2016 (5) TMI 1308 - AT - Income Tax

Tribunal rejects Commissioner's jurisdiction assumption under Income Tax Act Section 263, allows taxpayer's appeal

The Tribunal found that the Commissioner's assumption of jurisdiction under Section 263 of the Income Tax Act was not justified as the Assessing Officer ... Revision u/s 263 - exemption under section 10AA eligibility - Held that:- Here is a case in which a claim was made by the assessee, which was apparently in order, and the Assessing Officer, after usual verification, accepted the same. As for the learned Commissioner’s observation that “it is evident that the Assessing Officer while finalized the assessment order u/s 143{3) of the Act without examining assessee's eligibility of claim of deduction u/s. 10AA of the Act for the year under consideration nor carried out any inquiry or cross verification regarding genuineness of assessee's claim that the said consultancy services were actually provided from the SEZ”, we are unable to see any merits in this observation. Whether the Assessing Officer remained unduly passive on the facts which would trigger further inquiries by a reasonable man in his position? - Held that:- In our considered view, that’s not the case. An enterprising Assessing Officer, motivated by his passion and deep commitment, may indeed have discovered, even if that be so, a tax misadventure by an assessee, but that fact, even if correct, does not mean that those Assessing Officer who did not discover this misadventure were acting in a manner leading to their orders being rendered erroneous and prejudicial to the interest of the revenue. The action of the Assessing Officer was bonafide and correct and the conclusions arrived at by him were appropriate vis-à-vis material before him. The fact that he did not visit the assessee, that he did not visually examine the lock to find out when was in use or not, and put all the averments of the assessee on scanner cannot be put against him today. His order may not have discussed these aspects in great detail but then as is the settled legal position the mere fact that the Assessing Officer has not written a detailed order on an issue, even though the details have been called for and are on record, the order cannot be treated as erroneous for the purpose of Section 263 - Decided in favour of assessee Issues Involved:1. Jurisdiction under Section 263 of the Income Tax Act.2. Assumption of non-application of mind by the Assessing Officer (AO).3. Mandatory conditions for assuming jurisdiction under Section 263.4. Erroneous and prejudicial assessment orders.5. Cancellation and direction for fresh assessment.Issue-wise Detailed Analysis:1. Jurisdiction under Section 263 of the Income Tax Act:The appellant challenged the correctness of the order dated 11th March 2014 by the Commissioner under Section 263 r.w.s. 143(3) for the assessment year 2009-10. The appellant argued that the Commissioner erred in assuming jurisdiction under Section 263 based on arbitrary findings from the assessment order for the year 2011-12, ignoring the factual position for the year 2010-11. The Tribunal noted that the Commissioner initiated proceedings under Section 263 on the incorrect assumption that there was non-application of mind by the AO during the assessment for 2010-11, rendering the assumption of jurisdiction under Section 263 bad in law.2. Assumption of non-application of mind by the Assessing Officer (AO):The appellant argued that the Commissioner erred in assuming jurisdiction under Section 263 on the grounds that the AO did not apply his mind while making the assessment for 2010-11. The Tribunal found that the AO had examined all relevant documents, including audited accounts, tax audit reports, and Form 56F for exemption under Section 10AA. The AO had also issued notices and requisitions for further details, which the appellant duly provided. The Tribunal concluded that the AO had conducted adequate inquiries and that the assessment order was not erroneous or prejudicial to the interest of the revenue.3. Mandatory conditions for assuming jurisdiction under Section 263:The appellant contended that the Commissioner assumed jurisdiction under Section 263 without the mandatory conditions being met, making the order bad in law. The Tribunal observed that the Commissioner’s assumption was based on findings from a subsequent assessment year (2011-12) and that the AO had conducted sufficient inquiries for the assessment year 2009-10. The Tribunal held that the Commissioner’s assumption of jurisdiction under Section 263 was not justified.4. Erroneous and prejudicial assessment orders:The Commissioner concluded that the assessment order was erroneous and prejudicial to the interest of the revenue because the AO did not examine the eligibility of the appellant’s claim for deduction under Section 10AA. The Tribunal found that the AO had verified the claim based on the information provided and that the Commissioner had not shown how the material on record was unreliable. The Tribunal held that the AO’s order was not erroneous or prejudicial to the revenue’s interest.5. Cancellation and direction for fresh assessment:The Commissioner canceled the assessment order dated 30th October 2012 and directed the AO to make a fresh assessment. The Tribunal noted that the AO had examined the appellant’s claim for deduction under Section 10AA and that the Commissioner’s direction for fresh inquiries was not warranted. The Tribunal vacated the revision order and allowed the appellant’s appeal.Conclusion:The Tribunal concluded that the Commissioner’s assumption of jurisdiction under Section 263 was not justified, as the AO had conducted adequate inquiries and the assessment order was not erroneous or prejudicial to the revenue’s interest. The Tribunal vacated the revision order and allowed the appellant’s appeal for both the assessment years 2009-10 and 2010-11.