2015 (8) TMI 1207 - AT - Income Tax

Revision u/s 263 - as per CIT(A) AO in the present case failed to examine correct facts relating to export agency commission paid to the non-residents which were actually paid for various market services partaking the character of technical services - Held that - The AO in the present case failed to examine the correct facts relating to the Export Agency Commission paid to the non-residents which were actually paid for various market service partaking the character of technical services . AO has not examined the commission paid to various agents with regard to nature of services rendered by them, procurement of orders by them, agreements entered into with them etc. and applicability of provisions of section 40(a)(i) read with section 9(1)(vii) of the Act while completing the assessment. The order passed by the Assessing Officer under section 143(3) read with section 147 allowing the claim of the assessee without examining the payments made to non-resident agents towards sales commission and applicability of provisions of section 40(a)(i) read with section 9(1)(vii) of the Act is certainly an order passed erroneously and prejudicial to the interests of the Revenue. Therefore, we hold that the Commissioner of Income Tax rightly invoked the provisions under section 263 of the Act directing the Assessing Officer to complete the assessment afresh after providing effective opportunity to the assessee. - Decided against assessee.

Issues:
Challenge to order under section 263 of the Income Tax Act regarding assessment order passed under section 143(3) on 30.12.2010.

Detailed Analysis:

1. Issue of Jurisdiction under Section 263:
The appeal challenges the order of the Commissioner of Income Tax, LTU, Chennai, dated 28.12.2012, asserting jurisdiction under section 263 of the Act. The Commissioner held that the assessment order passed under section 143(3) on 30.12.2010 was erroneous and prejudicial to the Revenue's interests. The Commissioner directed the Assessing Officer to re-assess after providing the assessee with an effective opportunity to present relevant facts.

2. Examination of Payments to Non-Resident Agents:
The Commissioner found the assessment order erroneous as the Assessing Officer failed to scrutinize payments made to non-resident agents for sales commission and the application of section 40(a)(i) read with section 9(1)(vii) of the Act. It was noted that details regarding commission payments lacked specifics on agreements or services rendered, indicating a lack of examination by the Assessing Officer.

3. Nature of Payments and Technical Services:
The Assessing Officer did not delve into the nature of payments made to non-resident agents, particularly in relation to technical services under section 9(1)(vii) of the Act. The Commissioner emphasized that the Assessing Officer's failure to examine these aspects rendered the assessment order erroneous and prejudicial to Revenue interests.

4. Legal Precedents and Application of Law:
Citing the decision in M/s. Malabar Industrial Co.Ltd. case, it was highlighted that incorrect assumptions of facts or misapplication of law render an order erroneous. The failure of the Assessing Officer to consider crucial aspects like payments to non-resident agents indicated an order passed without due application of mind, justifying the Commissioner's intervention under section 263.

5. Upholding Commissioner's Order:
Upon review, the Tribunal concurred with the Commissioner's findings, emphasizing that the Assessing Officer's oversight in examining payments to non-resident agents and relevant tax provisions led to an erroneous and prejudicial assessment order. The Tribunal upheld the Commissioner's decision to invoke section 263 and directed a fresh assessment with adequate opportunity for the assessee to present relevant information.

In conclusion, the Tribunal dismissed the appeal, affirming the Commissioner's order under section 263 as justified based on the Assessing Officer's failure to properly scrutinize payments to non-resident agents and apply relevant tax provisions during the assessment process.

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