Case Law Details
RELEVANT PARAGRAPH
7. The scope of section 263 has been determined by the propositions pro-founded by the Hon’bie Apex Court as well as other courts. For the revenue, an incorrect assumption of fact, incorrect assumption of law, failure to or routinely to conduct investigation in to the issue together with the ‘prejudicial to the interest of revenue’ are the approved grounds for assuming the jurisdiction u/s 263. Limiting the aspects of ‘incorrect assumption of law7, which is the issue in the instant case, as well as ‘prejudicial to the interest of revenue’, the view of the supreme court and the High court of Bombay in the cases of Malabar Industrial Co Ltd (243 ITR83) and Gabriel India Ltd (203 ITR108)(Bom) respectively are relevant. In the case of Malabar Industrial Co Ltd (supra), the Hon’bie Supreme Court has held that the phrase ‘prejudicial to the interest of revenue’ has to be read in conjunction with the erroneous order passed by the AO. Ever loss of revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the revenue. For example, when an ITO adopted one of the courses permissible in law and it has resulted in the loss of revenue; or where two views are possible and the UO has taken one view with which the Commissioner does not agree, it cannot be treated as and erroneous order prejudicial to the interests of the revenue, unless the view taken by he ITO is unsustainable in law. In the case of Gabriel India Ltd (supra), the Jurisdiction High Court has also held that where the AO has made inquiries with regard to nature of the expenditure incurred by the assessee in the light of detailed explanations furnished by the assessee, the order of the AO cannot be called to be erroneous and prejudicial to the interest of revenue. Relevant observations in this regard are extracted here under:-
“that the ITO in this case had made inquiries in this regard to the nature of the expenditure incurred by the assessee. The assessee had given a detailed explanation in that regard by a letter in writing. All these were part of the record of the case. Evidently, the claim was allowed by the ITO on being satisfied with the explanation of he assessee. This decision of the ITO could not be held to be erroneous simply because in his order he did not make an elaborate discussion in that regard.”
Thus, where the CIT may not agree with the view taken by the AO while allowing the claim of the assessee but the view taken by the AO cannot be called to be absurd and non-plausible/ impossible view. It bas been repeatedly held by the various High Courts and Apex Court that if two views are possible and AO has taken one of it, such view cannot be revised under section 263 of the Income tax Act. Similar view were expressed by the Tribunal also following the aforesaid judgments in large number of the case such as Usha Martin Industries Ltd (86 ITD261) etc.
8. In the light of the above scope, the factual matrix of the instant case has been examined. In our opinion, the A07s undisputed questionnaire with item no 6 as well as the two-page-long- elaborate reply of the assessee on the issue of allow ability of the deduction u/s 80-M, confirms the fact that the issue of deduction u/s 80-M was within the scrutiny scope of the AO. In asking the assessee to justify the said deduction u/s 80-M, the AO has gone on record in not only doing the requisite investigation but also in applying his mind. Further, absence of discussion in the assessment order as why claim of deduction u/s 80-M is allowed by the AO is no ground for coming to the conclusion that AO did not apply his mind on the issue. Assessee has also done his job of proving that the dividend in question has suffered dividend tax with in the meaning of section 115-0(1) by filing the copies of the challans u/s 115-0 of the Act. Considering (i) the detailed questionnaire; (ii) the reply of the assessee along with evidences; and (iii) the 10 page long assessment order, we shall not subscribe to the inference that the AO has routinely decided this issue on merits.
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