COMMISSIONER OF INCOME TAX vs. M/S V.K. SOOD ENGG. & CONTRACTORS P LTD.

Facts

The Revenue appealed an Income Tax Appellate Tribunal (ITAT) order dated September 4, 2003, which had dismissed a revision order passed by the Commissioner of Income Tax (CIT) under Section 263 of the Income-tax Act, 1961. The CIT had revised an assessment order dated May 2, 1995, passed by the Assessing Officer (AO). The Revenue contended that the AO's order was erroneous and prejudicial to its interests, particularly regarding an arbitration award and cash withdrawals from a suspense account. The assessee argued that the award was for earlier assessment years (1989-90 and 1990-91) and additions related to it were deleted by the CIT(Appeals). The assessee also stated that no material supported the CIT's findings on cash withdrawals and jewellery found in a locker.

Held

The Tribunal held that the CIT was not justified in revising the AO's order under Section 263 of the Act. Regarding the arbitration award, it was an admitted position that the award was for assessment years 1989-90 and 1990-91, and additions made then were deleted by the CIT(Appeals). The assessee did not receive any award money during the assessment year 1993-94. Therefore, including award money in the assessment for 1993-94 was incorrect. Concerning cash withdrawals, the Tribunal found no material to support the CIT's assertion of black market foreign exchange purchases and subsequent deposits. The Tribunal also found that the AO had made proper inquiries before assessment regarding the suspense account. The High Court noted that the CIT's order was based on surmises and presumptions, and as per the Supreme Court in Malabar Industrial Co. Ltd. and M/s Paville Projects Private Limited, if two views are possible and the AO adopts one plausible view, the order cannot be revised under Section 263 merely because the CIT has a different view. The appeal was dismissed.

Key Issues

1. Whether the ITAT erred in holding that the CIT erred in revising the AO's order under Section 263 of the Income-tax Act, 1961, concerning an arbitration award and cash withdrawals from a suspense account, thereby finding the AO's order not erroneous or prejudicial to the Revenue? (Mixed law and fact) Assessee's Contentions: The ITAT's order should be upheld. The arbitration award was relevant to assessment years 1989-90 and 1990-91, and any additions made for those years were deleted by the CIT(Appeals). No award money was received during the assessment year under consideration (1993-94). There was no material to suggest the AO's order was erroneous. Jewellery found in a locker was explained in Wealth-tax Returns. Revenue's Contentions: The CIT rightly held the AO's order to be erroneous and prejudicial to the Revenue. The ITAT erred in limiting its finding on the award to assessment years 1989-90 and 1990-91. The AO failed to examine the taxing of money withdrawn from the Suspense Account, where the amount against bank guarantee reduced from Rs. 3,23,02,222/- to Nil. The CIT had the power under Section 263 to revise the AO's order if it was erroneous and caused loss to the Revenue.