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2014 (7) TMI 1003 - HC - Income TaxRevision u/s 263 - Disallowance u/s 14A Held that - Without pronouncing whether the figures given by the assessee were incorrect, the Commissioner recorded that this required verification from the records - This is impermissible and cannot be allowed u/s 263 as the Commissioner must reach the finding that the assessment order restricting disallowance under Section 14A to ₹ 45,07,413/- was erroneous and incorrect order of the Tribunal upheld Decided against Revenue. Loans/assets written off Held that - Once inquiries were conducted and a decision was reached by the AO, it cannot be said that it was a case of no inquiry - the Commissioner must reach a finding that the finding of the AO was erroneous, not because no inquiries were conducted, but because the final finding was wrong and untenable - order of the Tribunal upheld Decided against Revenue. Sale of agricultural land Claim of exemption u/s 54B Held that - Commissioner was not that the AO had not made any inquiries, but that the Assessing Officer had not properly applied his mind and deliberated upon the issue - This does not meet the statutory requirement that the order passed by the AO was erroneous - Once inquiries were held and the AO formed a belief, the finding/opinion formed can be set aside only when it is erroneous and not because no inquires or inadequate inquiries were conducted - order of the Tribunal upheld Decided against Revenue.
Issues:
1. Quashing of order under Section 263 of the Income Tax Act, 1961 by the tribunal. 2. Disallowance under Section 14A of the Income Tax Act. 3. Loans/assets written off under Section 36(1)(vii) of the Income Tax Act. 4. Exemption claim under Section 54B of the Income Tax Act for sale of agricultural land. Issue 1: Quashing of order under Section 263 of the Income Tax Act, 1961 by the tribunal The High Court declined to interfere with the tribunal's order quashing the order under Section 263 of the Income Tax Act. The Court did not delve into whether the Commissioner was precluded from passing the order under Section 263 due to a prior appeal concerning disallowance under Section 14A. The Court found that the Commissioner's order did not meet the jurisdictional pre-conditions of the assessment order being erroneous and prejudicial to the interest of the Revenue. Issue 2: Disallowance under Section 14A of the Income Tax Act The Assessing Officer had initially disallowed &8377; 45,07,413 under Section 14A, which the Commissioner sought to increase to &8377; 1,25,39,364. The assessee disputed this, stating the figures were incorrect. The Commissioner's order was set aside as impermissible under Section 263 since the Commissioner did not conclusively establish that the initial disallowance was erroneous. The Commissioner's uncertainty regarding the correctness of the disallowance amount rendered the order unsustainable. Issue 3: Loans/assets written off under Section 36(1)(vii) of the Income Tax Act Regarding loans/assets written off amounting to &8377; 6,25,245, the Commissioner observed that the Assessing Officer had not conducted meaningful inquiries, necessitating further examination. However, the Court held that the Commissioner's order lacked merit as it did not establish that the Assessing Officer's decision was erroneous. Merely suggesting further inquiries without proving the initial decision wrong was insufficient under Section 263. Issue 4: Exemption claim under Section 54B of the Income Tax Act for sale of agricultural land The assessee had claimed exemption under Section 54B, which was found inapplicable to a company. The Commissioner contended that the Assessing Officer did not properly deliberate on the issue, leading to an incorrect decision. However, the Court ruled that the Commissioner failed to demonstrate that the Assessing Officer's decision was erroneous. Merely alleging inadequate consideration or application of mind did not meet the statutory requirement for invoking Section 263. In conclusion, the High Court dismissed the appeal, finding no merit in challenging the tribunal's decision and upholding the principles governing the application of Section 263 of the Income Tax Act.
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