2019 (4) TMI 1170 - HC - Income Tax

High Court affirms Tribunal's decision on Commissioner's revisionary power under Income Tax Act

The High Court upheld the Tribunal's decision in a case involving the revisionary jurisdiction of the Commissioner under section 263 of the Income Tax ... Finality of audited books in computation of book profit under Minimum Alternative Tax - Revisional jurisdiction under section 263 of the Income tax Act - Genuineness of claim and requirement to justify the claim - Application of Apollo Tyres principle regarding interference with audited accountsRevisional jurisdiction under section 263 of the Income tax Act - Genuineness of claim and requirement to justify the claim - Whether the Commissioner could exercise revisional jurisdiction to reopen the assessment where the Assessing Officer had called for details about the claim but had passed the assessment without disallowing the claim. - HELD THAT: - The Tribunal found that the Assessing Officer had made inquiries into the genuineness of the donation and had accepted the claim in assessment. The High Court endorsed the Tribunal's approach, holding that the Commissioner could not, in the circumstances, invalidate the assessment by exercising revisionary powers merely because details had been called for; the record showed inquiries were carried out and the AO had not left the claim wholly unexamined. The Court therefore upheld the Tribunal's conclusion that the exercise of revisional jurisdiction was not justified on the facts of the case. [Paras 4]The revisional exercise by the Commissioner was not justified and the Tribunal rightly set aside the order of revision.Finality of audited books in computation of book profit under Minimum Alternative Tax - Application of Apollo Tyres principle regarding interference with audited accounts - Whether the Assessing Officer could alter book profits computed from audited accounts under MAT provisions and whether the donations in question were allowable in view of payments made. - HELD THAT: - Relying on the principle in Apollo Tyres that the AO cannot tinker with duly audited books when computing book profit under MAT, the Tribunal held that the AO's attempt to disallow part of the donation was impermissible. The High Court, while noting the reference of Apollo Tyres to a larger Bench, affirmed the Tribunal's decision as consistent with this Court's precedent. Independently on facts, the Court observed the assessee had committed to donations of the claimed amount, with Rs.10.25 crores actually donated in the relevant period and the balance largely paid either before the closing of accounts for the year or shortly thereafter; these factual findings removed any basis for disallowance. For these reasons the Court declined to interfere. [Paras 4, 5]The AO could not, in computing MAT book profit, rework audited accounts; on the factual matrix the donations were effectively made and the disallowance was rightly set aside.Final Conclusion: The appeal is dismissed: the Tribunal correctly set aside the Commissioner's revision-both because revisional jurisdiction was not justified on the facts and because, consistent with the Apollo Tyres principle as followed by this Court, the AO could not rework audited books to disallow the donations which were, on the record, substantially paid. Issues:1. Revisionary jurisdiction of the Commissioner u/s 263 of the Act.2. Applicability of the Apollo Tyres case in certification of accounts for donation claims.Issue 1: Revisionary jurisdiction of the Commissioner u/s 263 of the ActThe appeal before the High Court involved the question of whether the Commissioner of Income Tax had the jurisdiction to revise an assessment order passed by the Assessing Officer. The respondent-assessee, a limited company, had claimed a donation benefit of Rs. 12.75 crores in the assessment year 2010-11. The Assessing Officer granted this benefit after examination. However, the Commissioner issued a notice stating that Rs. 2.50 crores of the claimed donation had not been paid by the assessee. The Commissioner disallowed this amount, and the assessee appealed to the Tribunal. The Tribunal allowed the appeal, setting aside the Commissioner's order. The High Court noted that the Tribunal based its decision on two key grounds. Firstly, it relied on the Supreme Court's judgment in Apollo Tyres Ltd. vs. Commissioner of Income-Tax, stating that the Assessing Officer cannot alter audited books of accounts while computing book profit under the MAT provision. Secondly, the Tribunal found that since the Assessing Officer had already inquired into the donation's genuineness, the Commissioner could not exercise revisional powers. The High Court upheld the Tribunal's decision, emphasizing that the assessee had indeed donated a significant portion of the claimed amount during the relevant period, and there was no reason to interfere with the Tribunal's findings. The High Court also noted that while the Supreme Court's decision in Apollo Tyres was referred to a larger bench, the consistent view followed by the Court supported the Tribunal's decision.Issue 2: Applicability of the Apollo Tyres case in certification of accounts for donation claimsThe second issue in the appeal concerned the applicability of the Apollo Tyres case in certifying accounts for donation claims. The High Court observed that the Tribunal's decision was primarily based on the Apollo Tyres case, which emphasized that the Assessing Officer could not tamper with audited books of accounts while computing book profit under the MAT provision. In this case, the Tribunal found that the Assessing Officer had already investigated the donation's genuineness, which precluded the Commissioner from exercising revisional powers. The High Court concurred with the Tribunal's reasoning, noting that the assessee had fulfilled a substantial part of the donation commitment during the relevant period. The Court highlighted that this factual scenario did not warrant interference, especially considering the consistent application of the Apollo Tyres precedent by the Court. Consequently, the High Court dismissed the appeal, affirming the Tribunal's decision and underscoring the importance of adhering to established legal principles in such matters.