2010 (12) TMI 1224 - AT - Income Tax

Tribunal rules in favor of assessees on exemption revocation, finding Assessing Officer's decision correct.

The Tribunal allowed the appeals of the assessees against the order revoking exemption under section 10(10C) on ex-gratia amount received under the Exit ... - Issues involved: Challenge to order u/s 263 of the Act revoking exemption u/s 10(10C) on ex-gratia amount received under Exit Option Scheme by State Bank of India.Summary:The appeals were filed by assessees against the order passed by CIT Rajahmundry u/s 263 of the Act challenging the revocation of exemption u/s 10(10C) on ex-gratia amount received under Exit Option Scheme. The assessees retired from State Bank of India under the said scheme and claimed exemption initially accepted u/s 143(1) of the Act. The Assessing Officer reopened assessments u/s 148 and allowed the exemption u/s 10(10C) after comparing with a relevant decision. However, CIT directed to revoke the exemption due to non-compliance with rule 2BA of Income-Tax rules. The assessees appealed against this decision.The Authorized Representative argued that the Assessing Officer's order was not erroneous as he verified the claim properly. He cited a relevant decision to support his argument. He also mentioned circulars and court decisions supporting the exemption claim under similar schemes. The State Bank of India modified the scheme to comply with rule 2BA, which was not considered by CIT. The Authorized Representative contended that the Assessing Officer's order was correct and not erroneous.The Departmental Representative argued that the scheme by State Bank of India explicitly stated no exemption u/s 10(10C) on ex-gratia payment and did not comply with rule 2BA. He stated that the Assessing Officer did not apply the law correctly, making the order erroneous. The Departmental Representative supported the CIT's decision to revoke the exemption.The Tribunal discussed the legal position of section 263 and emphasized that the order must be erroneous and prejudicial to the revenue for revision. They noted that the CIT relied on a directive issued after assessments were completed and that the Assessing Officer's view was plausible and sustainable in law. The Tribunal found no justification for initiating proceedings u/s 263 and set aside the CIT's orders, allowing the appeals of the assessees.In conclusion, the Tribunal allowed all the appeals of the assessees, pronouncing the decision on 7th December 2010.