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2015 (10) TMI 1515 - AT - Income TaxRevision u/s 263 - unaccounted receipt of compensation - addition on accrual basis - Held that - The Assessee received only ₹ 2,50,00,000 towards compensation from M/s Charm India Pvt. Ltd. during the year under consideration and as the Appellant was following cash system of accounting, as is apparent from clause (11a) of tax audit report i.e. Form 3CD the Appellant rightly accounted for the actual amount of receipt of compensation on receipt basis and therefore, there was no justification on the part of the Id. CIT to make addition of ₹ 38,48,050/- to the income of the Assessee on accrual basis. Keeping in view of the above, the impugned order u/s 263 is also illegal as the Ld. CIT has not conducted any independent enquiry/verification before making addition of ₹ 38,48,050/- on account of compensation. In this regard, we draw our support from case of ACIT vs. Manas Salt Iodisation Industries (P) Ltd. (2015 (5) TMI 674 - ITAT GAUHATI ) in which the Hon ble ITAT had endorsed the view taken in the case of Bharat Petroleum Corporation Ltd vs. Jt CIT (2004 (4) TMI 516 - ITAT MUMBAI) wherein held as under The CIT by deciding the fate of the issues himself has pre-empted the assessee company in agitating the matter before the various authorities right from the assessment onwards in a systematic and consistent manner. Therefore, that part of the conclusion of the revision order is not sustainable . Thus the assessment framed by the Assessing Officer was not erroneous and prejudicial to the interests of revenue so as to attract the proceedings u/s. 263 - Decided in favour of assessee.
Issues Involved:
1. Jurisdiction of CIT to invoke Section 263 of the Income Tax Act. 2. Whether the assessment order dated 15.11.2010 was erroneous and prejudicial to the interest of revenue. 3. Validity of the addition of Rs. 38,48,050/- made by the CIT. 4. Adequacy of the AO's enquiry during the assessment proceedings. Detailed Analysis: Jurisdiction of CIT to Invoke Section 263: The assessee contended that the CIT had no jurisdiction to invoke Section 263 of the Income Tax Act, 1961. The Tribunal examined the revisional power conferred on the Commissioner under Section 263, which is of wide amplitude, enabling the Commissioner to call for and examine the records of any proceeding under the Act. However, the Tribunal emphasized that the revisional power is quasi-judicial and must be exercised within its scope and ambit, requiring the Commissioner to provide reasons and material for passing an order. The Tribunal concluded that the CIT did not have adequate grounds to invoke Section 263 as the twin conditions of the order being erroneous and prejudicial to the interests of the revenue did not co-exist in this case. Erroneous and Prejudicial Assessment Order: The CIT argued that the assessment order was erroneous and prejudicial to the interest of revenue because the AO did not properly investigate the discrepancies and variations in the assessee's income and the arbitration award. The Tribunal, however, found that the AO had made proper enquiries during the assessment proceedings, examined all relevant evidences, and applied his mind to the facts and circumstances of the case. The Tribunal cited the Supreme Court's decision in Malabar Industries Co. Ltd. vs. CIT, which established that an order can only be revised if it is both erroneous and prejudicial to the interests of the revenue. Since the AO had conducted a thorough enquiry, the Tribunal held that the assessment order was neither erroneous nor prejudicial to the interest of revenue. Validity of the Addition of Rs. 38,48,050/-: The CIT made an addition of Rs. 38,48,050/- to the income of the assessee, holding that the difference between the amount as per the arbitration award and the amount declared by the assessee was concealed income. The Tribunal found that the assessee had shown only Rs. 2.50 crores as income from the arbitration award, which was received during the year under consideration. The remaining amount of Rs. 38,48,050/- was not received and was therefore not accounted for by the assessee. The Tribunal noted that the assessee followed the cash system of accounting and rightly accounted for the actual amount received. The Tribunal concluded that there was no justification for the CIT to make the addition on an accrual basis. Adequacy of AO's Enquiry: The CIT contended that the AO completed the assessment without proper enquiry. The Tribunal examined the records and found that the AO had issued multiple notices and conducted a detailed enquiry, including issuing a notice under Section 133(6) to M/s Charms India Pvt. Ltd., which provided all necessary details. The Tribunal emphasized that an order passed after conducting proper enquiries cannot be held erroneous and prejudicial to the interest of the revenue merely because it is brief or cryptic. The Tribunal concluded that the AO had made a thorough enquiry and the assessment order was passed after proper application of mind. Conclusion: The Tribunal held that the assessment order was not erroneous and prejudicial to the interests of revenue, and therefore, the CIT's invocation of Section 263 was not justified. The Tribunal canceled the revisional order passed under Section 263 and restored the original assessment order. The appeal filed by the assessee was allowed.
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