2013 (10) TMI 701 - AT - Income Tax

Revision Order u/s 263 Held that - The assessing officer did not discuss anything in the assessment order about the claim of advertisement expenses made in this year - the Ld A.R claimed that the AO did examine this issue during the course of assessment proceedings, but he did not file any material to support his claim Relying upon Grasim Industries Ltd. V CIT 2010 (2) TMI 4 - BOMBAY HIGH COURT - Section 263 of the Income-tax Act, 1961 empowers the Commissioner to call for and examine the record of any proceedings under the Act and, if he considers that any order passed therein, by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, to pass an order upon hearing the assessee and after an enquiry as is necessary, enhancing or modifying the assessment or canceling the assessment and directing a fresh assessment - The key words that are used by section 263 are that the order must be considered by the Commissioner to be erroneous in so far as it is prejudicial to the interests of the Revenue . The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it is only when an order is erroneous that the section will be attracted - an incorrect assumption of fact or an incorrect application of law will satisfy the requirement of the order being erroneous - An order passed in violation of the principles of natural justice or without application of mind, would be an order falling in that category - the Assessing Officer has failed to examine the issue relating to advertisement expenses - the assessment order is rendered erroneous and prejudicial to the interests of the revenue - the CIT was justified in passing the revision order by invoking the provisions of sec. 263 of the Act Decided against Assessee.

Summary

Issues:
Challenge to revision order passed by Ld. CIT u/s. 263 of the Act for assessment year 2008-09.

Analysis:
The appellant contested that the assessment order by the Assessing Officer was not erroneous and prejudicial to revenue interests, thus challenging the revision order. The dispute arose from the assessee changing the method of claiming advertisement expenses from immediate deduction to spreading it over five years. The Ld. CIT observed that this change was to reduce the loss for the preceding year, affecting subsequent years' income. The Assessing Officer did not address this issue, prompting the revision proceedings u/s. 263. The Ld. CIT set aside the assessment order, directing a reassessment. The appellant argued that the AO did examine the matter, but failed to provide evidence. The Tribunal referred to the scope of sec. 263 as discussed by the Bombay High Court, emphasizing the need for an order to be erroneous and prejudicial to revenue interests. Lack of inquiry by the AO on a significant issue indicates a lack of application of mind.

The Delhi High Court's decision in Toyoto Motor Corporation case highlighted the quasi-judicial nature of AO proceedings, requiring reasoned decisions. In the present case, the AO's failure to address the advertisement expenses issue rendered the assessment order erroneous and prejudicial to revenue interests. The Tribunal upheld the Ld. CIT's revision order under sec. 263, emphasizing the importance of proper reasoning in assessment orders. Consequently, the appellant's appeal was dismissed on 11-10-2013.