2019 (4) TMI 1231 - HC - Income Tax

Revision u/s 263 - AO while passing the original assessment order had not examined the issue of allowability of the expenditure to acquire marketing rights of CD's - ITAT was justified in quashing the order passed by CIT u/s. 263 - HELD THAT - It is by now well settled that, the Commissioner can exercise revisional powers under Section 263 of the Act only when it is found that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue. In the present case, the Tribunal noted the observations of the Assessing Officer in the order of remand to the effect that Jain munis do not advocate spread of religion through use of computers, source of electronic media is usually shunned, very small section of the community uses computer technology for religious purposes as plenty of printed literature is available in the market. All these factors led to the market value of the CDs declining dramatically. It was on account of these reasons, that the assessee had incurred substantial loss arising out of reduction in the value of stock lying at the end of the year. The Tribunal, therefore noted that the Assessing Officer had carried out detailed enquiries and taken a plausible view. No reason to interfere with the view of the Tribunal. No question of law arises - Decided against revenue

Summary

Issues:
1. Whether the Tribunal was justified in quashing the order passed by CIT-8 under Section 263 of the Income Tax Act, 1961 without appreciating the facts of the case?
2. Whether the Assessing Officer's order was erroneous and prejudicial to the interest of Revenue?

Analysis:
1. The issue in this case revolves around the Tribunal's decision to quash the order passed by the Commissioner under Section 263 of the Income Tax Act, 1961. The respondent-assessee, an individual, had purchased CDs on Jain Religion amounting to ?10.4 crores, which did not sell well in the market, resulting in losses. The Assessing Officer accepted the treatment of this expenditure by the assessee during the scrutiny assessment. However, the Commissioner revised the assessment order under Section 263, arguing that the Assessing Officer failed to investigate whether the expenditure was capital in nature. The Tribunal, in its judgment, held that the Assessing Officer had conducted detailed inquiries and taken a plausible view, thereby concluding that the Commissioner wrongly exercised revision powers. The Tribunal's decision was based on the detailed inquiries conducted by the Assessing Officer, which led to a plausible view regarding the expenditure incurred by the assessee.

2. The crux of the matter lies in determining whether the Assessing Officer's order was erroneous and prejudicial to the interest of Revenue, warranting revision under Section 263. The Tribunal considered various factors, such as the nature of the expenditure, market conditions affecting the sale of CDs on Jain Religion, and the reasons for the substantial losses incurred by the assessee. The Tribunal highlighted the Assessing Officer's observations regarding the limited use of computer technology for religious purposes within the Jain community, leading to a decline in the market value of the CDs. These factors were crucial in understanding the circumstances that led to the losses suffered by the assessee. Ultimately, the Tribunal concluded that the Assessing Officer had conducted thorough inquiries and arrived at a plausible view, thereby dismissing the Revenue's appeal and upholding the Tribunal's decision.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing that the Assessing Officer had appropriately examined the case and reached a valid conclusion. The Court found no reason to interfere with the Tribunal's view, stating that no question of law arose in this matter. As a result, the Income Tax Appeal was dismissed, settling the dispute in favor of the respondent-assessee.