2007 (6) TMI 266 - AT - Income Tax

Tax Tribunal upholds Commissioner's order under section 263, directs reassessment for specific issues.

Icici Bank Limited. Versus Joint Commissioner Of Income-tax.

The Tribunal partly allowed the assessee's appeals, upholding the Commissioner of Income Tax's order under section 263 for issues other than lease ... Erroneous And Prejudicial Order Issues Involved:1. Validity of CIT's jurisdiction u/s 263 of the IT Act, 1961.2. Examination of lease transactions and depreciation claims.3. Consideration of other issues such as broken period interest, expenditure relating to exempt income, foreign exchange fluctuations, and securities valuation.Summary:1. Validity of CIT's Jurisdiction u/s 263:The common grounds raised in the appeals were that the CIT was not justified in invoking his jurisdiction u/s 263 of the IT Act, 1961. The assessee challenged the validity of assuming the said jurisdiction and raised grounds on the observations made by the CIT in respect of several items. The CIT examined the second assessment order and concluded that it was erroneous and prejudicial to the interests of the Revenue, thus issuing a notice u/s 263. The CIT's notice mentioned that the assessment order lacked proper application of mind and disregarded the CIT(A)'s order. The Tribunal upheld the CIT's jurisdiction u/s 263 for items other than lease transactions, stating that the AO failed to conduct proper enquiry, rendering the order erroneous.2. Examination of Lease Transactions and Depreciation Claims:The assessee, a banking company, had entered into 17 lease transactions and claimed depreciation on 14 of them. The AO disallowed the entire depreciation claimed, considering some transactions as non-genuine or finance transactions. The CIT(A) set aside the assessment, directing the AO to frame the assessment de novo after complying with natural justice requirements. In the second round, the AO disallowed depreciation in 8 transactions and allowed it in 6. The CIT found the AO's order erroneous for allowing depreciation in 6 transactions. However, the Tribunal quashed the CIT's order regarding lease transactions, stating that the AO's decision on the 6 transactions was based on the same material and could not be termed erroneous and prejudicial to the Revenue.3. Consideration of Other Issues:The CIT raised issues like the allowability of broken period interest, expenditure relating to exempt income, profit/loss from foreign exchange fluctuations, and securities valuation. The Tribunal noted that the AO did not discuss or enquire into these issues in the assessment orders. The Tribunal upheld the CIT's order u/s 263 for these items, stating that the AO's failure to conduct due enquiry rendered the order erroneous. The Tribunal did not delve into the merits of these issues, as the CIT had not given specific directions but had set aside the assessment for fresh framing.Conclusion:The Tribunal partly allowed the assessee's appeals, upholding the CIT's order u/s 263 for items other than lease transactions and quashing the order regarding lease transactions. The AO was directed to follow the CIT's directions for reassessment on the other issues.