2000 (8) TMI 252 - AT - Income Tax

Summary

Issues Involved:
1. Whether the CIT was justified in setting aside the assessment order under section 263 of the Income-tax Act, 1961, on the grounds that the deduction allowed for deferment of Sales-tax was erroneous and prejudicial to the interests of the revenue.

Detailed Analysis:

1. Justification of CIT's Action under Section 263:

Background:
The assessee's appeals challenged the CIT's orders passed under section 263 of the Income-tax Act, 1961, for the assessment year 1992-93. The main issue was the CIT's decision to set aside the assessment order on the grounds that the deduction allowed for deferment of Sales-tax was erroneous and prejudicial to the interests of the revenue.

Arguments by the Assessee:
The assessee argued that the Assessing Officer (AO) had applied his mind and conducted a detailed enquiry before allowing the deduction for the deferment of Sales-tax. They contended that the AO's decision should not be revised by the CIT under section 263 of the Act, even if the CIT disagreed with the AO's view. The assessee cited several judgments to support their claim, including Gee Vee Enterprises v. Addl CIT [1975] 99 ITR 375 (Delhi) and CIT v. Ratlam Coal Ash Co. [1988] 171 ITR 141 (MP).

CIT's Observations:
The CIT observed that the AO had allowed the deduction without verifying whether the Sales-tax liability had been converted into a loan liability by the specified agency, as required under section 43B of the Income-tax Act and section 22(3B) of the M.P. General Sales-tax Act (MPGST Act). The CIT noted that the AO's action was not in accordance with the provisions of the Act and issued a show-cause notice to the assessee.

Analysis by the Tribunal:
The Tribunal examined the provisions of section 22(3B) of the MPGST Act, which stipulate that Sales-tax liability converted into loan liability by a specified agency is deemed to have been paid. The Tribunal noted that the AO had not verified whether the conversion certificate had been issued by the specified agency, which was a prime condition for treating the Sales-tax deferment as deemed payment under section 43B of the Act.

The Tribunal also reviewed the scheme for conversion of deferred Sales-tax into loan liability, as outlined in the MPGST Act and the notifications issued by the State Government. The Tribunal emphasized that the deduction for deferment of Sales-tax could only be claimed after the competent authority issued an order converting the deferred tax into a final loan liability.

Conclusion:
The Tribunal concluded that the AO had not examined the assessee's claim in light of the relevant provisions of the MPGST Act, the scheme launched by the State Government, and the circulars issued by the CBDT. The Tribunal held that the CIT was justified in setting aside the assessment order as it was erroneous and prejudicial to the interests of the revenue. The Tribunal upheld the CIT's order and dismissed the assessee's appeals.

Outcome:
Both appeals by the assessee were dismissed, and the CIT's orders setting aside the assessment orders under section 263 of the Income-tax Act, 1961, were upheld.