| The Tax Publishers2020 TaxPub(DT) 4582 (Pune-Trib) INCOME TAX ACT, 1961
Section 263
Where AO called for the details regarding the true nature of legal and professional expenses and the same was explained by assessee, then on being satisfied, the AO had chosen not to make any addition and there was no material on record to hold that legal and professional expenses were not allowable as revenue expenditure, therefore, CIT was not justified in exercising power of revision.
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Revision under section 263 - Validity - Estimation of gross profit -
Assessee was engaged in the business of port and allied activities. It was a joint venture on BOOST basis between the assessee's holding company and State Government. Assessee disclosed a loss of Rs. 2,44,01,285 and against the said return of income, assessment was taken for scrutiny and the assessment was completed by CIT at a loss of Rs. 2,26,51,285. While doing so, AO made addition of Rs. 17,50,000 in the hands of assessee. Subsequently, CIT issued show-cause Notice under section 263 calling upon assessee to show-cause as to why the assessment order should not be set aside as AO had failed to examine the issue of allowability of legal and professional expenses of Rs. 10 lakhs incurred towards drafting of agreement in connection with the IMG for the procurement of New Ship Lift System. Held: As during the course of assessment proceedings, AO had called for the details regarding the true nature of legal and professional expenses and the same was explained by the assessee on being satisfied, the AO had chosen not to make any addition. The fact that assessment order does not discuss about this item of expenditure does not mean that AO had not examined the issue. Fact would clearly suggest that there was no material on record to hold that the legal and professional expenses were not allowable as revenue expenditure. Therefore, CIT was not justified in exercising the power of revision.
Followed:CIT v. Bush Boake Allen India Ltd. (1982) 135 ITR 306 (Mad) : 1982 TaxPub(DT) 848 (Mad-HC) and Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 (SC) : 2000 TaxPub(DT) 1227 (SC). Relied:CIT v. Gabriel India Ltd. (1993) 203 ITR 108 (Bom) : 1993 TaxPub(DT) 1357 (Bom-HC), CIT v. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del) : 2011 TaxPub(DT) 88 (Del-HC), CIT v. Gera Developments Pvt. Ltd. (2016) 387 ITR 691 (Bom) : 2016 TaxPub(DT) 1779 (Bom-HC) and Addl. CIT v. J.K.D'Costa (1982) 133 ITR 7 (Del) : 1982 TaxPub(DT) 507 (Del-HC).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2011-12
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