2014 (7) TMI 86 - ITAT MUMBAI - Income Tax

Head Note / Extract:
Invocation of section 263 of the Act – Allowability of the expenditure - scope of deeper inquiry to be conducted by AO - Held that:- The decision in Malabar Industrial Company Ltd. vs. CIT [2000 (2) TMI 10 - SUPREME Court] is a locus classicus on the subject - the matter is primary factual, so that it would be required to be seen if the AO has considered all the materials, or that there has been a proper examination and verification by him, demonstrating application of mind, in adopting a considered view and, thus, eschew the charge of non-application of mind - the occasion to explain the scope and meaning of the clause of the agreement, which without doubt is extremely relevant in-as-much as it determines the scope of the contractual obligation on the assessee in respect of the expenditure, i.e., in-so-far as the charge of non-application of mind by the AO is concerned, is before the latter and not subsequently in the review proceedings. There would have been a dislocation of the assessee’s operations during the period the property was subject to renovation - it is claimed that the expenditure was incurred by the lessor in the first instance, and subsequently reimbursed by the assessee - the issue as to the nature of the expenditure, explained as non-regular or accumulated repairs, may be relevant from the stand-point of its allowability, including the provision of law under which it is - A finding of a business purpose as well as the provision under which it is allowable must precede and inform the assessment, and on which we observe no enquiry by the AO – the present case is one of lack of or absence of enquiry by the AO, so that the revision jurisdiction in relation the deduction of the expenditure in assessment stands validly assumed by the competent authority – the direction for fresh adjudication after examining the facts, and upon allowing proper opportunity to the assessee is consistent with the finding of the non-application of mind, necessitating fresh determination of the matter – thus, there was no infirmity in the order – Decided against Assessee.