2015 (3) TMI 402 - HC - Income Tax

Revision u/s 263 - payment of gratuity - disallowance u/s 43-B - Whether there existed any figure like ₹ 7,35,787/-, which formed the basis of discussion by CIT(A) in its order passed u/s 263 which was considered in the context of Section 43-B of Act, 1961? - Held that - Before Tribunal the assessee specifically raised an issue that this figure of ₹ 7,35,787/- is not traceable and let it be known to him as to wherefrom this figure has come. When we required learned counsel for the appellant to show whether there existed any such figure in any of the document, he fairly admitted that atleast from the record he had seen, he could not lay his hand on existence of such amount. He also could not dispute that there is nothing on record to show that assessee ever claimed deduction of ₹ 7,35,787/- as provident fund. Thus it is evident that Commissioner of Income Tax while discussing the question of disallowance of ₹ 7,35,787/-, under Section 43-B of Act, 1961, has considered the matter relating to an amount which did not exist at all and before this Court also it could not be shown to have existed. This shows a total non-application of mind on the part of Commissioner. The view taken by Tribunal in favour of assessee, therefore, cannot be faulted. - Decided in favour of assessee.

Issues:
1. Competency of Commissioner of Income Tax under section 263 of the I.T. Act, 1961.
2. Disallowance of payment of gratuity under section 43-B of the I.T. Act, 1961.
3. Existence of a specific figure in relation to disallowance under section 43-B of the I.T. Act, 1961.

Analysis:

Competency of Commissioner of Income Tax under section 263 of the I.T. Act, 1961:
The High Court considered whether the Commissioner of Income Tax was competent to exercise jurisdiction under section 263 of the I.T. Act, 1961. The Court noted that there was a dispute regarding the disallowance under section 43-B of the Act. The Tribunal had held that the Commissioner was not competent to exercise jurisdiction under section 263 without appreciating the prima facie case of disallowance. The Court found that the Commissioner had not applied his mind properly as a specific figure crucial to the case was non-existent. Consequently, the Court upheld the Tribunal's decision in favor of the assessee, dismissing the appeal.

Disallowance of payment of gratuity under section 43-B of the I.T. Act, 1961:
The Court examined the issue of disallowance of a specific amount under section 43-B of the I.T. Act, 1961, which was claimed to represent payment of gratuity. The Tribunal had to determine the validity of the disallowance in relation to the unpaid liability of contribution to the provident fund. The Court found that the figure in question was not traceable in the records, and the appellant could not provide evidence of its existence or claim for deduction. As a result, the Court concluded that the Commissioner's decision to disallow the amount lacked proper consideration and upheld the Tribunal's decision in favor of the assessee.

Existence of a specific figure in relation to disallowance under section 43-B of the I.T. Act, 1961:
The Court delved into the crucial question of whether a specific figure of a substantial amount existed, forming the basis of the Commissioner's order under section 263 of the I.T. Act, 1961. It was revealed that the figure was not verifiable from the records, and the appellant failed to establish its existence or any claim for deduction. The Court emphasized the lack of application of mind by the Commissioner in considering this non-existent amount, leading to a decision in favor of the assessee. Consequently, the Court dismissed the appeal, as questions one and two were deemed irrelevant in light of the non-existent figure crucial to the case.

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