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2012 (12) TMI 807 - AT - Income TaxJurisdiction power u/s 263 by CIT(A) - claim of depreciation on car against salary and interest from the firm Held that - The AO made an addition of Rs.17,533/-, treating the same as monetary perquisite, being interest free loan as the tax on the same as not exempt u/s 10(10CC) of the Act. The addition was made by the AO, on perusal of form No. 16A and on the basis of explanation, filed by the assessee. It is evident that the AO, has taken a legally permissible view, in the matter, in terms of the provisions of Section 10(10CC). The CIT has computed the income of Rs.18,339/- in respect of interest paid by the employer, as is evident from findings of the CIT. The issue, in question has been dealt with and considered by the AO, after application of mind and making requisite enquiries. Therefore, CIT is not competent u/s 263 to substitute his opinion, in place of the view taken by the AO. The impugned order of the CIT, falls beyond the statutory pale of Section 263 view further supported by the decision of the Apex Court n the case of Malabar Industrial Co. Ltd.V CIT 2000 (2) TMI 10 - SUPREME COURT - in favour of assessee.
Issues:
Challenging order passed by CIT u/s 263 of the Income-tax Act,1961 for the assessment year 2005-06; Consideration of issues by AO in assessment u/s 147 read with Section 143; Disallowance of depreciation on car against income from partnership firm; Addition of interest-free loan as monetary perquisite; Competency of CIT u/s 263 to substitute views of AO. Analysis: The appellant challenged the order passed by the CIT u/s 263 of the Income-tax Act,1961 for the assessment year 2005-06, raising eight grounds of appeal. The appellant contended that the AO had already considered and adjudicated all issues raised in the impugned order, thus questioning the invocation of Section 263. The AO had added Income Tax paid by the Punjab Government on the appellant's salary as a perquisite and allowed depreciation on the car against income from the partnership firm. The CIT, however, proposed to enhance the additions made by the AO, considering them erroneous and prejudicial to revenue. During the proceedings, the AO's assessment order was analyzed, where depreciation on the car was allowed against salary and interest from the firm. The AO disallowed a portion of the depreciation to cover personal expenses. The CIT, in the order u/s 263, disagreed with the AO's decision, stating that depreciation related to non-taxable income should have been disallowed. The CIT's view was challenged on the grounds that the AO had applied a legally permissible view and made the decision after due enquiry. In another issue, the AO had made an addition of an interest-free loan as a monetary perquisite, which was not exempt u/s 10(10CC) of the Act. The CIT disagreed with the AO's treatment and added an additional amount to the appellant's income. However, it was argued that the AO had correctly interpreted the provisions of Section 10(10CC) and made the addition after due consideration, rendering the CIT's interference unjustified. The judgment highlighted the importance of the AO's conscious view, supported by legal precedents, and emphasized that the CIT cannot substitute its opinion for that of the AO under Section 263. The decision for the assessment year 2005-06 was in favor of the appellant. The assessment for the subsequent year 2006-07 presented similar issues, leading to a similar outcome in favor of the appellant. The appeals for both years were allowed, emphasizing the importance of the AO's legally permissible views and the limitations on the CIT's revisionary powers under Section 263.
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