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2015 (11) TMI 921 - AT - Income TaxRevision u/s 263 - Held that - As before enhancing or annulling or modifying or cancelling the assessment while exercising his powers under section 263 of the Act, the Commissioner must record a finding of fact or of law that the order of the AO is erroneous and is also prejudicial to the interest. In the case in hand, this prerequisite condition has not been satisfied as the Commissioner after calling for the explanation from the assessee has failed to make necessary exercise in examining or cause to examine the explanation/details submitted by the assessee for the justification of its claim. Hence, the order of the Commissioner exercising jurisdiction under section 263 of the Act cannot be held to be sustainable in law and the same is accordingly set aside. - Decided in favour of assessee.
Issues Involved:
1. Purchase of tools and implements treated as revenue expenditure. 2. Depreciation on dies and moulds claimed at 40%. 3. Depreciation on motor car claimed at Rs. 9,42,382/-. 4. Deduction under section 80G for donations without evidence. Detailed Analysis: 1. Purchase of Tools and Implements: The Commissioner of Income Tax (CIT) exercised his revisional jurisdiction under section 263 of the Income Tax Act, calling for and examining the assessment records. He found that the purchase of tools and implements amounting to Rs. 62,44,802/-, which was in the nature of capital expenditure, was debited as revenue expenditure in the profit and loss account and allowed by the Assessing Officer (AO) without verification. The assessee argued that the expenditure was of a revenue nature, citing case laws "CIT vs. Mysore Spun Concrete Pipe (P) Ltd." and "CIT vs. Jagatjit Industries Ltd." However, the CIT concluded that the AO had not made proper verification, rendering the assessment erroneous and prejudicial to the interest of Revenue. 2. Depreciation on Dies and Moulds: The CIT noted that the assessee claimed depreciation on dies and moulds at 40%, while the allowable rate as per Income Tax Rules was 25%. The AO allowed the depreciation without examination. The assessee provided a depreciation chart and argued that the claim was rightly made. Despite this, the CIT found the AO's lack of specific findings on this matter problematic, leading to the assessment being considered erroneous and prejudicial to the interest of Revenue. 3. Depreciation on Motor Car: The total allowable depreciation on the motor car was Rs. 7,53,906/-, but the assessee claimed Rs. 9,42,382/-, which the AO allowed without verification. The assessee submitted details supporting the claim. The CIT, however, determined that the AO did not properly verify this claim, thus treating the assessment as erroneous and prejudicial to the interest of Revenue. 4. Deduction under Section 80G: The assessee claimed a deduction under section 80G for donations, but no evidence was provided to support this claim. The assessee later clarified that no such donation was made, and the amount was for subscriptions, claimed as business expenditure. The CIT observed that the AO allowed the deduction without proper verification, making the assessment erroneous and prejudicial to the interest of Revenue. Tribunal's Findings: Legal Provisions and Enquiries: The Tribunal reviewed the provisions of section 263, noting that the CIT must demonstrate that the AO's order was erroneous and prejudicial to the interest of Revenue. The AO had asked for and received detailed explanations and records from the assessee, which were considered before passing the assessment order. The CIT, however, did not examine the explanations or make a prima-facie opinion on the validity of the claims. Case Laws and Precedents: The Tribunal referred to various case laws, emphasizing that the CIT must provide a clear finding that the AO's order is erroneous and prejudicial to the interest of Revenue. The Tribunal noted that mere lack of detailed reasoning in the AO's order does not imply lack of enquiry. The CIT must demonstrate that the AO's view was not legally sustainable. The Tribunal found that in this case, the CIT did not fulfill this requirement. Conclusion: The Tribunal concluded that the CIT failed to examine the explanations and details provided by the assessee, and did not establish that the AO's order was erroneous and prejudicial to the interest of Revenue. Therefore, the Tribunal set aside the CIT's order under section 263, allowing the appeal of the assessee. Result: The appeal of the assessee was allowed, and the order of the CIT was set aside.
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