TaxTMI 
TaxTMI 
2015 (6) TMI 36
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....ed by the assessee, calling into question correctness of the aforesaid revision order passed by the learned Commissioner, are as follows: 1) The Ld. Commissioner of Income Tax, Jabalpur passed the order under section 263 dated 11/02/2014 & set aside the Assessment order under section 143(3) dated 28/12/2011 & order under section 154 dated 26/07/2012 passed directing to the Assessing officer to complete the Assessment afresh in accordance with law. 2) The Proceeding under section 263 of the Income Tax Act are unwarranted, unjustified and bad in law in as much as the assessment order has been passed after verifying facts and in conformity with the decision of ITAT, which are to be followed by the tax authorities. (Govindram Seksaria Charitable Trust Vs ITO 168 ITR 387 MP & Agrawal Housing & Leasing Vs CIT 257 ITR 235 MP) 3) Because, the order of the ld. Income Tax Commissioner is perverse, arbitrary and unsustainable in law and on facts. 4) Because the order U/S 263 of the Ld. Commissioner was very injustice, to the appellant, unlawful, bad in law for void-ab-initio and liable to be quashed. 5) Because the order Under Section 263 of the Ld Commissioner was passed by ig....
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....n considering the reply given by the assessee, and taking into account the fact that the CIT(A) has already deleted similar disallowance in the earlier assessment years and that the CoD has declined permission to the Western Coalfield Limited to agitate similar disallowance in further litigation, the Assessing Officer held that this amount of Rs. 2,74,740.33 lakhs should be allowed for deduction. The Assessing Officer was of the view that " it is of no use to make such addition in this case further so that repeated litigation can be avoided". During these assessment proceedings, the Assessing Officer first allowed a deduction of Rs. 950.82 lakhs under section 35 D in respect of onetime payment of lease rent and afforestation charges, as against the deduction of Rs. 1074.24 lakhs claimed by the assessee, but subsequently, vide order dated 26th July 2012 passed under section 154 r.w.s. 143(3), allowed the relief of Rs. 123.42 lakhs and thus allowed the entire deduction as claimed by the assessee. 4. The matter, however, did not rest at that. 5. On a perusal of the assessment records, learned Commissioner initiated the revisions proceedings by issuance of notice dated 29th Augus....
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....166 (Del)] "where the assessment order has been passed by the AO after taking into account assessee's submissions and documents furnished by him, and no material is brought on record by the CIT which shows that there was any discrepancy or falsity in the evidence furnished by the assessee, the order cannot be set aside for making deep enquiry only on the presumption that something new may come". It was also submitted that the revision powers under section 263 cannot be invoked merely because the Commissioner has a different opinion on the matter than the opinion of the Assessing Officer, and, in this regard, reliance was placed on a decision of the coordinate bench in the case of Rama Kant Singh Vs CIT [(2011) 8 ITR (Tribunal) 403]. Learned Commissioner was thus urged to drop the revision proceedings. 7. None of these submissions, however, impressed the learned Commissioner. She was of the view that the appeals filed by the income tax department for the assessment years 1995-96, 1996-97 and 1997-98 were dismissed by the Tribunal for want of clearance by the CoD [Committee on Disputes, Cabinet Secretariat- as set up in pursuance of Hon'ble Supreme Court's directions in the case o....
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....same issue, in the case of WCL. 5.3 The issue is squarely covered by the judgment of the Hon'ble ITAT Jabalpur in ITA No. 23/Jab/2011, in the case of M/s Babjee Builders Engineers & Contractors wherein it was held that failure to conduct inquiry by itself attracts action u/s 263. Reliance in this regard is further placed in the judgment of Malabar Company 243 ITR 83 (SC), in which it was held that the order shall be subject to action u/s 263, if it is erroneous in so far as it is prejudicial to the interest of revenue. The phrase 'prejudicial to the interest of revenue' as well as 'erroneous' has been duly defined in the said judgment and strong reliance is placed on the same. Reliance is placed on a similar judgment by the Hon'ble MP High Court in the case of CIT Vs. Mahaveer Traders (1996) 220 ITR 167 (MP). 5.4 The assessee company has also stated that power under Section 263 can't invoke merely because the CIT had a different opinion on the matter by placing reliance on the judgment in the case of Ramakant Singh Vs. CIT (2011) 8 ITR Trb. 403 (Pat). 5.5 The contention put forth by the assessee is not acceptable since the instant revision under....
