PCIT Vs LG Electronics India Pvt. Ltd. (Delhi High Court)
The Delhi High Court considered whether the ITAT had erred in holding that the Commissioner of Income Tax (CIT) could not exercise revisional jurisdiction under Section 263(1) of the Income-tax Act. The assessee had claimed that subsidy of ₹49,38,00,503 received under a Government of Maharashtra scheme was a capital receipt not chargeable to tax. The Assessing Officer accepted the claim without discussion or recording reasons.
Read SC Judgment in this case: SC Upholds Section 263 Revision Due to Unreasoned Assessment Order
The CIT invoked Section 263, holding that the unreasoned assessment order was erroneous and prejudicial to the interests of the Revenue, and remitted the matter after recording findings that the subsidy was revenue in nature. The ITAT, after considering the subsidy scheme and Supreme Court decisions in Sahney Steel & Press Works Ltd. and Ponni Sugars and Chemicals Ltd., held that the character of the subsidy was a debatable issue and that the Assessing Officer had committed no error.
The High Court held that the Assessing Officer’s order contained virtually no reasoning and that acceptance of the assessee’s claim without discussion, despite the complex nature of the subsidy, rendered the assessment ex facie erroneous and potentially prejudicial to the Revenue. It further held that the question whether an issue is debatable arises only where reasons are apparent in the assessment order. Accordingly, the ITAT was not justified in setting aside the exercise of revisional jurisdiction under Section 263.
