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Issues:
Challenge to order under section 263 of the IT Act, 1961 regarding deduction of commission earned by an agent of LIC for the assessment year 1991-92. Analysis: The appeal was filed by the assessee against the order of the CIT under section 263 of the IT Act, 1961, challenging the deduction allowed by the Assessing Officer (AO) for commission earned during the relevant assessment year. The CIT found the assessment order erroneous and prejudicial to the Revenue's interest as the AO allowed a deduction higher than what was permissible based on the Board's Circular. The CIT directed the AO to pass a fresh order allowing a maximum deduction of Rs. 10,000 only, leading to the appeal by the assessee. The learned counsel for the assessee vehemently objected to the CIT's order, arguing that the AO's decision was correct as per the Board's Circulars. The counsel emphasized that the CIT failed to understand the guidelines provided in the Circulars and did not consider the assessee's explanations adequately. The Departmental Representative supported the CIT's order. Upon reviewing the circulars issued in 1965 and 1984 regarding the deduction of expenses for insurance agents, the Tribunal noted that the AO's decision to allow a deduction of 40% on the first year's commission and 15% on renewal commission was justified. The Tribunal highlighted that the CIT misinterpreted the Circulars and that the maximum deduction of Rs. 10,000 as per the Circular was not applicable in this case. The Tribunal also referenced a similar case where the CIT had allowed a deduction of 40% instead of 50%, supporting the assessee's position. The Tribunal further pointed out that the CIT did not address all objections raised by the assessee in response to the show cause notice, which was essential in determining the correctness of the assessment order. Citing a decision of the Allahabad High Court, the Tribunal concluded that the assessment order was neither erroneous nor prejudicial to the Revenue's interest. Therefore, the Tribunal reversed the CIT's order and restored the AO's decision to allow the deductions as per the Circulars. In conclusion, the Tribunal allowed the appeal, finding in favor of the assessee and reinstating the AO's assessment order.
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