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2014 (6) TMI 154 - HC - Income TaxValidity of order u/s 263 of the Act - Whether the AO in allowing the claim of the assessee with respect including the receipt of sum of ₹ 18 crores from the German Concern took a possible view of the matter Held that - There was absolutely no attempt on the part of Mr. Nizamuddin to demonstrate that the AO did not take a possible view in accepting the contention of the assessee - The parent contract dated 14th September, 1995 did not provide for payment of any compensation or any sum on any account whatsoever - Upon expiry of the contract, the assessee was liable to surrender the technical know-how and to cease to manufacture the goods - The assessee was not entitled in any event, upon expiry of the contract, to prevent the German Concern from setting up its 100% subsidiary for the purpose of manufacturing and marketing its goods - In case the German Concern paid the aforesaid sum for the purpose of securing an NOC from the assessee, even if it is assumed that by agreeing to issue the same the assessee agreed to have his manufacturing and trading structure impaired resulting in loss of his source of income - the receipt would be a capital receipt Relying upon Kettlewell Bullen And Company Limited Versus Commissioner Of Income-Tax, Calcutta 1964 (5) TMI 4 - SUPREME Court - If on the other hand it was a gratuitous payment as indicated in the agreement dated 22nd March, 2005 amounts are being paid by BDF on its own free will the receipt would still be a capital receipt - the Tribunal was justified in holding that the AO took a possible view. Whether the assessment order dated 28th March, 2008 was passed without application of mind is basically a question of fact - Tribunal has held that the assessment order was not passed without application of mind - The records of the assessment including the order sheets go to show that appropriate enquiry was made and the assessee was heard from time to time - the fact that all requisite papers were summoned and thereafter the matter was heard from time to time coupled with the fact that the view taken by him is not shown by the revenue to be erroneous - A prima facie evidence on the basis of the presumption is converted into a conclusive proof of the fact the order was passed by the AO after due application of mind - unless the recital is factually incorrect or the computation is legally wrong, it is not possible to hold that the assessment order was passed without application of mind - If the AO cannot be shown to have violated any form prescribed for writing an assessment order, it would not be correct to hold that he acted illegally or without applying his mind. The Tribunal reached the conclusion that the order of the AO was not passed without application of mind Revenue is unable to point out any part of the finding, recorded by the Tribunal - in the absence of any challenge to the finding of the Tribunal that the ITO had actually made an enquiry the Revenue was precluded from challenging the order of the Tribunal setting aside an order passed in exercise of power u/s 263 - The ground as regards perversity is relatable to a finding on a question of fact revenue did not draw any attention to any part of the finding of the Tribunal which according to him was perverse Decided against Revenue.
Issues Involved:
1. Whether the Tribunal erred in quashing the CIT's order under Section 263 of the Income Tax Act, 1961. 2. Whether the assessing officer failed to examine/verify the assessee's claims and allowed excessive allowances. 3. Whether the Tribunal failed to distinguish between the scope of Section 154 and Section 263 of the Income Tax Act. 4. Whether the Tribunal's conclusion that the assessing officer took a possible view was justified. 5. Whether the Tribunal's order is perverse. Detailed Analysis: 1. Tribunal's Quashing of CIT's Order under Section 263: The Tribunal quashed the CIT's order under Section 263, which had set aside the assessment order dated 28th March 2008. The Tribunal held that the assessing officer had taken a possible view and conducted necessary inquiries. The Tribunal noted that the CIT's disagreement with the assessing officer's conclusions did not justify invoking Section 263 unless the order was unsustainable in law. The Tribunal emphasized that the CIT must demonstrate that the assessing officer's order was erroneous and prejudicial to the interests of the revenue. 2. Assessing Officer's Examination of Claims: The Tribunal found that the assessing officer had conducted inquiries and examined the assessee's claims, as evidenced by the notice under Section 142(1) and the replies provided by the assessee. The Tribunal concluded that the assessing officer had applied his mind to the facts and circumstances of the case before accepting the assessee's claims. The Tribunal rejected the CIT's assertion that the assessment order was erroneous due to a lack of examination or verification. 3. Distinguishing Between Section 154 and Section 263: The Tribunal noted that the CIT's power under Section 263 is not comparable to the power of rectification under Section 154. The Tribunal referred to the Supreme Court's judgment in CIT vs. Ralson Industries Ltd., which clarified that the initiation of proceedings under Section 263 cannot be deemed invalid merely because rectification proceedings were initiated under Section 154. The Tribunal emphasized that each case must be considered on its own facts. 4. Assessing Officer's Possible View: The Tribunal held that the assessing officer's acceptance of the assessee's claims was a possible view. The Tribunal referred to the Supreme Court's judgment in Malabar Industrial Co. Ltd. vs. CIT, which stated that when an assessing officer adopts one of the courses permissible in law, it cannot be treated as erroneous unless the view is unsustainable. The Tribunal found that the assessing officer's view was not unsustainable and, therefore, the CIT's invocation of Section 263 was unwarranted. 5. Perversity of Tribunal's Order: The Tribunal's order was challenged on the grounds of perversity. However, the Tribunal's findings were based on the evidence presented, including the assessment records and the replies provided by the assessee. The Tribunal concluded that the assessment order was not passed without application of mind and that the assessing officer had conducted necessary inquiries. The Tribunal's order was not found to be perverse, as it was based on a thorough examination of the facts and evidence. Conclusion: The Tribunal's decision to quash the CIT's order under Section 263 was upheld. The Tribunal's findings were based on a detailed examination of the assessment records and the evidence presented. The assessing officer's acceptance of the assessee's claims was deemed a possible view, and the CIT's invocation of Section 263 was found to be unwarranted. The Tribunal's order was not perverse, as it was based on a thorough evaluation of the facts and evidence. The appeal by the Revenue was dismissed.
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