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TMI Blog2014 (11) TMI 653X X X X Extracts X X X X X X X X Extracts X X X X ..... fairly possible view for treating the advertisement expenditure as 'Revenue Expenditure' - the order of the AO cannot be termed as 'erroneous'. Rather, CIT without independent application of mind has replicated audit objections in the show cause notice issued u/s.263 - In SHRI JASWINDER SINGH Versus COMMISSIONER OF INCOME TAX-II [2012 (6) TMI 543 - ITAT CHANDIGARH] it has been held that exercise of revisional power on the basis of audit objection is not tenable in law – thus, the CIT without examining the records and proper application of mind has invoked the provisions of section 263 in disallowing the advertisement expenditure claimed by the assessee - There is nothing on record to suggest that the order of AO is not sustainable in law – the order of the CIT is set aside – Decided in favour of assessee. - ITA No. 972/Mds/2014 - - - Dated:- 9-9-2014 - Dr. O. K. Narayanan, VP And Vikas Awasthy, JM,JJ. For the Appellant : Shri M. Narayanan For the Respondent : Shri Durgesh Sumrott, CIT ORDER Per Vikas Awasthy,J.M. The appeal has been filed by the assessee impugning the order of Commissioner of Income Tax, Chennai dated 18-03-2014 passed u/s.263 of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w expenditure of ₹ 1,99,13,832/- and treat the same as capital in nature. Aggrieved by the order of Commissioner of Income Tax, the assessee has come in appeal before the Tribunal. 3. Shri M.Narayanan, appearing on behalf of the assessee submitted that the advertisement expenditure questioned by the Commissioner of Income Tax was considered by Assessing Officer during scrutiny assessment. Now, the Commissioner of Income Tax has raised this question only on the basis of audit objection. The AR placed on record a copy of audit objection made by the office of the Directorate General of Audit (Central). The ld.AR submitted that the Commissioner of Income Tax has not applied his independent mind on the issue and has merely transplanted the audit objection while issuing notice u/s.263 of the Act. The ld.AR of the assessee also placed on record a copy of the letter dt.27-12-2011 filed before the Assessing Officer, giving reasons as to why advertisement expenditure incurred during Financial Year (FY) 2008-09 was considered as 'Revenue Expenditure'. The ld.AR further contended that the view taken by the Commissioner of Income Tax is merely a different view which he canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 34,63,022 towards preliminary expenses u/s.35D of IT act. However, in the assessment order dated 23.12.10 related to AY. 08-09, the above preliminary expenses u/s.35D was restricted to ₹ 16,09,408. The reason for the above restriction is that the Share premium amount also included in the quantified amount and which would not qualify for quantification of eligible amount for purpose of deduction u/s.35D. Thus, the assessee is eligible for deduction u/s.35D only to the extent of ₹ 16,09,408. However, the assessee has claimed a deduction of ₹ 34,63,022/-. Therefore, the net disallowance on this count is arrived at ₹ 18,53,614 (34,63,022 16,09,408) and this may be added back to assessed income . 6. A reading of the provisions of section 263 make it unambiguously clear that two conditions must be satisfied before the Commissioner of Income Tax can exercise revisional jurisdiction conferred on him. Firstly, the order passed by the Assessing Officer must be erroneous and secondly, the error must be such that it is prejudicial to the interests of revenue. If either of the two pre-conditions is absent, the Commissioner of Income Tax cannot invoke the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has incurred the expenditure for advertisement purposes, a view is possible that the expenditure is not capital in nature. It is, after examining these facts and circumstances, that the Assessing Officer has allowed the deduction as claimed by the assessee. The view taken by the assessing authority is one of the possible views. In the Audit Report, the auditors have pointed out that the assessee has deducted a sum of ₹ 1,99,13,832/- being brand building expenditure written off in full. The auditors have pointed out that the amount was shown under deferred revenue expenditure. The auditors have expressed their own views. That may be correct or may not be correct. But in the present audit note, they have not mentioned as to why this deferred revenue expenditure should be treated as a capital expenditure. A deferred revenue expenditure ipso facto does not become capital expenditure. It is called as deferred revenue expenditure, for the reason that it is not a capital expenditure. Therefore, the audit objection is itself objectionable. An observation in the audit report could be a valid reason for the Commissioner to exercise his jurisdiction under sec.263, if on his e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer cannot be termed as 'erroneous'. Rather, Commissioner of Income Tax without independent application of mind has replicated audit objections in the show cause notice issued u/s.263 of the Act. 10. The Chandigarh Bench of the Tribunal in the case of Sh.Jaswinder Singh Vs. CIT (supra) has held that exercise of revisional power on the basis of audit objection is not tenable in law. The co-ordinate Bench of the Tribunal while coming to such a conclusion has taken into consideration the decision of the Hon'ble Punjab Haryana High Court in the case of CIT Vs. Sohana Woollen Mills reported as 296 ITR 238 and the decision of the Hon'ble Calcutta High Court in the case of Jeewan Lal (1929) Ltd., Vs. ACIT reported as 108 ITR 407 (Calcutta). The Hon'ble Punjab Haryana High Court in the case of CIT Vs. Sohana Woollen Mills (supra) has held that mere audit objection and merely because a different view can be taken are not enough to say that order of the Assessing Officer is erroneous or prejudicial to the interest of revenue. 11. In the facts and circumstances of the case, we are of the considered opinion that the Commissioner of Income Tax wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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