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2016 (3) TMI 57 - AT - Income TaxRevision u/s 263 - income from incentives undisclosed - Held that - As far as the first issue is concerned, it is not the case of the Revenue that the assessee had income from incentives which were ultimately not offered. The assessee has explained to the AO that on account of procedural lapses, it could not claim the incentives, and therefore, no income has accrued to him. This stand of the assessee must have been examined by the AO. We could appreciate the stand of the ld.Commssioner, had she pointed out any fundamental change either in the nature of receipt or any development showing that this could be assessed in the hands of the assessee. As far as the second issue is concerned, the assessee has explained that its transaction does not fall within the meaning of speculative transactions provided under section 43(5) of the Income Tax Act. Now, how this could be a speculative transaction, nowhere discernible either from the show cause notice or from the findings of the ld.Commissioner. Ld. Commissioner has made an observation that there is an inadequate inquiry. As per the decision of the Hon ble Gujarat High Court in the case of Amit Corporation (2012 (6) TMI 593 - GUJARAT HIGH COURT ) lack of inquiry would give jurisdiction to the Commissioner to take action under section 263. But the alleged inadequacy of inquiry would not empower the ld. Commissioner to take action under section 263 of the Act. In view of above discussion, we allow the appeal of the assessee and quash the order passed under section 263 of the Act by the ld.Commissioner - Decided in favour of assessee
Issues Involved:
1. Whether the Commissioner of Income-Tax (CIT) erred in invoking Section 263 of the Income Tax Act, 1961. 2. Whether the assessment order passed under Section 143(3) of the Act was erroneous and prejudicial to the interest of the Revenue. Issue-wise Detailed Analysis: 1. Invocation of Section 263 by CIT: The primary grievance of the assessee revolves around the CIT's invocation of Section 263, which allows the CIT to revise an assessment order if it is deemed erroneous and prejudicial to the interest of the Revenue. The CIT believed that the assessment order dated 20.12.2010 was flawed due to the lack of proper inquiry into two specific issues: the non-accounting of industrial promotion assistance and the treatment of currency swap loss as a business loss instead of a speculative loss. The CIT issued a show cause notice under Section 263, highlighting these concerns and directing the Assessing Officer (AO) to make a fresh assessment. 2. Assessment Order's Alleged Errors: The CIT identified two main reasons for deeming the assessment order erroneous: a. Industrial Promotion Assistance: The CIT noted that the assessee did not account for Rs. 544.24 lakhs of industrial promotion assistance receivable under the West Bengal Incentive Scheme, 2000. The CIT argued that the AO failed to verify whether this incentive was accounted for in the correct assessment year and whether it was written off as bad debt in the subsequent year. The CIT cited several judicial decisions to support the view that lack of proper inquiry renders the assessment order erroneous and prejudicial to the Revenue's interests. b. Currency Swap Loss: The CIT contended that the assessee's claimed currency swap loss of Rs. 222.64 lakhs should have been treated as a speculative loss rather than a business loss. The CIT argued that the AO did not verify whether these transactions were for hedging purposes and whether the loss should be classified as speculative under Section 43(5) of the Income Tax Act. The CIT concluded that the AO's failure to properly verify these transactions made the assessment order unsustainable. Assessee's Defense: The assessee provided detailed submissions to counter the CIT's claims, arguing that the AO had issued a comprehensive questionnaire and received satisfactory responses from the assessee. The assessee emphasized that the AO had conducted inquiries and was satisfied with the explanations provided. The assessee also explained the accounting treatment of the industrial promotion assistance and the nature of the currency swap transactions, arguing that the AO's conclusions were based on a thorough examination of the facts. Tribunal's Findings: The Tribunal examined the CIT's invocation of Section 263 and the AO's assessment order. It noted that the AO had indeed issued a detailed questionnaire and received comprehensive responses from the assessee. The Tribunal emphasized that the AO had exercised quasi-judicial powers and made inquiries, and the CIT's disagreement with the AO's conclusions did not justify invoking Section 263. The Tribunal cited various judicial decisions to support the view that inadequate inquiry does not warrant revision under Section 263, and the AO's order could not be deemed erroneous simply because the CIT had a different opinion. Conclusion: The Tribunal concluded that the CIT's invocation of Section 263 was not justified, as the AO had conducted adequate inquiries and reached a plausible conclusion based on the facts and circumstances of the case. The Tribunal allowed the assessee's appeal and quashed the CIT's order passed under Section 263, thereby upholding the original assessment order. Order Pronouncement: The Tribunal pronounced the order in favor of the assessee on 8.12.2015, allowing the appeal and quashing the CIT's order under Section 263.
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