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2014 (7) TMI 914 - HC - Income TaxCancellation of order u/s 263 Held that - The Tribunal was of the view that the basis or foundation for the order u/s 263 was completely lacking - this was not a blind acceptance of the version of the assessee, as is now termed - Such an order may be erroneous, according to the Commissioner, surely Section 263 could not have been invoked - since the Tribunal had rested its conclusion essentially on applicability of Section 263 of the Act and which cannot he held to be perverse or vitiated by any error of law apparent on the face of record that there is no merit in the Appeal Decided against Revenue.
Issues Involved:
1. Challenge to the order passed by the Income Tax Appellate Tribunal, Mumbai dated 31st October 2012 in Income Tax Appeal No.376/Mum/2011 for the Assessment Year 2006-2007. 2. Whether the Tribunal was correct in canceling the order under section 263 by relying on a decision from ITAT Chennai Bench and the Madras High Court, ignoring the decision of the Supreme Court. 3. Whether the Tribunal was correct in allowing the notional loss in respect of shares allotted to employees as ESOP, despite the Income Tax Act not permitting deduction of such notional loss. Comprehensive Analysis: 1. The appeal challenged the order of the Income Tax Appellate Tribunal for the Assessment Year 2006-2007. The appellant argued that substantial questions of law arose for consideration, questioning the cancellation of the order under section 263. The first issue raised was whether the Tribunal erred in canceling the order under section 263 by relying on a decision from ITAT Chennai Bench and the Madras High Court, disregarding the Supreme Court's decision in a different case. The second issue was whether the Tribunal was correct in allowing the notional loss related to shares allotted to employees as ESOP, despite the Income Tax Act not permitting the deduction of such notional loss. 2. The appellant contended that the Assessing Officer had completed the assessment without proper scrutiny, resulting in an erroneous assessment prejudicial to the revenue's interest. The Commissioner then made an order under Section 263 of the Income Tax Act. The appellant argued that the Tribunal should have upheld this decision as the Assessing Officer failed to conduct a proper inquiry before allowing the ESOP Amortization expenses claimed by the assessee. 3. However, the High Court disagreed with the appellant's arguments. The Court emphasized that for Section 263 to be invoked, the Assessing Officer's order must be both erroneous and prejudicial to the revenue's interest. The Tribunal found that the Assessing Officer had considered the issue thoroughly, referencing relevant material and a decision from the Tribunal at Chennai. The High Court noted that the Tribunal's decision to quash the Commissioner's order was based on the lack of foundation for invoking Section 263, rather than the merits of the claim itself. As such, the Court found no error of law in the Tribunal's decision and dismissed the appeal. 4. In conclusion, the High Court upheld the Tribunal's decision to quash the Commissioner's order under Section 263, emphasizing that the Assessing Officer had not blindly accepted the assessee's version but had considered relevant material before making the assessment. The Court found no merit in the appeal and dismissed it accordingly.
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