2021 (4) TMI 1205 - HC - Income Tax

Revision u/s 263 - Tribunal quashing the order of the Commissioner of Income Tax passed u/s 263 as non-speaking and cryptic order - HELD THAT - The first reason cited in the show cause notice was that deduction under Section 10B has been allowed without excluding other incomes. The assessee placed on record the copy of the assessment order dated 30.12.2011 passed under Section 143(3) read with Section 147 wherein AO has categorically stated that the assessee has not claimed deduction under Section 10B. Therefore, the finding of the Commissioner of Income Tax that the assessee has claimed deduction under Section 10B is factually incorrect. So far as the genuineness of the expenditure claimed in the profit and loss account were not verified by the Assessing Officer and the Balance Sheet items and details of annexure were not examined at the time of assessment. The Tribunal, while setting aside the order of Commissioner of Income Tax, held that the Commissioner of Income Tax cannot direct the AO to conduct roving enquiry without any specific directions with regard to specific expenditure or income claimed or suppressed by the assessee. Tribunal observed that the order passed by the Commissioner of Income Tax is a non-speaking and cryptic order. Commissioner of Income Tax has not given any valid reason to come to the conclusion that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. No error or irregularity in the order passed by the Tribunal. - Decided in favour of assessee.

Summary

Issues:
Challenging order under Section 263 of the Income Tax Act, 1961 for assessment year 2008-09 - Validity of Commissioner's order - Genuineness of expenditure claimed in profit and loss account - Tribunal's authority to direct roving enquiry - Validity of Commissioner's reasoning for finding order prejudicial to Revenue's interest.

Analysis:
The High Court of Madras addressed the appeal filed by the Revenue against the order passed by the Income Tax Appellate Tribunal concerning the assessment year 2008-09. The substantial questions of law admitted for consideration included whether the Tribunal was correct in quashing the Commissioner's order under Section 263 as non-speaking and cryptic, and whether the Tribunal was justified in finding no valid reason in the Commissioner's order regarding the genuineness of claimed expenditures and balance sheet items not examined by the Assessing Officer. The Court carefully reviewed the materials and submissions, noting that the Commissioner initiated proceedings under Section 263 based on incorrect grounds, such as deduction under Section 10B, which the Assessing Officer had not allowed. The Tribunal found that the Commissioner's order lacked specific directions for a roving enquiry and was non-speaking and cryptic, with no valid reasons to deem the Assessing Officer's order erroneous or prejudicial to Revenue's interest.

The Court concluded that there was no error or irregularity in the Tribunal's order and no substantial question of law to warrant interference. The Tribunal's decision was upheld, and the appeal was dismissed, with no costs imposed. The judgment emphasized the importance of specific directions in Commissioner's orders under Section 263, highlighting the need for valid reasons to establish errors prejudicial to Revenue's interest. The Court's analysis focused on the lack of verification by the Assessing Officer regarding claimed expenditures and balance sheet items, supporting the Tribunal's decision to set aside the Commissioner's order. Overall, the judgment underscored the requirement for clear reasoning and factual accuracy in orders under Section 263 to ensure fairness and adherence to legal principles.