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2018 (2) TMI 507

Head Note:
Revision u/s 263 - deduction u/s 80P allowability - change of opinion - allowability under section 40A(9), section 37(1) and diversion by overriding title - revision permissible merely on audit objection - rule of consistency - Held that:- Deduction claimed under chapter VIA is held to be allowable for the year under consideration. This shows clearly that claim of deduction under section 80P has been examined and thereafter, it has been allowed. We are therefore of the view that in absence of any specific query/discussion/examination by the AO and in absence of any specific finding in the assessment order as having examined the claim of the assessee regarding general and education reserve and the provision for gratuity, it cannot be said that there is a change of opinion when such an opinion has not been formed at the first place. Therefore, we are unable to accede to the contention of the ld AR regarding change in opinion.

It is a case where we find that there is no due and proper application of mind by the AO. The AO having reproduced the entries of general and education reserve as appearing in the profit/loss appropriation account, should have applied his mind to determine firstly, whether the entries in the profit/loss appropriation account, which are below-the-line entries in the accounting parlance, are allowable at first place in the hands of the assessee and secondly, what is the nature and purpose of these reserve and how the same are allowable and under what provisions of the Act.

We donot find anything on record to suggest that the issue has been examined in the past from the perspective of section 40A(9). Hence, the above said contention of the ld AR regarding rule of consistency cannot be accepted.

As we refer to the provisions of section 263 which provides that the ld Pr CIT may call for and examine the record of any proceedings under this Act in the instant case, it is not disputed that the revenue audit memo is part of the records.

CIT has examined the assessment records as well as revenue audit memo available on record and after examining the same and providing a detailed reasoning in the revision order come to a conclusion that the assessment order passed under section 143(3) is erroneous and prejudicial to the interest of the Revenue. It is therefore not a question of borrowed satisfaction on the part of the ld Pr CIT wherein merely on account of revenue audit memo, she has initiated the proceedings under section 263. Rather she has examined the records and independently applied her mind and has come to a conclusion that the assessment order is erroneous and prejudicial to the interest of the revenue. The decisions relied upon by the ld AR are rendered in the peculiar facts of the case and are distinguishable.

Regarding the arguments of the ld AR on merit regarding allowability under section 40A(9), section 37(1) and diversion by overriding title, we believe that the same can be examined by the AO and the assessee shall be free to raise the same before the AO. To this extent, we modify the directions of the ld Pr CIT and the same should be read to the effect that claim of the assessee regarding the claim of the deduction towards the transfer to general reserve, education reserve and the provisions for gratuity should be examined afresh as per law after providing reasonable opportunity to the assessee.

 


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