2021 (2) TMI 880 - AT - Income Tax

Revision u/s 263 - disallowance u/s.14A read with Rule - Suo moto disallowance made by assessee accepted - set off / carry forward of the business loss/unabsorbed depreciation of demerged company - HELD THAT - The appellant-company filed detailed replies supported by relevant documents and other evidences and after considering the facts and circumstances and after full and proper application of mind the Assessing Officer accepted the disallowance suo motu made by the appellant-company U/S.14A read with Rule 8D and also that having regard to the facts and the provisions of section 72A of the I.T. Act, the appellant-company was entitled to set off / carry forward of the business loss/unabsorbed depreciation of demerged company as per the Composite Scheme approved by the Hon'ble Gujarat High Court. As we can see that Ld. A.O. has considered all aspects of aforesaid income and after thorough application of mind the A.O. has accepted the disallowance. Thus, we allow this ground of appeal. It is well settled principle of law where A.O. has exercised quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be found to be erroneous simply because Commissioner does not feel satisfied with the conclusion. CIT ought not to have initiated proceedings u/s 263 of the Income Tax Act when already enquiry is made by the Assessing Officer. - Decided in favour of assessee.

Issues:
1. Validity of order passed by Ld. Pr. CIT under section 263 of the I.T. Act.
2. Correctness of assessment order dated 11th March, 2016 and direction for a fresh assessment order.
3. Disallowance of advertisement expenses and other issues examined by the Assessing Officer.
4. Disallowance under section 14A and its impact on book profit under section 115JB.
5. Set off of carry forward loss/unabsorbed depreciation from a Composite Scheme of Arrangement.
6. Assessment order being erroneous and prejudicial to the interest of revenue as per the Principal CIT.
7. Appellant's contention of thorough inquiry by Assessing Officer and application of mind on relevant issues.
8. Interpretation of provisions related to demerger and set off of losses as per Income Tax Act.
9. Application of quasi-judicial powers by Assessing Officer and satisfaction of conclusions.
10. Precedents supporting the conclusion that the assessment order was not erroneous.

Analysis:
1. The appeal challenges the order passed by the Ld. Pr. CIT under section 263 of the I.T. Act, contending it to be ab initio void. The validity of the order and its legality are questioned, raising concerns about its compliance with the law.

2. The correctness of the assessment order dated 11th March, 2016, and the direction to pass a fresh assessment order are disputed. The appellant contests the decision made by the Ld. Pr. CIT, emphasizing the need for a reevaluation of the assessment order.

3. The issues related to disallowance of advertisement expenses and other matters examined by the Assessing Officer are discussed. The assessment process, including inquiries and submissions, leading to the addition of specific expenses, is detailed.

4. The disallowance under section 14A and its impact on the book profit under section 115JB are highlighted. The failure to include the disallowed amount in the book profit is raised as a concern by the Ld. Pr. CIT.

5. The set off of carry forward loss/unabsorbed depreciation from a Composite Scheme of Arrangement is analyzed. The disagreement regarding the permissibility of such set off is a key point of contention in the judgment.

6. The Ld. Pr. CIT's perspective on the assessment order being erroneous and prejudicial to the interest of revenue is explained. The reasons cited for invoking section 263 of the I.T. Act are outlined, focusing on discrepancies identified in the assessment.

7. The appellant's argument regarding the thorough inquiry by the Assessing Officer and the application of mind on relevant issues is presented. Detailed replies and supporting documents submitted by the appellant are discussed in response to the notices issued by the Principal CIT.

8. The interpretation of provisions related to demerger and set off of losses as per the Income Tax Act is examined. The contrasting views on the applicability of specific provisions in the case of the appellant are analyzed.

9. The application of quasi-judicial powers by the Assessing Officer and the satisfaction of conclusions drawn during the assessment process are emphasized. The adequacy of the inquiry conducted and the acceptance of disallowances are key factors in the judgment.

10. Precedents supporting the conclusion that the assessment order was not erroneous are cited. The reliance on legal judgments and principles to justify the decision to set aside the order passed by the Ld. Pr. CIT is detailed, highlighting the importance of legal precedents in tax matters.

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