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.... 10. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 11. We have noted that on both the issues, in respect of which the learned Commissioner has invoked the revision powers, and vide our order of even date in the case of this very assessee for the assessment year 2010-11, we have decided the matter in favour of the assessee, on merits, by observing, inter alia, as follows: A: On Overburden removal expenses 13. We have, at the outset, noted that the decisions of the CIT(A), in confirming the stand of the Assessing Officer, has not only consciously disregarded of the stand taken by the coordinate benches of this Tribunal but he has also held these decisions to be incorrect. He has himself stated, in so many words, that he would rather "respectfully disagree" with the stand of the Tribunal than to follow these decisions. The binding nature of the decisions of the judicial forums is not dependent on the seal of approval by the lower judicial forums. Declining to follow the binding judicial precedents by questioning the correctness of these decisions, rather than loyally fol....
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....enefit of presentations by the assessee on this aspect, in addition to, whatever its worth, our own research on this process. 17. Open cast coal mining, in sharp contrast with underground mining or, for that purpose, any extractive method requiring tunnelling into the earth, is a method whereby coal is extracted from an open pit after removal of the overburden i.e. surface material covering the coal. This surface material could be plants and vegetation, top soil, rocks and other material covering the coal. Obviously, open cast mining is economic when the coal seam is not much below the surface level. Such large opencast mines can cover an area of many square kilometres, as indeed in the case of this assessee. 18. What is very crucial, however, is to appreciate the fact that overburden removal process is not a onetime process in one coal mining site because even in between the coal seams below the surface levels, there could be unrelated layers of soil or rocks which are required to be removed before one can reach the second or third coal seam, and because the same coal seam may be at different levels below the surface as it need not be parallel to the surface level all along.....
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.... parallel to the surface, overburden is required to be removed. Overburden removal process does not, therefore, come to a halt upon reaching the coal level. Of course, there is a difference in the character of overburden removal expenses till the regular coal extraction process starts vis-àvis the overburden removal expenses after the regular coal extraction starts, and this approach is implicit in the accounting policy which treats the overburden removal expenses, till the point of time a mine is a development mine and the regular coal extraction on commercial basis has not yet started, as a capital expenditure. 21. The basis on which a mine is classified as a development mine or as a revenue mine has been consistent all along and has been accepted by the income tax department not only in assessment of this assessee but also in the assessments of other similarly placed assessees such as subsidiaries of the Coal India Limited. As the learned CIT(A) has noted, in the extracts reproduced earlier in this order, until the point of time when coal production in a mine reaches 25% of rated capacity in a given mine, it is generally treated as a 'development mine' and ther....
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....tertain of the law of the case, or new versions as to what should be a proper apprehension by the Court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted, and there is abundant authority reiterating that principle. Thirdly, the same principle - namely, that of a setting to rest rights of litigants, applies to the case where a point, fundamental to the decision taken or assumed by the plaintiff and traversable by the defendant, has not been traversed. In that case also a defendant is bound by the judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken." These observations were made in a case where taxation was in issue. This Court in Parashuram Pottery Works Co. Ltd. vs. ITO 1977 CTR (SC) 32 : (1977) 106 ITR 1 (SC) stated : "At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond....
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....ships needs to be appreciated. This decision cannot be an authority for the proposition that in all cases where trust is a revocable trust, the benefit of exemption under section 11 and 12 will nevertheless be applicable. What has been decided in this case is the admissibility of tax exemption in the case of revocability of trust but then, as Their Lordships stated in so many words, this decision is confined to the facts of this case and is not of general application. 24. To construe this observation as diluting the general principles of consistency, as succinctly summarized by Their Lordships, is wholly fallacious. This observation is in the context of the decision and not the reasons of the decision. The decision is holding the trust eligible for tax exemption de hors revocability of the assessee trust. The reasons for this decision, inter alia, include impact of revocability in this peculiar fact situation as indeed the principles of consistency. The decision does not hold good in all fact situations because of the peculiarity of the facts in this particular case. The reasons, however, continue to bind the lower judicial forums. 25. There is, thus, no merit in the stand of....
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....removal expenses. In such circumstances, clearly that coal extraction is taking place and yet further overburden is required to be removed for continuing with coal extraction. Such overburden removal can only be in the process of extraction of coal and further coal protection is not possible unless that overburden is removed. Given the nature of expenses, in the light of the foregoing discussions, such an inference is clearly incorrect and unsustainable in law. 27. We have also noted that a lot of emphasis has been placed by the authorities below on the scope of Section 35 E. The Assessing Officer has observed that, "with due deference to Hon'ble ITAT judgments, it is stated that the relevance of the OBR expenses can be examined in connection with section 35E which has neither been pleaded nor considered by Hon'ble bench" and the CIT(A) has stated that "Section 35E of the Act was introduced to deal with amortisation of expenditure on prospecting and developing of certain minerals and the very purpose of this section was to address the treatment to be given for expenses relatable to development of a mine. In the instant, the A.O. has invoked the provisions of this sec. considerin....
