2016 (2) TMI 1047 - AT - Income Tax

Tribunal favors assessee, overturns CIT's decision under sec 263, restores AO's order under sec 143(3).

Surat Textile Mills Ltd. Versus Income Tax Officer

The Tribunal found in favor of the assessee, setting aside the Ld. CIT's order under section 263 and restoring that of the Assessing Officer under section ... Revision u/s 263 - disallowance made by the assessee u/s. 14A - Held that:- As under the head income from business, the assessee has added ₹ 18,151/- as disallowance u/s. 14A of the Act. On page 184 of the paper book, we find that in assessment order 2008-09, the assessee has disallowed ₹ 32,725/- u/s. 14A of the Act. Again at page 191, we find that for assessment year 2009-2010, the assessee has disallowed ₹ 23,164/- u/s. 14A of the Act. In both these occasions, the disallowance made by the assessee has been accepted. We fail to understand how a similar disallowance made during the year under consideration on same set of facts would make the assessment erroneous and pre-judicial to the interest of the revenue. Further, in our considered opinion Rule 8D cannot be invoked mechanically. It can be invoked only when the A.O is not satisfied with the computation of disallowance made by the assessee. In the case in hand, we find that the A.O was satisfied as similar disallowances were accepted in earlier years. Considering these facts in totality, the action of the ld. CIT on this issue is not justified. Claim of set off of brought forward business loss/unabsorbed depreciation of earlier years when there was no loss available - Held that:- While filing the return of income for A.Y. 2008-09, the assessee has reduced the book profit by ₹ 21,77,733/- being adjustments as per Clause- VII of the Explanation to section 115JB(2) of the Act which can be found at page 185 of the paper book. We further find that in the assessment order for A.Y. 2008-09 made u/s. 143(3) r.w.s. 153A of the Act while computing the tax on book profit u/s. 115JB of the Act. The A.O has deducted the adjustments as mentioned above of ₹ 21,77,733/- and the book profit was computed at Nil figure, this can be seen at page 188 of the paper book.Similarly, in the computation of income for A.Y. 2009-2010, the assessee has reduced the book profit by making adjustments u/s. 115JB of the act at ₹ 6,92,38,861/-, the same adjustments have been accepted by the A.O in the assessment order made u/s. 143(3) of the Act which can be found at page 200 of the paper book. We fail to understand how a similar adjustment made during the year under consideration can be considered as erroneous and prejudicial to the interest of Revenue. In our considered opinion, the action of the Commissioner is without jurisdiction. As discussed hereinabove, we do not find any error in the assessment order which could make it erroneous and pre-judicial to the interest of the Revenue. Assessee appeal allowed. Issues:Jurisdiction of the Ld. CIT under section 263 of the Act regarding errors in the assessment order made under section 143(3) of the Act.Analysis:The appeal by the assessee challenged the jurisdiction of the Ld. CIT under section 263 of the Act, arguing that the assessment order made under section 143(3) of the Act was not erroneous or prejudicial to revenue. The Ld. CIT raised issues regarding the disallowance under section 14A of the Act and the set off of brought forward business loss/unabsorbed depreciation. The Tribunal analyzed the case in detail.Regarding the disallowance under section 14A of the Act, the Tribunal found that similar disallowances made in earlier years were accepted, indicating the Assessing Officer's satisfaction with the assessee's computation. Rule 8D was considered applicable only when the AO was not satisfied with the assessee's disallowance. The Tribunal concluded that the Ld. CIT's action on this issue was unjustified.Regarding the set off of brought forward business loss/unabsorbed depreciation, the Tribunal noted that the assessee had followed the directions of the BIFR, as evidenced by the write-offs in the Profit and Loss account. The adjustments made in previous years were accepted by the AO. The Tribunal found no error in the similar adjustment made in the year under consideration and deemed the Ld. CIT's action as lacking jurisdiction.The Tribunal referred to legal precedents, including the decision in Malabar Industrial Co. Ltd., emphasizing that not every loss of revenue due to the AO's decision is prejudicial to revenue. The Tribunal highlighted the importance of sustainable views taken by the AO in accordance with the law. Citing the decision in CIT Vs Gabrial India Ltd., the Tribunal concluded that the assessment order was neither erroneous nor prejudicial to revenue, setting aside the Ld. CIT's order under section 263 and restoring that of the Assessing Officer under section 143(3) of the Act.In conclusion, the Tribunal allowed the appeal filed by the assessee, pronouncing the order in open court on 29th February 2016.