2019 (11) TMI 1195 - HC - Income Tax

Revision u/s 263 - Period of limitation - Correct principles of law - deduction claimed by the assessee on account of premium paid for the accountant risked policy premium allowed by Tribunal - HELD THAT - The action u/s 263 of the Act in so far as the premium paid was barred by limitation as laid down u/s 263(2) of the Act. We therefore quash the order u/s 263 of the Act on the ground of limitation. We may also add that even on merits we are of the view that the premium paid in question cannot be considered as one falling within the ambit of Explanation 1 to section 37 of the Act. Since we have decided the issue on the point of limitation we do not wish to elaborate on this aspect further. For the reasons given above we quash the order u/s 263 of the Act and allow the appeal of the assessee.

Summary

Issues:
1. Deduction claimed on premium paid for the accountant risked policy.
2. Correctness of the tribunal's order accepting the deduction claim.
3. Legality of revenue's action.

Analysis:
1. The appellant claimed a deduction of ?1,20,30,048 under the head "Accountants Risk Policy Premium" for the assessment year 2007-08. The Assessing Officer initially allowed this claim under Section 143(3) of the Income Tax Act, 1961. Subsequently, the Commissioner of Income Tax (Appeals) partially granted relief to the appellant on other issues. Both the appellant and the revenue appealed to the Income Tax Appellate Tribunal, which upheld the appellate order on all issues except PWC Global Service Charges. The Assessing Officer then passed orders giving effect to the tribunal's decision. The appellant filed an application for rectification under Section 154, which was upheld by the tribunal. However, the CIT(Appeals) later set aside the Assessing Officer's order regarding the allowability of the Accountants Risk Policy Premium, leading to further legal proceedings.

2. The tribunal's order dated 22nd September, 2017, acknowledged that the Assessing Officer's previous orders did not address the issue of the premium paid for the Accountants Risk Policy. The tribunal found that the CIT's attempt to revise the order was beyond the scope of the previous proceedings and was barred by the limitation period under Section 263(2) of the Act. The tribunal quashed the CIT's order under Section 263 on grounds of limitation and also opined that the premium paid did not fall within the ambit of Explanation 1 to section 37 of the Act. The tribunal ultimately allowed the appeal of the assessee based on the limitation issue and declined to elaborate on the merits of the premium paid.

3. The High Court, after considering the submissions and the facts on record, agreed with the tribunal's reasoning and decision to quash the CIT's order under Section 263. The High Court concurred with the tribunal's view that the CIT's action was time-barred and that the premium paid did not qualify for deduction under the relevant provisions of the Income Tax Act. Consequently, the High Court dismissed the appeal, answering question no. 3 in favor of the assessee and against the revenue, rendering questions 1 and 2 moot in light of this determination.