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....up of associated minerals or of any rights in or over such deposits; or (iii) of a capital nature in respect of any building, machinery, plant or furniture for which allowance by way of depreciation is admissible under section 32, shall not be deemed to be expenditure incurred by the assessee for any of the purposes specified in sub-section (2). (4) The deduction to be allowed under sub-section (1) for any relevant previous year shall be- (a) an amount equal to one-tenth of the expenditure specified in sub-section (2) (such one-tenth being hereafter in this sub-section referred to as the instalment); or (b) such amount as is sufficient to reduce to nil the income (as computed before making the deduction under this section) of that previous year arising from the commercial exploitation [whether or not such commercial exploitation is as a result of the operations or development referred to in sub-section (2)] of any mine or other natural deposit of the mineral or any one or more of the minerals in a group of associated minerals as aforesaid in respect of which the expenditure was incurred, whichever amount is less: Provided that the amount of the instalment relating....
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....n Indian company which is entitled to the deduction under sub-section (1) is transferred, before the expiry of the period of ten years specified in sub-section (1), to another Indian company in a scheme of demerger,- (i) no deduction shall be admissible under sub-section (1) in the case of the demerged company for the previous year in which the demerger takes place; and (ii) the provisions of this section shall, as far as may be, apply to the resulting company as they would have applied to the demerged company, if the demerger had not taken place. (8) Where a deduction under this section is claimed and allowed for any assessment year in respect of any expenditure specified in sub-section (2), the expenditure in respect of which is so allowed shall not qualify for deduction under any other provision of this Act for the same or any other assessment year 30. A plain reading of this section reveals that this section applies to an assessee who is "engaged in any operations relating to prospecting for, or extraction or production of, any mineral" but it applies only with respect to the expenditure specified in Section 35E (2). While the assessee fulfils the criterion so far a....
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....relevance. As far as the fact situation that we are dealing with is concerned, it is an undisputed position that commercial production has begun in all the mines and, for this reason alone, Section 35 E would not have any application on the facts of this case. 33. As regards the limitation placed in Section 35E (8), in our humble understanding, this limitation does not come into play unless the assessee, on his own, claims the deduction under section 35E and the deduction is granted to the assessee. It cannot, therefore, be open to the Assessing Officer to first thrust the deduction under section 35 E even though he does not seek the same, and then deny deduction in respect of qualifying expenditure under any other section, such as section 37(1), on the ground that the assessee has been granted a deduction under section 35 E and the limitation under section 35E (8) has thus come into play. In any event, section 35E (8) is clearly intended to avoid a double deduction rather than restrict an otherwise admissible deduction. It is only elementary that expenditure incurred by an assessee before commencement of his business is normally not deductible, and that, in the case of units en....
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....erals or on the development of a mine or other natural deposit of any such mineral or group of associated minerals. The minerals and the groups of associated minerals for the purposes of this provision have been specified in a new Seventh Schedule inserted by s. 58 of the Amending Act. 49. As in the case of preliminary expenses, amortisation in respect of expenditure on prospecting for, and development of, the specified minerals, will also be allowed only in the case of Indian companies and resident assessees other than companies. The benefit of amortisation (emphasis by underlining supplied by us) will not be available to a foreign company even if such company declares its dividends in India, and regardless of the pattern of its share- holding. It will also not be available to non-resident taxpayers generally. 50. The expenditure to be amortised under s. 35E will be the expenditure incurred under the specified heads after 31st March, 1970, during a 5-year period ending with the "year of commercial production", i.e., the previous year in which, as a result of any operation relating to prospecting commercial production of any one or more of the specified minerals or associated....
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....nt year and added to that year's instalments and so on for succeeding previous years. Such carry over will be allowed only up to and including the 10th previous year as reckoned from the year of commercial production. If there is any unabsorbed amount at the end of the 10th year, it will lapse. 53. As in the case of amortisation of preliminary expenses under s. 35D, the amortisation of expenditure on prospecting for, and development of, specified minerals is also subject to the requirements that, where the assessee is a person other than a company or a co-operative society, his accounts for the year or years in which the expenditure is incurred have been audited by a chartered accountant or other person as s tated in paragraph 46 and also subject to the requirement that the assessee furnishes along with his return of income for the first year in which the amortisation is claimed, the report of such audit in a form to be prescribed for the purpose, duly signed and verified by the chartered accountant or other person setting forth such particulars as may be prescribed. 54. The amortisation under s. 35E is also available only to the assessee who incurs the expenditure. Howev....
