2014 (6) TMI 154 - CALCUTTA HIGH COURT

Validity of order u/s 263 of the Act - Whether the AO in allowing the claim of the assessee with respect including the receipt of sum of ₹ 18 crores from the German Concern took a possible view of the matter – Held that:- There was absolutely no attempt on the part of Mr. Nizamuddin to demonstrate that the AO did not take a possible view in accepting the contention of the assessee - The parent contract dated 14th September, 1995 did not provide for payment of any compensation or any sum on any account whatsoever - Upon expiry of the contract, the assessee was liable to surrender the technical know-how and to cease to manufacture the goods - The assessee was not entitled in any event, upon expiry of the contract, to prevent the German Concern from setting up its 100% subsidiary for the purpose of manufacturing and marketing its goods - In case the German Concern paid the aforesaid sum for the purpose of securing an NOC from the assessee, even if it is assumed that by agreeing to issue the same the assessee agreed to have his manufacturing and trading structure impaired resulting in loss of his source of income - the receipt would be a capital receipt – Relying upon Kettlewell Bullen And Company Limited Versus Commissioner Of Income-Tax, Calcutta [1964 (5) TMI 4 - SUPREME Court] - If on the other hand it was a gratuitous payment as indicated in the agreement dated 22nd March, 2005 “amounts are being paid by BDF on its own free will” the receipt would still be a capital receipt - the Tribunal was justified in holding that the AO took a possible view.

Whether the assessment order dated 28th March, 2008 was passed without application of mind is basically a question of fact - Tribunal has held that the assessment order was not passed without application of mind - The records of the assessment including the order sheets go to show that appropriate enquiry was made and the assessee was heard from time to time - the fact that all requisite papers were summoned and thereafter the matter was heard from time to time coupled with the fact that the view taken by him is not shown by the revenue to be erroneous - A prima facie evidence on the basis of the presumption is converted into a conclusive proof of the fact the order was passed by the AO after due application of mind - unless the recital is factually incorrect or the computation is legally wrong, it is not possible to hold that the assessment order was passed without application of mind - If the AO cannot be shown to have violated any form prescribed for writing an assessment order, it would not be correct to hold that he acted illegally or without applying his mind.

The Tribunal reached the conclusion that the order of the AO was not passed without application of mind – Revenue is unable to point out any part of the finding, recorded by the Tribunal - in the absence of any challenge to the finding of the Tribunal that the ITO had actually made an enquiry the Revenue was precluded from challenging the order of the Tribunal setting aside an order passed in exercise of power u/s 263 - The ground as regards perversity is relatable to a finding on a question of fact – revenue did not draw any attention to any part of the finding of the Tribunal which according to him was perverse – Decided against Revenue.