2007 (10) TMI 220 - HC - Income Tax

Tribunal allowed assessee appeal holding that assessment is not erroneous - CIT was not justified in revising order of AO on the ground that books of account were not duly audited by Indian C.A AO has accepted the revised loss after examining vouchers & evidence & after discussing IT act & DTAA of India-Australia properly - non-application of mind by AO cannot be lightly inferred & order of assessment cannot be held erroneous & prejudicial to interests of revenue tribunal order justified

Summary

Issues:
- Appeal against ITAT order
- Substantial questions of law raised
- Revision under section 263 of the Act
- Assessment of a non-resident company
- Dispute over audit report compliance
- Application of mind by Assessing Officer
- Approval of draft assessment order

Analysis:
The appeal was filed against the ITAT order pertaining to the assessment year 2001-02. The substantial questions of law raised included the legality of setting aside the order under section 263 passed by the Commissioner of Income-tax, and whether the Commissioner was justified in resorting to section 263 in canceling the assessment. The non-resident company, incorporated in Australia, had contracts with ONGC and Cairn Energy India Pvt. Ltd., receiving payments in foreign currency in Perth. The Assessing Officer did not tax the company due to reported losses. However, the Commissioner revised the order under section 263, citing non-compliance with audit requirements. The ITAT then allowed the company's appeal.

The High Court noted that the ITAT found the company had maintained proper vouchers and documents for income computation. The audit report by Price Waterhouse Coopers, Perth, was submitted along with the return. The court emphasized that even if the audit report did not fully meet section 44AB requirements, the assessment order could not be deemed erroneous as the Assessing Officer had conducted a thorough examination. The court referenced a similar case to support this view. It was established that the Assessing Officer had diligently verified the company's receipts, expenses, and tax treaty benefits, demonstrating proper application of mind.

The court observed that the Revenue failed to provide evidence of the Assessing Officer's lack of diligence. The court concluded that the factual findings were undisputed, rendering the appeal meritless. Consequently, the appeal was dismissed based on the factual findings and lack of substantial legal questions.