2011 (1) TMI 1175 - AT - Income Tax

Dis-allowance of expenditure - Assessing Officer examined each end every aspect of the case, including the expenses relating to manufacturing and/or profit and loss account and disallowed the expenses on estimate basis - Commissioner of Income-tax doubted the disallowance made by the Assessing Officer and initiated proceedings by issuing notice dated October 12, 2009 under section 263(1) of the Act. The learned Commissioner of Income-tax, while passing order under section 263 of the Act, held that it is a fit case for invoking the provisions of section 263 of the Act, as the assessment framed by the Assessing Officer under section 143(3) on December 29, 2008, is erroneous in so far as prejudicial to the interests of the Revenue - Held that - issue considered and decided by the learned Commissioner of Income-tax within the meaning of Explanation (c) to section 263 of the Act, does not fall under the jurisdiction of the provisions of section 263 of the Act, assessment order passed by the Assessing Officer is neither erroneous nor prejudicial to the interests of the Revenue, order of the learned Commissioner of Income-tax cannot be upheld and the same is set aside, appeal of the assessee is allowed

Summary

Issues:
Appeal against order under section 263 of the Income-tax Act, 1961 for assessment year 2006-07.

Analysis:
1. The assessee challenged the order of the Commissioner of Income-tax (CIT) under section 263 of the Income-tax Act for the assessment year 2006-07. The CIT had doubted the expenses disallowed by the Assessing Officer and initiated proceedings under section 263. The CIT held that the assessment by the Assessing Officer was erroneous and prejudicial to the Revenue's interests, directing a fresh assessment. The assessee contended that the CIT cannot re-adjudicate issues already considered by the Assessing Officer, citing relevant case laws supporting the position that where the Assessing Officer has taken a possible view, the CIT cannot revise it under section 263.

2. The Assessing Officer disallowed a portion of the expenses after examining the case thoroughly. The CIT, however, found the assessment erroneous as the assessee adjusted loss to avoid tax liability without producing necessary vouchers. The ITAT observed that the Assessing Officer had considered and decided the issues after appreciating the facts and records. The ITAT held that the CIT's order under section 263 was not valid as the Assessing Officer had already addressed the relevant issues. Citing judicial pronouncements, the ITAT concluded that the assessment order was neither erroneous nor prejudicial to Revenue's interests, thereby allowing the assessee's appeal against the CIT's order under section 263.

3. The ITAT's decision was based on the fact that the Assessing Officer had applied his mind and adjudicated the issues based on the available material. The ITAT emphasized that the CIT cannot revise an assessment merely because of a different view, especially when the Assessing Officer's decision was based on a possible interpretation of the facts and law. The ITAT highlighted that the CIT's order did not fall within the purview of section 263 as the Assessing Officer had already considered and decided the issues raised. Therefore, the ITAT set aside the CIT's order and allowed the assessee's appeal, ruling in favor of the assessee.

In conclusion, the ITAT's detailed analysis and reliance on relevant case laws supported the decision to overturn the CIT's order under section 263, emphasizing that the Assessing Officer's assessment was not erroneous or prejudicial to the Revenue's interests. The ITAT's thorough examination of the facts and legal provisions led to the allowance of the assessee's appeal, providing a comprehensive resolution to the issues raised in the case.