TaxTMI 
TaxTMI 
2007 (12) TMI 184
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....d February 28, 2007, passed by the Income-tax Appellate Tribunal, Chandigarh Bench B, Chandigarh in I. T. A. No. 475/Chandi/2005 in respect of the assessment year 2000-01. It has been claimed that the following substantial questions of law would arise for determination of this court : "1. Whether, on the facts and in law, the Income-tax Appellate Tribunal was legally justified in cancelling the order under section 263 of the Income-tax Act passed by the learned Commissioner of Income-tax ? and 2. Whether the Income-tax Appellate Tribunal is right in law in cancelling the order of the Commissioner of Income-tax passed under section 263 of the Income-tax Act by holding the same to be not warranted in the facts of the present case ?" ....
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...., Chandigarh. The Tribunal vide order dated February 28, 2007, allowed the appeals and cancelled the order of the Commissioner of Income-tax dated March 24, 2005. The Tribunal in paragraph 16 of its order considered the issue as to whether the order of the Assessing Officer was so erroneous as to warrant exercise of revisional jurisdiction by the Commissioner of Income-tax (Central) under section 263 of the Act. After perusing the record, the Tribunal recorded the satisfaction that the Assessing Officer had made enquiries regarding the applicability of the proviso to section 14A of the Act during the course of assessment proceedings. A reference has also been made to the questionnaire issued by the Assessing Officer in February, 2003, showi....
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....e of Ind Sphinx Precision Ltd. v. CIT [2007] 293 ITR (A. T.) 17 (Chandigarh) in I. T. A. Nos. 549 and 550/Chandi/2004 for the assessment years 2000-01 and 2001-02 and went on to observe that the judgment of the hon'ble Supreme Court in the case of R. M. Chidambaram Pillai [1977] 106 ITR 292 would be squarely applicable in respect of salary paid to partners yet it also accepted the position that a different view might have been possible. It also held that in the light of scheme of taxation of firm and its partners the claim of the assessee could not be totally ignored. The salary and interest paid to the partners cannot be regarded as expenses incurred for the purposes of earning income in the light of the scheme of taxation of firms and its....
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....y that the assessee has not escaped the taxation in respect of interest allowed as a deduction in computing the income of the firm in so far as the partners have paid the taxes on such income in their individual assessments. Therefore, it cannot be said that great prejudice has been caused to the Revenue by accepting the view considered view that the order passed by the Commissioner of Income-tax under section 263 lacks jurisdiction. We accordingly cancel the same." 5. After hearing learned counsel for the Revenue we are of the considered view that no question of law warranting admission of the appeal would arise because firstly there would be no tax effect as the interest income realised from the capital invested by the partners is boun....
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.... as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue. Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC)." (emphasis added) 6. It is thus evident that the Assessing Officer has taken one view which is probable if we examined the same in the light of the judgment of the hon'ble Supreme Court in the case of R. M. Chidambaram Pillai's case [1977] 106 ITR 292. It has further been held by the Tribunal that it may still be possible to take another view. Therefore, merely on the basis that another view is possible the Commissioner cannot acquire revisional juri....