INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Erroneous and prejudicial order - Excise duty subsidy treated as capital receipt without application of mind by AO directed to be included to total income of assessee -

CIT held assessment order as erroneous and prejudicial to the interests of revenue, on the ground that AO without conducting any enquiry had allowed assessee's claim of exemption of excise duty subsidy treating the same as capital receipt. Thus, CIT directed AO to tax the same.Held: When AO treated sales tax incentive and refund of royalty as revenue receipt, he should have provided proper reasoning and justification why he omitted excise duty exemption from being considered as revenue receipt. The said omission on part of AO was glaring considering the fact that in preceding assessment years AO had added back all the three items of receipts viz. sales tax incentive, excise duty incentive as well as refund of royalty both under normal provisions as well as under section 115JB by treating them as revenue receipt. Accordingly, AO neither applied his mind nor carried enquiry any further to ascertain correctness of assessee's claim of excise duty incentive as capital receipt and thus allowance of assessee's claim without necessary inquiry certainly made assessment order erroneous and prejudicial. However, decision of CIT in directing AO to disallow excise duty incentive and add it to income of assessee could not be approved and AO was, therefore, directed to examine the issue in proper perspective and take an independent view after considering all relevant facts and materials on record.

REFERRED :

FAVOUR : Partly in assessee's favour.

A.Y. : 2013-14 & 2014-15

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