2023 (4) TMI 247 - HC - Income Tax

Revision u/s 263 by CIT - As per CIT assessment was erroneous in so far as it was prejudicial to the interest of revenue - whether the assumption of jurisdiction by the PCIT u/s 263 was just and proper? - provisions for doubtful debts was not disallowed, PF contribution received from the employees was not deposited to concerned account in due date AND amount was debited to the profit and loss account under the head Air Conditioner Expenses which being capital in nature is not allowable expenses - THAT - AO had issued notice u/s 142(1) and issued a questionnaire form and the assessee had submitted all the relevant details which have been noted by the Tribunal - there is another question with regard to the details of expenses head-wise, where assessee had deducted tax at source. Tribunal on going through the assessment records found that the questionnaire on the issues raised by the assessing officer called for the details of expenses appearing in the audited P L Account and various replies filed by the assessee and the Tribunal found that the assessing officer has specifically carried out an enquiry regarding provisions for doubtful debts and air-conditioner expenses and the specific reply given by the assessee was also taken note of. Provisions for doubtful debts - Tribunal noted that the assessee during the regular course of business as claimed to have been shown sales, in the preceding years of which, some sales turned bad and the same has been written off in the books of accounts as bad debts which the assessee is entitled for and, therefore, found the claim to be admissible. Similarly, for air-conditioner charges the assessee had filed complete details along with tax deducted on the charges paid and the bills were also placed in the form of a paper book which the Tribunal perused and found the same to be acceptable. Thus, the Tribunal concluded that on both these issues, namely with regard to the provisions for doubtful debts and air-conditioner expenses, the assessing officer had conducted a detailed enquiry and thereafter completed the assessment. Secondly, it was held that the PCIT had erred in invoking the revisional jurisdiction under Section 263 of the Act. The law on the subject is well settled, that if it is found, that the assessing officer has in fact conducted an enquiry, merely because the PCIT is of a different opinion, it would not justify action under Section 263. Provident fund contribution - As mentioned, the assessment order was of the year 2017-18 and on the date, when the assessing officer completed the assessment, the law on the subject as laid down in the case of Vijay Shree Ltd. 2011 (9) TMI 30 - CALCUTTA HIGH COURT - Thus AO had followed the decision of this Court in the said case and had completed the assessment. AO having followed the decision of the Jurisdictional High Court which held the field, at the relevant point of time, the assessment cannot be held to be prejudicial to the interest of revenue. Decided in favour of assessee.

Summary

Issues involved:
The judgment involves the consideration of whether the Principal Commissioner of Income Tax was justified in invoking jurisdiction under Section 263 of the Income Tax Act, 1961, and the correctness of the decision made by the Income Tax Appellate Tribunal on various issues raised by the revenue.

Issue 1: Jurisdiction under Section 263 of the Act
The Principal Commissioner of Income Tax initiated proceedings under Section 263, alleging errors in the assessment related to provisions for doubtful debts, PF contributions, and air-conditioner expenses. The PCIT set aside the assessment order and directed a fresh assessment. However, the Tribunal found that the assessing officer had conducted a detailed enquiry into the issues raised and concluded that the PCIT erred in invoking revisional jurisdiction under Section 263. The Tribunal held that the assessing officer's actions were in line with the law and that the assessment cannot be considered prejudicial to the revenue's interest.

Issue 2: Provisions for Doubtful Debts and Air-Conditioner Expenses
Regarding provisions for doubtful debts and air-conditioner expenses, the assessing officer had issued a notice, conducted an enquiry, and received relevant details from the assessee. The Tribunal found that the assessing officer's actions were appropriate, and the claims made by the assessee for these expenses were admissible. The Tribunal concluded that the PCIT's intervention under Section 263 was unwarranted on these issues.

Issue 3: PF Contribution
In the case of PF contribution, the assessing officer had followed a decision of the jurisdictional High Court, which was in line with the law at the time of assessment. The Tribunal held that since the assessing officer had adhered to the High Court's decision, the assessment could not be deemed prejudicial to the revenue's interest. Therefore, the Tribunal ruled in favor of the respondent/assessee, dismissing the appeal and answering the substantial questions of law against the revenue.

Separate Judgment:
The High Court, comprising the Hon'ble T.S. Sivagnanam (Acting Chief Justice) and the Hon'ble Justice Hiranmay Bhattacharyya, upheld the Tribunal's decision, finding that the assessing officer had appropriately handled the issues raised in the assessment, and the PCIT's invocation of jurisdiction under Section 263 was deemed unjustified. The appeal was dismissed, and the substantial questions of law were answered against the revenue.