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2016 (7) TMI 374

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..... as non-taxable income. We find in the instant case that the Ld. CIT in 263 proceedings had only tried to substitute his own opinion in lieu of decision already taken by the Ld. AO. We find that the Ld. DR had only tried to argue on flimsy ground that the Ld. AR had not furnished the covering letter before the AO while replying to section 142(1) questionnaire dated 18.01.2010. It is not in dispute that the Ld. AO disallowed a sum of ₹ 22,584/- being the disallowance offered by the assessee based on workings given above. Under these circumstances, the claim of the assessee requires to be accepted and that of revenue deserves to be rejected. In view of the aforesaid findings and judicial precedents relied on hereinabove, we quash the revisionary proceedings u/s. 263 of the Act by the Ld. CIT - Decided in favour of assessee. - I.T.A No.889/Kol/2013 - - - Dated:- 1-6-2016 - Shri N. V. Vasudevan, JM Shri M. Balaganesh, AM For The Appellant: Shri Ravi Tulsiyan, AR For The Respondent: Shri Niraj Kumar, CIT, DR ORDER Per Shri M. Balaganesh, AM: This appeal by assessee is arising out of revision order of CIT, Central-III, Kolkata vide M. No. CIT/C-III/ .....

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..... at the assessment had been completed by the A.O. without application of mind and hence, the assessment was required to be treated as 'erroneous' in so far as it was prejudicial to the interest of revenue. 3. On the facts and in the circumstances of the case, the learned CIT erred in holding that the A.O. is duty-bound to follow provisions of Rule 8D of the LT. Rules, 1962 for determination of the amount of disallowance u/s 14A of the I. T. Act'. 4. On the facts and in the circumstances of the case, the learned CIT erred in revising the assessment order passed by the A.O. u/s 143(3) of the Act; on the basis of his own views on the matter of making disallowance u/s 14 A of the Income-tax Act, 1961; and in directing the A. O. to re-compute the said disallowance by applying Rule 8D of the Income Tax Rules, 1962. 4. The Ld. AR argued that the issue of disallowance was examined by the AO in original scrutiny assessment proceedings. In support of his contention, he referred to pages 1 to 4 of the paper book containing the detailed questionnaire issued by the AO wherein vide question no. 12 the following query was raised by AO vide notice u/s. 142(1) of the A .....

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..... it fit not to resort to Rule 8D of the Rules. He had in fact made disallowance u/s. 14A(2) of the Act. For the sake of convenience the provisions of section 14A of the Act are reproduced hereinbelow: 14A [1] For the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act.] [(2) The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act. (3) The provisions of sub-section (2) shall also apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under this Act:] 7. We find from the bare reading o .....

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..... ution of the judgment of the Commissioner for that of the ITO, who passed the order, unless the decision is held to be erroneous. Cases may be visualised where the ITO while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the ITO. That would not vest the Commissioner with power to re-exmine the accounts and determine the income himself at a higher figure. It is because the ITO has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interests of the revenue. But that by itself will not b .....

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..... decision of the ITO could not be held to be 'erroneous' simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the ITO to re-examine the matter. That was not permissible. Hence, the provisions of section 263 were not applicable to the instant case and, therefore, the Commissioner was not justified in setting aside the assessment order. 8. We also find in the instant case that adequate enquiry has been made by the Ld. AO by taking the issue of disallowance u/s. 14A of the Act to the logical end. Hence, it cannot be construed as lack of enquiry or even inadequate enquiry though it is well settled that inadequate enquiry would not give rise to revisionary jurisdiction u/s. 263 of the Act. The Ld. AO in the instant case had conducted extensive enquiry and had concluded the matter to its logical end by invoking the provisions of section .....

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..... it was a case of 'lack of inquiry'. [Para 15] The instant case was not a case where the Commissioner had concluded that the opinion of the Assessing Officer was clearly erroneous and not warranted on the facts before him, viz., the expenditure incurred was not the revenue expenditure, but should have been treated as capital expenditure. Even the Commissioner in his order passed under section 263 was not clear as to whether the expenditure could be treated as capital expenditure or it was revenue in nature. No doubt, in certain cases it may not be possible to come to a definite finding and, therefore, it is not necessary that in all cases the Commissioner is bound to express final view, but the least that was expected was to record a finding that order sought to be revised was erroneous and prejudicial to the interest of the revenue. No basis for that was disclosed. In sum and substance, accounting practice of the assessee was questioned. However, that basis of the order vanished in thin air when it was found that very accounting practice followed for a number of years had the approval of the income-tax authorities. Interestingly, even for future assessment years, th .....

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..... rsy right from the order of the Assessing Officer till the Tribunal as to whether the expenditure was revenue or capital in nature. [Para 19] Likewise, whether the Commissioner should have recorded definite finding or not, may not be very relevant factor in the instant case where on the facts it was found that the opinion of the Assessing Officer in treating the expenditure as revenue expenditure was plausible and, thus, there was no material before the Commissioner to vary that opinion and ask for fresh inquiry. [Para 20] Thus, the conclusion would be that the order of the Tribunal did not call for any interference, as the question of law had rightly been decided. [Para 21] 9. We find that the Ld. DR had only tried to argue on flimsy ground that the Ld. AR had not furnished the covering letter before the AO while replying to section 142(1) questionnaire dated 18.01.2010. It is not in dispute that the Ld. AO disallowed a sum of ₹ 22,584/- being the disallowance offered by the assessee based on workings given above. Under these circumstances, the claim of the assessee requires to be accepted and that of revenue deserves to be rejected. In view of the aforesaid fi .....

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