TaxTMI 
TaxTMI 
2023 (6) TMI 812
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....ut is not prejudicial to the revenue or if it is not erroneous but it is prejudicial to the revenue - recourse cannot be had to Section 263 of the Act as held by Hon'ble Supreme Court in Malabar Industrial Co. Ltd. V/s CIT [243 ITR 83 10/02/2000] & noted by Hon'ble Delhi High Court in CIT V/s Vikas Polymers [194 Taxman 57 16/08/2010]. The Hon'ble Supreme Court in Malabar Industrial Co. Ltd. V/s CIT (supra) has held that the phrase 'prejudicial to the interests of the revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of the revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue, unless the view taken by the Income-tax Officer is unsustainable in law. The said principal has been reiterated by Hon'ble Court in its subsequent judgment....
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.... and unchartered arbitrary power. The exercise of the power is limited to cases where the Commissioner on examining the records comes to the conclusion that the earlier finding of the Income-tax Officer was erroneous and prejudicial to the interest of the revenue and that fresh determination of the case is warranted. There must be material to justify the Commissioner's finding that the order of the assessment was erroneous insofar as it was prejudicial to the interest of the revenue. 1.4 The Hon'ble Delhi Court, in the cited decision, further observed that there is a fine though subtle distinction between "lack of inquiry" and "inadequate inquiry". It is only in cases of "lack of inquiry" that the Commissioner is empowered to exercise his revisional powers by calling for and examining the records of any proceedings under the Act and passing orders thereon. In Gabriel India Ltd. (supra), it was expressly observed:- "The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all l....
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....ifferent shades of power conferred on different authorities under the Act has to be exercised within the areas specifically delineated by the Act and the exercise of power under one provision cannot trench upon the powers available under another provision of the Act. In this regard, it must be specifically noticed that against an order of assessment, so far as the revenue is concerned, the power conferred under the Act is to reopen the concluded assessment under section 147 and/or to revise the assessment order under section 263. The scope of the power/jurisdiction under the different provisions of the Act would naturally be different. The power and jurisdiction of the revenue to deal with a concluded assessment, therefore, must be understood in the context of the provisions of the relevant sections. While doing so, it must also be borne in mind that the legislature had not vested in the revenue any specific power to question an order of assessment by means of an appeal. Regarding applicability of Section 263, what has to be seen is that a satisfaction that an order passed by the Authority under the Act is erroneous and prejudicial to the interest of the revenue is the basic pre-co....
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.... on 28.12.2019. The assessee being resident corporate assessee is stated to be engaged in the business of real estate. The grounds raised by the assessee read as under: - 1. For that the order of the Learned Principal Commissioner of Income tax, Chennai u/s 263 of the Income Tax Act is opposed to law, facts and circumstances of the case. 2. For that the Learned Principal Commissioner of Income tax-4, Chennai is not justified in invoking the provisions of Section 263 of Act when the impugned assessment made under Section 143(3) of the Act is not erroneous and prejudicial to the interest of the revenue and thereby erred in setting aside the order passed by the Assessing Officer u/s 143(3) of the Act dated 28.12.2019. 3. For that the order of the Learned Principal Commissioner of Income tax-4, Chennai has erred in holding that the Assessing Officer has failed to make necessary enquiry to bring on record all facts without appreciating that specific query was raised during the assessment proceedings on issue under consideration of claim of bad debts u/s 36(1)(vii) of the Act and all relevant details in response thereof was filed by the appellant and accepted b....
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....assessee furnished the details called for through e-proceedings from time to time. Upon examination of details as furnished by the assessee, the returned income was accepted by Ld. AO. 3.2 In notice u/s 142(1) issued on 25.11.2019, the assessee was asked to furnish various details on various points numbering 18 in total. In point No.14, the assessee was asked to file complete details and workings with respect to sale of business undertaking with a note on specific compliance of the same. In point No.16, the assessee was directed to furnish the details of bad debts written-off along with a note on allowability of the same. The assessee furnished detailed note and working of bad-debts written-off as under: - Write-off of Bad Debts amounting to Rs.201,30,97,206 The Appellant, during the subject Assessment Year, had written off Bad debts to the tune of Rs. 201,30,97,206/- relating to quality rejections on purchases made, the breakup of which is as enclosed as Annexure 1. The Company had made purchases from various parties in earlier years, out of which certain materials were rejected due to quality issues and a debit note was issued in this regard and the ....