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....precedent for pursuing the litigation before Hon'ble Courts above, as subsequently held by a five judge bench of Hon'ble Supreme Court in the case of E lectronics Corporation of India Limited Vs Union of India [(2011) 332 ITR 58 (SC)], these judicial precedents cannot be said to be good in law. Learned senior counsel for the assessee, on the other hand, submits that these were the cases in which the permission for challenging the decisions of the coordinate benches were declined by the Committee on Disputes. He submits that the permission not being granted by the CoD is one thing, and the permission being declined by the CoD is quite another. While in the former case, according to the learned counsel, the matter could still be agitated before the Hon'ble Courts above, in the latter situation, as in the present case, there is a conscious decision of the Government of India, which continues to be binding on the tax administration, not to pursue the matter in further litigation before Hon'ble Courts above, and, therefore, such a decision cannot be revisited now. It is also pointed out that, whether the tax administration takes up the matter in further appeals before the Hon'ble Courts....
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....echanism has led to delay in filing of civil appeals causing loss of revenue. For example, in many cases of exemptions, the Industry Department gives exemption, while the same is denied by the Revenue Department. Similarly, with the enactment of regulatory laws in several cases there could be overlapping of jurisdictions between, let us say, SEBI and insurance regulators, civil appeals lie to this Court. Stakes in such cases are huge. One cannot possibly expect timely clearance by CoD. In such cases, grant of clearance to one and not to the other may result in generation of more and more litigation. The mechanism has outlived its utility. In the changed scenario indicated above, we are of the view that time has come under the above circumstances to recall the directions of this Court in its various orders reported as (i) 1995 Supp (4) SCC 541 dt. 11th Oct., 1991 (supra) (ii) (2004) 6 SCC 437 dt. 7th Jan., 1994 (supra) and (iii) (2007) 7 SCC 39 dt. 20th July, 2007 (supra). (Emphasis by underling supplied by us) 38. What Their Lordships have thus recalled are the directions issued in its earlier orders. These directions, as set out in the judgment dated 11th October 1991, were ....
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.... this mine should not be construed to mean that overburden removal expenses from all over the mine area could be treated as revenue expenditure. 40. We are unable to find any legally sustainable merits in this objection either. The criterion on the basis which call is taken as to be whether a mine can be treated as a development mine or as a revenue mine is, as we have noted in paragraph 22 earlier in this order, is uniform all along not only in this case of this assessee but in the case of other similarly placed assessees, and the revenue authorities have accepted that criterion all along. It is a purely a factual matter which permeates through different assessment years, and for the detailed reasons discussed earlier, there is no good reason to disturb this criterion. In any case, the authorities below have neither suggested any alternative criterion, which will be appropriate on the facts of this case, nor have they have demonstrated that the facts implicit in their stand actually exist. As a matter of fact, the apprehensions of the Assessing Officer seem to be purely hypothetical and in the realm of conjectures and surmises inasmuch as not one instance is shown in which the ....
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....e has already been allowed as deduction and nothing survives for being allowed as deduction now. What has been claimed, in our humble understanding, is not expenditure relating to assessment year 2004-05 but amortization of eligible expenditure which was originally incurred in the assessment year 2004-05. Merely because the expense was originally incurred in the previous year relevant to the assessment year 2004-05, as long as it is otherwise eligible for amortization under section 35E, the deduction under section 35E to the amount so amortized cannot be declined. 53. In view of the above discussions, as also bearing in mind entirety of the case, we see no legally sustainable merits in the impugned disallowance. We, accordingly, direct the Assessing Officer to delete this disallowance of Rs. 123.42 lakhs as well. 12. As for the learned Commissioner's observation that the expenses claimed for amortization, vide Tribunal's order in ITA Nos. 96 and 97/Jab/1998 for the assessment year 1998-99, were held to be capital in nature and are thus debatable in nature, we find that what can be amortized under section 35E is only capital expenditure or else such an expense will anyway be a....
