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2020 (10) TMI 461 - HC - Income TaxRevision u/s 263 - AO allowed depreciation at 25% on the right to lease hold land as classified as an intangible asset by the assessee - Tribunal held that the assessee having furnished the details that the lease hold rights were intangible assets before the Assessing Officer it should be deemed that the details was deemed to have been examined and relief granted in favour of the assessee by the Assessing Officer and the finding recorded by the Commissioner to the contrary was not correct - HELD THAT - Tribunal has found that the AO on meticulous appreciation of evidence on record has allowed depreciation on intangible assets and the CIT (Appeals) while passing the order u/s 263 has held that the enquiry and verification made by the AO is inadequate and the land cannot be treated as intangible asset. Powers u/s 263 of the Act has been exercised and the order of the AO has been set aside. The Tribunal has held that mere inadequacy of an enquiry or insufficiency of material on record cannot be a ground to invoke powers under Section 263 of the Act. The view taken by the Tribunal is in consonance with well settled legal principles referred to supra. - Decided against revenue.
Issues:
1. Interpretation of Section 263 of the Income Tax Act, 1961 regarding revision of orders prejudicial to revenue. 2. Determination of whether the order of the Assessing Officer allowing depreciation on intangible assets was erroneous and prejudicial to the interest of revenue. 3. Examination of whether the Tribunal correctly quashed the order passed by the Commissioner of Income Tax under Section 263. Analysis: 1. The appeal under Section 260A of the Income Tax Act, 1961 was filed by the revenue concerning the Assessment year 2006-07. The primary issue revolved around the interpretation of Section 263 of the Act, which allows the Commissioner to revise orders prejudicial to revenue. The Supreme Court's interpretation in the 'MALABAR INDUSTRIAL COMPANY VS. CIT' case was pivotal, emphasizing that an order can only be revised if it is both erroneous and prejudicial to revenue due to an error in the assessment order. 2. The facts leading to the appeal involved the Assessing Officer allowing depreciation on the right to leasehold land classified as an intangible asset by the assessee. The Commissioner of Income Tax (Appeals) initiated proceedings under Section 263 and directed a reassessment, which was challenged by the assessee before the Tribunal. The Tribunal, in its order, found that the Assessing Officer had appropriately allowed depreciation on intangible assets, contrary to the Commissioner's view. The Tribunal's decision was based on the principle that inadequacy of an inquiry or insufficiency of material cannot be grounds for invoking Section 263. 3. The Tribunal's decision was challenged by the revenue, arguing that the Tribunal erred in relying on the Supreme Court's decision in the 'MALABAR INDUSTRIAL COMPANY VS. CIT' case. However, the High Court upheld the Tribunal's decision, emphasizing that the Assessing Officer's order was not erroneous or prejudicial to the revenue's interest. The Court reiterated the legal principles established in previous Supreme Court decisions, including 'CIT VS. MAX INDIA LTD.' and 'ULTRATECH CEMENT LTD. AND ORS. VS. STATE OF RAJASTHAN AND ORS.', supporting the Tribunal's interpretation. 4. Ultimately, the High Court dismissed the appeal, ruling in favor of the assessee and against the revenue. The Court's analysis concluded that the substantial questions of law framed were answered against the revenue, affirming the Tribunal's decision to quash the Commissioner's order under Section 263. The judgment highlighted the importance of adherence to legal principles and the necessity for an order to be both erroneous and prejudicial to the revenue's interest for revision under Section 263.
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