INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Erroneous and prejudicial order - Lack of enquiry by AO -

Assessee was engaged in the business of Fertilizers, Pharma, Bio-tech and Engineering Services. AO did not make enquiry at the time of framing of scrutiny assessment under section 143(3) on the issue of write off capital work in progress consisting of interest on FRN as well foreign exchange fluctuation loss on FRN of earlier years which stood debited to capital work-in-progress in earlier years prior to impugned assessment year 2003-04 and the same was charged off as revenue expenses in Profit and Loss Account during the impugned year under consideration, viz., assessment year 2003-04. CIT after considering replies of the assessee filed in response to the SCN issued by CIT under section 263 during the course of revisionary proceedings under section 263 and on perusal of the records rejected the contentions of the assessee and held that assessment Order, dated 30-3-2006 passed by AO was erroneous so far as prejudicial to the interest of revenue. Held: There was no explanation/evidences forthcoming from the assessee on the same and only bald statements were made that the assessee does not envisage to undertake any further projects and hence it was decided to write off the entire capital work in progress which was existing upto assessment year 2002-03 in the year under consideration, viz., assessment year 2003-04 as revenue expenses. Thus, no details at all were submitted before assessing officer during assessment proceedings, CIT during revisionary proceedings under section 263 and even before this Tribunal. Assessee had completely failed to discharge its onus and the AO clearly erred in accepting the bald statement made by the assessee without conducting any enquiry and certainly the action of the AO in accepting these capital work in progress accumulated over years as revenue expenses in the year under consideration while computing income of the assessee chargeable to tax without making any enquiry which was certainly warranted based on facts and circumstances of this case before allowing entire capital work in progress existing upto assessment year 2002-03 as revenue expenses in this year, viz., assessment year 2003-04 was clearly erroneous and prejudicial to the interest of revenue and CIT rightly therefore, interfered by invoking his revisionary powers under section 263.

REFERRED : Indo Rama Synthetic (India) Ltd. v. CIT (2010) 228 CTR 278 (Del.) : 2011 TaxPub(DT) 93 (Del-HC) and CIT v. Tata Robins Fraser Limited (2012) 211 Taxman 257 (Jharkh-HC) : 2012 TaxPub(DT) 3014 (Jhar-HC).

FAVOUR : Against the assessee.

A.Y. : 2003-04

INCOME TAX ACT, 1961

Section 263 Section 41(1) Section 28(iv)

SUBSCRIBE FOR FULL CONTENT

OR Try Reload the Page