By TIOL News Service

KOLKATA, AUG 03, 2018: THE ISSUE IS - Whether during assessment failure of AO to carry out investigation on nature of subsidy received by assessee, makes the assessment order prima facie prejudicial to the interest of the revenue and justify exercise of revisional jurisdiction by CIT u/s 263 of Act. YES IS THE VERDICT.

Facts of the case

++ the assessee has not preferred to challenge the direction of the Principal CIT in respect of direction for unpaid liability for gratuity of Rs. 2,10,450/-. Therefore, the direction for same was not disturbed. As far as direction in respect of subsidy received is concerned, it is noted from a perusal of the assessment order of AO that there is no whisper about the subsidy of Rs. 2,33,51,560/- received by the assessee from W.B.I.D.C.I (promotional assistance). The assessee could not bring to notice any statutory notices issued by the AO during assessment proceedings wherein the question of the Subsidy receipts has been queried as to whether it is a capital receipts or revenue receipts. Therefore, the Principal CIT's observation that the AO did not investigate this issue, could not be controverted by the assessee. It has to be noted that the AO while assessing an assessee, plays a dual role to discharge (i) as an investigator and (ii) as a adjudicator. In this case, the AO has not conducted any investigation in respect of subsidy received by the assessee. Therefore, the order of the AO is erroneous on this score for non-investigating this issue. Therefore, Principal CIT has the jurisdiction to exercise revisional jurisdiction u/s 263 of the Act. However, the AO while giving appeal effect to the order of Principal CIT, has to consider the judgment of the Jurisdictional High Court in the case of CIT vs. Rasoi Ltd. provided the facts of the assessee's case are identical to the facts of the judgment of the Jurisdictional High Court in the case of CIT vs. Rasoi Ltd. The AO has to pass a speaking order taking into consideration judicial precedents. It was decided to dismiss the appeal of the assessee.

(See 2018-TIOL-1189-ITAT-KOL)