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....iry (emphasis by underlining supplied by us)". There is nothing on the facts of this case which should necessarily provoke an inquiry and where Assessing Officer's not subjecting the claim for overburden removal expenses being subjected to detailed inquiry would render the assessment order erroneous and prejudicial to the interest of the revenue. The second aspect is revision can be carried out only on the ground in respect of which the assessee has been put to notice. When the question of inadequate inquiries has not been taken up at the stage of show cause notice, it cannot be a ground for subjecting an order to revision as well. A co-ordinate bench of this Tribunal, in the case of Synergy Entrepreneur Solutions Pvt Ltd Vs DCIT [(2011) 13 ITR Tribunal 377 (Mum)], had an occasion to deal with a somewhat similar situation. That case a case in which in the show cause notice, learned Commissioner held that the loss brought forward could not be set off against profits of the current year, but when the Commissioner was to pass the final revision order, he simply held that the matter is required to be examined afresh in accordance with the law. As to whether such a shift in the stand wa....
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...., the assessment order is set aside with a direction to obtain complete details and conduct necessary enquiries and examine the same for the assessment year under consideration. The AO shall provide adequate opportunity to the assessee before passing the assessment order." 5. It is thus clear that there has been shift in the stand of the CIT on whether it was a fit case for revision on the ground that the assessee was not eligible for set off of losses on speculative transactions or whether it was a case for revision on the ground that the AO did not make necessary verifications about the transactions. The reason given in the show-cause notice is former, while the reason for which revision powers are finally exercised in the impugned order are latter. As to whether such an exercise of revisional powers, on the grounds other than the grounds of revision as set out in the show-cause notice, could be held to be sustainable in law, we find guidance from the decisions of a Co-ordinate Bench in the case of Maxpak Investment Ltd. vs. Asstt. CIT (2006) 104 TTJ (Del) 881 : (2007) 13 SOT 67 (Del) which, inter alia, observes as follows: ".............In CIT vs. G.K. Kabra (1995) 125 CTR....
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....s. 263 and the powers of the Tribunal while dealing with an appeal against the order passed under that section were explained in that decision. The CIT had found the order of the AO allowing continuation of registration to the assessee-firm to be erroneous on the ground that the actual distribution of the profits was different from the ratio mentioned in the deed of partnership. The Tribunal set aside the order of the CIT but while doing so observed that there was a change in the number of partners from 10 to 11 which fact had not been taken into account by the AO when he granted registration for the firm for the asst. yr. 1966-67 and thus the grant of registration was erroneous. On the basis of this observation it was argued before the High Court on behalf of the Revenue that the Tribunal ought to have sustained the order of the CIT on that ground. Repelling the contention, it was held by the High Court as under (pp. 502-3): 'The jurisdiction vested in the CIT under s. 263(1) of the Act is of a special nature or, in other words, the CIT has the exclusive jurisdiction under the Act to revise the order of the ITO if he considers that any order passed by him was erroneous insofar ....
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....When we examine the facts of this case in the light of the legal position so set out, we find that in the impugned revision proceedings, learned Commissioner started by pointing out that the AO did not realize that the matter was decided on the basis of accepting CoD verdict but the CoD itself has outlived its utility as was held by Hon'ble Supreme Court in the case of Electronics Corporation (supra), but what he concluded was that the said assessment order was passed "in haste, without making necessary inquiries warranted and also not appreciating the correct set of facts". In our humble understanding, lack of proper inquiries, which an Assessing Officer ought to have conducted on the facts of the said case, is altogether a different reason from a claim having been allowed on the basis of CoD decision which is no longer legally valid. In view of the above discussions, as also bearing in mind entirety of the case, we are of the considered view that the impugned revision order is contrary to the scheme of law, and should be quashed for this reason also. 16. There is, however, one more reason on account of which the impugned revision order must be quashed. 17. The reason is thi....
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....he fact that the CoD has "declined" the permission to the income tax authorities to agitate this issue before the judicial forums. The Committee on Disputes is a high powered committee in the Government and its decisions, as is our considered view, bind the Government entities. It cannot be open, in our opinion, to the Central Board of Direct Taxes to say that it can disregard the views of a committee set up as part of the Cabinet Secretariat. 17. Viewed thus, even after Hon'ble Supreme Court's decision in the case of Electronics Corporation (supra), where Committee on Disputes in the Cabinet Secretariat has taken a conscious view to decline permission to the income tax department to agitate, before judicial forums, on admissibility of a deduction, i t may not really be open to the income tax department to contend otherwise. The whole idea behind setting up the CoD was to avoid unproductive litigation, between the Government entities inter se and to promote mutual conciliation. The fact that these CoD decisions no longer bind the Courts or Tribunals does not negate the fact that to pursue a litigation between the Government entities inter se, and particularly as such litigation ....