Case Note & Summary
The appeal by the Revenue under Section 260A of the Income Tax Act, 1961 arose from an order of the Income Tax Appellate Tribunal dated 15 January 2009, which held that the Commissioner of Income Tax had not validly exercised jurisdiction under Section 263. The assessee, Development Credit Bank Limited, had its assessment for the year 2002-2003 completed under Section 143(3) on 24 December 2004. During assessment, the Assessing Officer dealt with a provision for depreciation on current investments. The assessee claimed depreciation of Rs.6.22 crores on current investments, treating them as stock in trade. The Assessing Officer, after considering the assessee's submissions and CBDT Circular No.665, allowed depreciation only to the extent of Rs.6.22 crores as per RBI guidelines, disallowing the balance of Rs.10.81 crores. The Commissioner of Income Tax initiated revision proceedings under Section 263, contending that the Assessing Officer's order was erroneous and prejudicial to the Revenue because the assessee had not followed RBI guidelines requiring set-off of appreciation against depreciation. The Tribunal quashed the revision, holding that the Assessing Officer had applied his mind and the order was not erroneous. The High Court framed the substantial question of law: whether the Tribunal was justified in holding that initiation under Section 263 was not justifiable. The Court noted that the Assessing Officer had specifically called for details, considered the assessee's explanation, and applied RBI guidelines. The Court held that the Commissioner cannot invoke Section 263 merely because a different view is possible; the order must be both erroneous and prejudicial to the Revenue. Since the Assessing Officer had taken a plausible view, the order was not erroneous. The appeal was dismissed.
Headnote
A) Income Tax - Revision under Section 263 - Erroneous and Prejudicial Order - Section 263 of the Income Tax Act, 1961 - The Commissioner of Income Tax sought to revise an assessment order under Section 263, contending that the Assessing Officer had erroneously allowed depreciation on current investments without considering appreciation as per RBI guidelines. The Tribunal held that the Assessing Officer had applied his mind and the order was not erroneous or prejudicial to the Revenue. The High Court affirmed, holding that the Commissioner cannot substitute his view merely because a different view is possible. (Paras 1-6) B) Income Tax - Depreciation on Current Investments - Stock in Trade vs Capital Asset - CBDT Circular No.665 - The assessee, a bank, treated securities as stock in trade and claimed depreciation. The Assessing Officer, after considering RBI guidelines and CBDT Circular No.665, allowed depreciation only to the extent computed as per RBI guidelines. The High Court held that the Assessing Officer had taken a plausible view and the order was not erroneous. (Paras 3-5)
Issue of Consideration
Whether the Tribunal was justified in holding that the initiation of proceedings under Section 263 was not justifiable, on the ground that the order of the Assessing Officer was not erroneous or prejudicial to the interests of the Revenue.
Final Decision
The appeal is dismissed. The Tribunal's order dated 15 January 2009 is upheld. No order as to costs.
Law Points
- Section 263 jurisdiction
- erroneous order
- prejudicial to revenue
- CBDT Circular No.665
- RBI guidelines
- stock in trade vs capital asset
- depreciation on current investments
