2007 (2) TMI 176 - HC - Income Tax

High Court clarifies interpretation of Income-tax Act, emphasizing genuine transactions; Commissioner's revision deemed unnecessary.

The High Court of Delhi ruled in a case involving the interpretation of section 263 of the Income-tax Act, 1961, related to the revision of an assessment ... - Issues involved: The judgment involves the interpretation of section 263 of the Income-tax Act, 1961, regarding the revision of an assessment order based on the genuineness of a transaction and the applicability of the principle of 'dividend stripping' in the assessment year 2001-02.Summary:The High Court of Delhi heard an appeal from the Revenue challenging an order of the Income-tax Appellate Tribunal related to the assessment year 2001-02. The case involved the purchase of mutual fund units cum dividend, subsequent sale at a loss, and adjustment of the loss against business profits.The Assessing Officer initially accepted the transaction's genuineness and allowed the loss adjustment. However, the Commissioner of Income-tax invoked powers under section 263 to revise the assessment order, alleging the transaction was not bona fide.The Court considered the applicability of section 263 and the principle of 'dividend stripping,' noting a legislative gap in the law for the relevant assessment year. Referring to the decision in Malabar Industrial Co. Ltd. v. CIT, the Court emphasized that if two reasonable views exist, the Commissioner should not revise the assessment.In this case, the Court found only one reasonable view, as accepted by the Assessing Officer, making the Commissioner's intervention unnecessary. The Court concluded that the transaction was bona fide, and there was no basis for revising the assessment under section 263.Citing the decision in Vikram Aditya and Associates P. Ltd., the Court dismissed the appeal, stating that no substantial question of law arose for consideration under section 260A of the Income-tax Act.