2012 (12) TMI 632 - AT - Income Tax

Appellate Tribunal overturns CIT's decisions under section 263 for Assessment Years 2006-07 and 2007-08.

National Aluminium Company Ltd., Versus Commissioner of Income-tax, Bhubaneswar.

National Aluminium Company Ltd., Versus Commissioner of Income-tax, Bhubaneswar. - TMI Issues:- Jurisdiction of CIT under section 263 for Assessment Years 2006-07 and 2007-08- Disallowance of interest on electricity duties, water charges, and provisions for salary/wagesAnalysis:1. Jurisdiction of CIT under section 263 for Assessment Years 2006-07 and 2007-08:The appeals arose from orders under section 263 of the Income-tax Act, 1961 by the CIT for the Assessment Years 2006-07 and 2007-08. The common issues raised by the assessee appellant pertained to interest on electricity duties, water charges, and provisions for salary/wages. The CIT assumed jurisdiction under section 263 for both years based on these issues.2. Disallowance of interest on electricity duties, water charges, and provisions for salary/wages:For the Assessment Year 2006-07, the CIT's jurisdiction under section 263 was challenged as the issues had been previously adjudicated by the Assessing Officer and CIT(A). The CIT's attempt to reexamine these issues was deemed unwarranted as the matters had already been settled through due process. Regarding the Assessment Year 2007-08, the CIT disallowed the provision for salary/wages pending revision, considering it not allowable under section 37.3. Detailed Analysis:- The assessee, a Public Sector Undertaking, had majority shares held by the Government of India. Assessments were conducted for the respective years under section 143(3), addressing errors highlighted by the CIT as prejudicial to revenue. The CIT's contention that certain provisions were disallowable under section 43B was challenged by the assessee, citing legal precedents and the Assessing Officer's previous decisions.- The CIT's disallowance of interest on electricity duties and water charges was contested by the assessee, arguing that these were statutory liabilities and not contingent provisions. The CIT's attempt to challenge matters already under judicial scrutiny was deemed unjustified.- The provision for salary/wages pending revision was also a point of contention. The CIT considered it a contingent liability, while the assessee argued it was an accrued liability based on services rendered. The CIT's stance on disallowance under section 37 was refuted by the assessee, highlighting the legality of the provisions made.4. Conclusion:After considering the arguments and reviewing the orders, the Appellate Tribunal held that the CIT's jurisdiction under section 263 was not justified for the issues raised. The Tribunal found no error or prejudice to revenue in the decisions made by the Assessing Officer and higher authorities. Therefore, the orders passed by the CIT under section 263 for the relevant Assessment Years were quashed, and the appeals of the assessee were allowed.