Tribunal Rules Rs. 500 Fee for Appeal, Invalidates CIT's Order; AO's Inquiry Deemed Sufficient, No Change of Opinion Allowed.

The Tribunal allowed the assessee's appeal, determining that the appropriate Tribunal fee payable was Rs. 500 under clause (d) of section 253(6) of the Income Tax Act, as the appeal related to an order under section 263 and not directly linked to assessed income. Additionally, the Tribunal annulled the CIT's order under section 263, finding it invalid. The Tribunal concluded that the Assessing Officer (AO) had conducted due inquiries and was satisfied with the explanations provided by the assessee, and the CIT's action was merely a change of opinion, which is not permissible under section 263.

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Issues Involved:
1. Tribunal fee payable by the assessee.
2. Validity of the order passed by the CIT under section 263.

Issue-wise Detailed Analysis:

1. Tribunal Fee Payable by the Assessee:

The primary issue was to determine the appropriate Tribunal fee payable by the assessee for the appeal. The relevant provisions are section 253(6) of the Income Tax Act, which outlines the fee structure based on the total income computed by the Assessing Officer (AO). The provisions state:

- Clause (a): Rs. 500 for total income up to Rs. 100,000.
- Clause (b): Rs. 1,500 for total income between Rs. 100,000 and Rs. 200,000.
- Clause (c): 1% of assessed income (maximum Rs. 10,000) for total income above Rs. 200,000.
- Clause (d): Rs. 500 for matters not specified in clauses (a) to (c).

The assessee argued that the fee should be Rs. 500 under clause (d), as the appeal related to an order under section 263, not directly linked to the assessed income. The Departmental Representative relied on the Kolkata Special Bench decision in Bidyut Kumar Sett v. ITO, which linked the fee to the assessed income even for penalty appeals.

The Tribunal referenced the Karnataka High Court decision in Rajakamal Polymers (P) Ltd. v. CIT, which stated that appeals not related to the computation of total income should fall under clause (d). The Tribunal concluded that the order under section 263 did not relate to the computation of income, thus the fee payable was Rs. 500 under clause (d). The objection raised by the Registry was deemed unsustainable.

2. Validity of the Order Passed by the CIT Under Section 263:

The central issue was whether the CIT's order under section 263 was valid. The assessee contended that the CIT's order was invalid and should be annulled. The assessment was completed under section 143(3) with a total income of Rs. 23,59,257. The CIT issued a notice under section 263 on two grounds: the AO accepted a lower Gross Profit (GP) rate without verification and did not inquire into capital introduced by partners and cash credits.

The assessee argued that the AO had indeed made inquiries and provided explanations regarding the GP rate and capital introduction, as evidenced by letters and submissions. The Tribunal noted that if the AO had taken one of the possible views after due inquiry, the order could not be deemed erroneous. The Tribunal referenced the Supreme Court decision in Malabar Industrial Co. Ltd. v. CIT, which held that for section 263 to be invoked, the order must be both erroneous and prejudicial to the interests of the Revenue.

The Tribunal found that the AO had made inquiries and was satisfied with the explanations provided by the assessee. The CIT's order was based on a subjective view and did not prove that the AO's decision was unsustainable in law. The Tribunal concluded that the CIT's action was a change of opinion, which is not permissible under section 263. Consequently, the order passed by the CIT was annulled.

Conclusion:

The appeal filed by the assessee was allowed. The Tribunal determined that the appropriate fee payable was Rs. 500 under clause (d) of section 253(6), and the CIT's order under section 263 was invalid and annulled.

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