2021 (11) TMI 971 - HC - Income Tax

Revision u/s 263 by CIT - Allowability of provision and contingencies on account of arrear payment due to wage revision - whether Tribunal was justified in law or in fact in holding that the assessing officer had made due enquiries on the assessment of deduction on account of arrear payment which are payable consequent to wage revision and that it was an ascertained liability and was liable to be allowed as deduction? - HELD THAT - Tribunal on facts came to the conclusion that the action of the assessing officer in allowing the claim of the assessee for deduction cannot be said to be erroneous as it was a possible view which the assessing officer has taken and merely because the CIT does not agree with the view expressed by the assessing officer, he could not invoke his jurisdiction under Section 263 of the Act. On facts, we have found that there is nothing to interfere with the order passed by the Tribunal. Appearing for the respondent/assessee places reliance on a decision in the case of Commissioner of Income Tax, Ward-3, Tirunelveli versus Smt. Padmavathi 2020 (10) TMI 425 - MADRAS HIGH COURT as held that the Commissioner while invoking his power under Section 263 faults the assessing officer on the ground that he did not make proper enquiry and in the absence of any clarity as to why in the opinion of the Commissioner the enquiry was not proper, invocation of power under Section 263 was not justified. In our considered view, the said decision will apply with full force to the case on hand. We say so because the Tribunal on examining the facts found that there was no error in the manner in which the assessment was completed and no fault can be attributed to the assessing officer as to how the enquiry was conducted. Thus, we find that the order passed by the Tribunal does not call for any interference. In the result, the appeal fails and the same stands dismissed and the substantial question of law is answered against the Revenue.

Summary

Issues:
1. Whether the jurisdiction exercised by the Commissioner of Income Tax under Section 263 of the Income Tax Act was just and proper.

Comprehensive Analysis:
The High Court of Calcutta considered an appeal filed by the Revenue against an order of the Income Tax Appellate Tribunal. The appeal raised a substantial question of law regarding the deduction of a specific sum on account of arrear payment due to wage revision. The Court examined whether the exercise of jurisdiction by the Commissioner of Income Tax under Section 263 of the Act was appropriate. The Tribunal had previously determined that the assessing officer had conducted due enquiries regarding the provision for arrears of wages and allowed the deduction claimed by the assessee. The Court noted that the Commissioner's assumption of jurisdiction under Section 263 was incorrect, as the assessing officer's decision was based on proper enquiries and a possible view. The Court referenced relevant legal precedents and concluded that there was no error in the assessment process. The Court relied on a previous decision to emphasize that invoking power under Section 263 required clarity on why the enquiry was deemed improper, which was lacking in this case. Consequently, the Court upheld the Tribunal's order, dismissing the appeal and ruling against the Revenue on the substantial question of law.

In conclusion, the High Court of Calcutta found that the assessing officer had appropriately conducted enquiries and made a valid decision regarding the deduction claimed by the assessee. The Court emphasized the importance of clarity in invoking power under Section 263 and upheld the Tribunal's decision, dismissing the appeal and ruling against the Revenue on the substantial question of law.