in not enquiring about these two issues, becomes erroneous, we hold that twin conditions of section 263 of the Act is not cumulatively satisfied in the instant case. Reliance is made on the decision of Hon ble Apex Court in the case of Malabar Industries Ltd. (2000 (2) TMI 10 - SUPREME COURT). Accordingly, we have no hesitation in quashing the revision proceedings initiated u/s 263 of the Act in the facts of the instant case by the ld. Administrative CIT. Accordingly, grounds raised by the assessee are allowed.

Summary

Issues:
- Jurisdiction of revisionary powers under section 263 of the Income Tax Act, 1961.

Analysis:
1. The appeal pertains to the order of the Principal Commissioner of Income Tax-8, Kolkata under section 263 of the Income Tax Act, 1961 for the Assessment Year 2012-13.
2. The main issue is whether the Principal Commissioner was justified in invoking revisionary jurisdiction under section 263 of the Act.
3. The appellant raised a ground which was later dismissed as not pressed.
4. The appellant, a cooperative society, had filed its return of income claiming deduction under section 80P of the Act. The assessing officer disallowed certain deductions leading to the revisionary proceedings by the Principal Commissioner.
5. The Principal Commissioner sought to disallow provisions for gratuity and bad debts, alleging they were unascertained liabilities. The appellant contended that such provisions were in line with its activities and would not prejudice revenue interests.
6. The Tribunal noted that disallowing these provisions would increase the appellant's income, thereby enhancing the deduction under section 80P. Referring to CBDT circular, it held that such disallowances do not prejudice revenue interests and quashed the revision proceedings.
7. Relying on the decision in Malabar Industries Ltd. case, the Tribunal allowed the appeal, stating that the twin conditions of section 263 were not met in this case.

This detailed analysis covers the jurisdiction of revisionary powers under section 263 of the Income Tax Act, 1961, the specific issues raised by the appellant, the contentions presented, and the Tribunal's decision based on relevant legal principles and precedents.