2012 (11) TMI 553 - AT - Income Tax

Revision Order u/s 263 - Following the decision of Bombay High Court in the case of CIT vs. Gabriel India Ltd. 1993 (4) TMI 55 - BOMBAY HIGH COURT Held that - Unless commissioner comes to a categorical finding that the stand of the Assessing Officer is erroneous, he can not remit the matter back to the file of the Assessing Officer for fresh adjudication. in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the ITO to re-examine the matter that, in our opinion, is not permissible. Further inquiry and/or fresh determination can be directed by the Commissioner only after coming to the conclusion that the earlier finding of the ITO was erroneous and prejudicial to the interests of the revenue. Without doing so, he does not get the power to set aside the assessment. The revision has been done on an altogether different ground of deeming fiction u/s. 68 which was not even touched upon by the Commissioner at notice stage - Impugned revision order is set aside - The assessee gets the relief accordingly - In the result the appeal filed by the assessee is allowed.

Summary

Issues involved:
1. Challenge to correctness of revision order under section 263 r.w.s. 143(3) of the Income Tax Act, 1961 for the assessment year 2008-09.
2. Accounting treatment of purchases of paintings and reflection in the balance sheet.
3. Allegations regarding the purchase of a painting from a specific artist and subsequent sale to another party without proper documentation.

Analysis:
Issue 1:
The appellant challenged the revision order passed by the Commissioner under section 263 r.w.s. 143(3) of the Income Tax Act, 1961 for the assessment year 2008-09. The Commissioner initiated revision proceedings based on discrepancies in the accounting treatment of purchases of paintings by the appellant.

Issue 2:
The appellant explained that the accounting entries were made in accordance with the Mercantile System of Accounting, as required by the Companies Act and Accounting Standards. The appellant clarified that purchases were reflected in the profit and loss account and unpaid amounts were shown in the balance sheet under sundry creditors. The Commissioner, however, raised concerns about the accounting treatment and initiated revision proceedings.

Issue 3:
Regarding the specific purchase and sale of a painting from an artist, the Commissioner questioned the sequence of events and payments involved. The appellant's explanation about the purchase and subsequent sale of the painting raised doubts about the transactions. The Commissioner invoked section 68 of the Income Tax Act, deeming certain transactions as income, leading to the revision order.

The Tribunal, after considering the arguments and legal precedents, found that the Commissioner did not provide a categorical finding of error by the Assessing Officer. The Tribunal also noted that the revision was based on grounds not mentioned in the show cause notice. Citing legal positions from previous cases, the Tribunal concluded that the revision order lacked merit and set it aside, granting relief to the appellant. The appeal filed by the appellant was allowed, overturning the revision order.