TMI Blog2010 (5) TMI 547X X X X Extracts X X X X X X X X Extracts X X X X ..... 31-5-2010 - R.S. PADVEKAR JUDICIAL MEMBER J. P.M. JAGTAP ACCOUNTANT MEMBER J. Appellant by : Shri J.D. Misri/Shri K.K. Ved Respondent by : Shri Hemant J. Lal ORDER PER P.M. JAGTAP, A.M. This appeal by the assessee is directed against the order of ld. CIT-VII, Mumbai dated 19.12.2008 passed u/s 263. 2. The assessee in the present case is an investment company which filed its return of income for the year under consideration on 29.10.04 declaring total income of Rs. 5,03,38,480/-. The said return filed by the assessee was selected for scrutiny assessment and in the assessment completed vide an order dated 29.9.2006 passed u/s 143(3), the total income of the assessee was computed by the A.O. at the same amount of Rs. 5,03,38,480/- as declared by the assessee in the return of income. Subsequently, record of the said assessment was examined by the Ld. CIT and on such examination he formed a prima facie opinion that the assessment made by the A.O. u/s 143(3) was erroneous and prejudicial to the interest of the Revenue. He, therefore, issued notice u/s. 263 to the assessee pointing out such error and calling for its explanation in the matter. The relevant p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was also brought to the notice of the ld. CIT that the assessee company is a registered non-banking finance company and during his visit to London, its director had held a series of meetings with various fund houses, investment banks, private equity houses etc. in connection with business. As regards the amount of Rs. 20,21,509/- debited to its P L Account on account of reduction in value of investments, it was pointed out on behalf of the assessee company to the ld. CIT that the said amount had already been added back in the computation of total income by the assessee and, therefore, no further adjustment was required to be made by the A.O. to the total income of the assessee for the said amount. 4. After considering the submissions made on behalf of the assessee company, the ld. CIT held that the need to undertake foreign travel by the Director of the assessee company for the purpose of its business was not satisfactorily established. According to him, going by the activities of the Assessee Company as well as source of its income, the need to undertake such foreign travel for the purpose of its business did not get highlighted. He noted that there was no supporting material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e claim of the assessee for deduction on account of foreign travel expenses was allowed by the A.O. taking a possible view. He contended that the ld. CIT therefore was not justified in exercising his revisionl powers u/s. 263 to substitute his own view for the view already taken by the A.O. after verifying the relevant details. He contended that even the basis of which the allowability of foreign travel expenses was disputed by the ld. CIT is not well founded. In this regard, he invited our attention to the notice issued by the ld. CIT u/s. 263 wherein it was observed that the foreign travel expenses are not allowable as deduction since there are no business activities of the assessee company in foreign countries. He contended that this basis adopted by the ld. CIT itself was in-correct since it is not necessary that for claiming deduction on account of foreign travel expenses, there has to be a business activity of the assessee in foreign countries. He contended that merely because there is no such activity in foreign countries, the claim of the assessee for foreign travel expenses cannot be disallowed and therefore it cannot be said that the order of the A.O. in allowing the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the facts of the present case. He submitted that the proceedings u/s 263 were initiated by the Id. CIT on the specific grounds as given in the notice issued to the assessee. He invited our attention to the relevant portion of the said notice and pointed out that there was no allegation leveled by the ld. CIT to the effect that proper enquiry was not made by the A.O. before allowing the claim of the assessee for foreign travel expenses. He contended that the ld. D.R. has made an attempt to support the impugned order of the Id. CIT passed u/s. 263 on the ground different from the one given in the notice issued u/s. 263 which is not permissible. In this regard he relied on the decision of Hon'ble Punjab Haryana High Court in the case of CIT vs. Jagadhri Electric Supply Industrial Co., 140 ITR 490 wherein it was held that new grounds cannot be supplied even by the Tribunal to uphold the order passed by the ld. CIT u/s 263. He contended that specific reasons were given by the ld. CIT for initiating the proceedings u/s. 263 in the notice issued to the assessee and sustainability of the said order proceedings has to be decided on the basis of such reasons alone. 8. We have con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT in the assessment order passed by the A.O. allowing the expenditure of Rs. 3,15,290/-incurred by the assessee company on account of foreign travel expenses, it is observed that the allowability of the said expenditure was disputed/doubted by the ld. CIT on the basis that there was no business activity of the assessee company in foreign countries. As rightly submitted on behalf of the assessee before the Id. CIT during the course of proceeding u/s 263 as well as before us during the course of hearing, it was not necessary that for claiming deduction on account of foreign travel expenses, there has to be some business activity of the assessee in foreign countries. Merely because there was no such activity of the assessee in foreign countries during the year under consideration, it cannot be said that the claim of the assessee for foreign travel expenses has to be disallowed and the order of the A.O. allowing the said expenditure was erroneous. In this regard, the ld. D.R. has submitted that keeping in view the fact that there was no business activity of the assessee company in foreign countries, the A.O. should have examined the claim of the assessee for foreign travel expenses c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings u/s 263 has to be strictly confined to the notice issued invoking the jurisdiction under that section for the reasons stated therein and the law does not permit expanding the said proceeding u/s 263 after its initiation beyond what is stated in the notice itself. It was also held that whether the impugned assessment is erroneous and prejudicial to the interest of the Revenue is to be judged only with reference to the reasons stated in the notice issued u/s 263 and it is not permissible to extend scope of proceedings beyond such notice. In the case of CIT vs. L.F.D.'Silva, 192 ITR 547, Hon'ble Karnataka High Court has held that the scope of proceeding u/s 263 has to be ascertained with reference to the purpose and basis of initiation of proceedings. Keeping in view the legal position emanating from these judicial pronouncements and having regard to the facts of the case, we are of the view that there was no error in the assessment order passed by the A.O. u/s 143(3) as alleged by the ld. CIT in the notice issued u/s 263 and this being so, the ld. CIT was not justified in revising the said assessment. In that view of the matter, we set aside the impugned order of the ld. C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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