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....the said claim, for which act of justice we shall ever remain grateful." From the above, it is clear that the assessee furnished complete breakup of the bad debts along factors leading to write-off the same. The assessee also relied on the binding judicial precedent of Hon'ble Supreme Court in the case of TRF Ltd. (CA Nos.5292 and 5294 of 2003) as followed by jurisdictional High Court in the case of First Leasing Company of India Ltd. vs. CIT (33 Taxmann.com 626). The party-wise details were also furnished along with the reply. The assessee also made alternative claim u/s 28 r.w.s. 37 of the Act. The copy of all these documents has been placed on page nos. 136 to 148 of the paper book. 3.3 Apparently, convinced with assessee's reply, Ld. AO chose not to raise any further query in this regard and accepted the claim so made by the assessee. In the background of above facts, it could be stated that a view was taken by Ld. AO in the matter and while taking that view, the ratio of binding judicial precedents was followed. Thus, it was a case where Ld. AO, making certain enquiries, accepted the claim of the assessee with due application of mind and the said view could not be said t....
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....ad debt, the same should have been a proper debt and the bad-debt would be admissible as deduction only if it is taken into account in computing the total income of the assessee of the previous year or in earlier years. Generally, when the goods are sold on credit, there arises a debt and the corresponding credit would be in the form of sales which will be credited to Profit & Loss account thereby it would be taken into account in computing the total income of the assessee. Thereafter, if the debt is partially or fully irrecoverable, the same could be claimed as bad debt by writing off in the books of accounts. The assessee also submitted that certain items would be allowable deduction u/s 28 r.w.s. 37 of the Act. With respect to the allegation that the bad debts was written-off to avoid capital gains on transfer of business on slum sale basis u/s 2(42C), it was submitted that the business was sold pursuant to Business Transfer Agreement dated 14.07.2016. In terms of Schedule-6, the receivables attributable to quality claims were specifically excluded from the agreement on account of them being non-recoverable. The decision to exclude these receivables were taken as part of the due....
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....rty-wise balances thus written-off. The assessee also explained the factors leading to write-off the same. The assessee also made alternative claim u/s 28 r.w.s. 37 of the Act. Having satisfied with assessee's claim, Ld. AO chose not to raise any further query in this regard and accepted the claim so made by the assessee. The view taken by Ld. AO was in conformity with the binding judicial precedent of Hon'ble Supreme Court in TRF Ltd. (supra) and the same could be said to be one of the possible views in the light of explanation furnished by the assessee. It was also a case wherein specific query was raised by Ld. AO which was duly replied by the assessee to the satisfaction of Ld. AO. The claim was finally accepted with due application of mind. It could very well be said that the aforesaid view was not contrary to any law or not sustainable under law. 6. We find that Ld. Pr. CIT seek revision of the order by observing that some of the items claimed by the assessee was not in accordance with the provisions of Sec.36(1)(vii). These items were not revenue in nature and since the business was sold during the year, the said items could not be classified as revenue loss since it coul....
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.... bad debts till the time-barring date. The note on bad debts as well as the list containing the requisite details was furnished only four days before time-barring date leaving no time for AO to enquire into the correctness or genuineness of the claim. The AO called out the details but did not carry out the requisite enquiries regarding the bad debts before accepting the claim of the assessee. Therefore, this was a case of no-enquiry / no-verification by Ld. AO. However, we are not inclined to accept this argument on the face of the assessment order. We find that a specific query was raised by Ld. AO during the course of assessment proceedings and the same was duly responded to by the assessee. The assessment order also takes note of the fact that the requisite details were furnished by the assessee and no comments have been made on the conduct of the assessee in the assessment order, in this regard. Therefore, the plea raised by Ld. CITDR could not be accepted. 9. Another line of argument is that certain items as pointed out in the revisional order could not be allowed u/s 36(1)(vii). It has been submitted that the assessee had explained that the debts arose as a result of debit....