TaxTMI 
TaxTMI 
2015 (6) TMI 675
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....,01,515/- and Rs. 12,93,62,086/- respectively pertaining to AYs 2001-02 to 2005-06, on the ground that the same was paid in the FY 2008-09 (AY 2009-10) has been allowed despite not being disclosed in the regular books of accounts, which is bad in law with reference to the following observations:- (a) The expenditure was resulted from undisclosed production and sales which was not part of regular books of accounts. (b) The assessee did not disclose any details regarding liability towards unpaid excise duty, which the assessee wsa likely to have incurred on account of order by CESTAT (Central Excise Settlement Commission). Hence, it is evident that the assessee himself did not acknowledge liability towards excise duty and interest leviable on undisclosed production, and sales for the AY 2001-02 to 2007-08 in the statement of income submitted before Hon'ble ITSC (Income Tax Settlement Commission). Accordingly he is barred from claiming benefit of such expenditure in the years of payment i.e. AY 2009-10. (c) On perusal of the assessee's original application and letter dated 28.03.2008, it is evident that the issue of unpaid excise duty was not disclosed before the ITSC, hen....
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....tel [236 ITR 469] It was further submitted that the subject matter of the excise duty and the interest thereon was adjudicated by the CIT(Appeals) while adjudicating the Ground No. 3 in his order passed under section 250 dated 20.01.2014 and our attention in this regard was drawn towards the order of CIT(Appeals). The observations made in sub-para (a), (b), (c) and (d) of the notice were also adjudicated by the CIT(Appeals) while adjudicating the Grounds No. 3 & 5. The said amount of excise duty of Rs. 29,17,01,551/- was paid during the financial year 2008-09 in pursuance to the demand as per the order of the Hon'ble Customs & Central Excise Settlement Commission. The provisions of section 43B(a) are explicitly clear that the said payment has to be allowed on payment basis irrespective of the method of accounting followed by the assessee. Based on the order of the Settlement Commission of Customs and Central Excise an income of Rs. 105,00,00,000/- for the assessment years 2001-02 to 2007-08 was settled by the Settlement Commission of Income Tax vide order passed under section 245D dated 28.03.2008. Thus the sales/income as per the order of the Hon'ble Customs and Central Excise Se....
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....the case of Malabar Industrial Co. Ltd. -vs.- CIT reported in 243 ITR 83. 5. Ld. D.R. on the other hand, relied on the order of CIT and contended that the proceedings initiated were valid as on the date when the proceedings under section 263 were initiated. The order passed under section 154 was already annulled and thus was not inexistence. Therefore, the proceedings were initiated against the order passed under section 143(3). CIT(Appeals) annulled the order under section 154. The appeal does not relate to the assessment order passed under section 143(3), therefore, it cannot be said that the order of CIT(Appeals) got merged with the order of Assessing Officer. It is a case where the Assessing Officer has allowed the deduction of the assessee without examining whether the assessee is entitled for the deduction in respect of excise duty as well as interest thereon. 6. We have heard the rival submissions and carefully considered the same along with the order of tax authorities below. Now the question before us is whether the order passed by the CIT under section 263 is within the four corners of his order as is envisaged on him under the Income Tax Act, 1961. Before deciding the ....
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....e of an order which has been passed in consequence of or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, the High Court or the Supreme Court. Explanation.-In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded." 7. From the perusal of the aforesaid section, it is apparent that there are four main features of the power of revision to be exercised u/s 263 by the Commissioner of Income-tax. Firstly, the Commissioner may call for and examine the records of any proceedings under the Act and for this purpose he need not to show any reason or record any reason to believe. It is a part of his administrative power to call for the record and examine them relating to any assessee. Secondly he may consider any order passed by the Assessing Officer as erroneous as well as prejudicial to the interest of the Revenue. This consideration having regard to the language of section 263 apparently is a consi....
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....ee of being heard and after making or causing the enquiry he can pass an order. Moreover the inquiry is conducted once the CIT forms an opinion on the basis of record that the order passed is erroneous and prejudicial to the interest of Revenue. The word 'record' has been defined under Explanation (b) of Section 263 to mean that the 'record' shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner. The examination of the record is to be carried by the Commissioner prior to the forming an opinion that the order is erroneous and prejudicial to the interest of the Revenue. Once the record is examined and the CIT on the basis of examination of the record forms an opinion that the order is erroneous and prejudicial to the interest of the Revenue, he is empowered after giving the opportunity to the assessee, to make such enquiry as he may deem necessary. Therefore, the enquiry to be conducted by the CIT is an act once the CIT arrives at a conclusion that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue after examining the rec....
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.... sum payable by the assessee as interest on any loan or borrowing from any public financial institution or a state financial corporation or a State Industrial investment corporation, in accordance with the terms and conditions of the agreement governing such loan or borrowing, or (e) Any sum payable by the assessee as interest on any loan or advances from a scheduled bank in accordance with the terms and conditions of the agreement governing such loan or advances, or (f) Any sum payable by the assessee as an employer in lieu of any leave at the credit of his employee, Shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him: Provided that nothing contained in this section shall apply in relation to any sum, which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay....
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....e printing work done from M/s. Lamicoat International Pvt. Ltd. & M/s. Jai Sai Laminators Pvt. Ltd., he filed the submission why the interest paid to comply with the section 11AB of Central Excise Duty would not be disallowed. Both the contention has been filed separately along with some case laws. Further, the AR has filed one separate submission contained with details of contention why the depreciation on Hummer Car and other incidental business expenditure should not be disallowed. He argued that being an industrialist/manufacturer the assessee has to pay frequent visit to its distributors to survive in competition. As a manufacturer, when the society is fond of...., Moreover, the assessee has unit at Haridwar, Delhi, Kolkata. Thus, visit to distributors and coordination among the manufacturing units centred at Delhi and Kolkata. Then the AR clarified that the interest paid on unsecured loan proportionate to the loan advanced without charging any interest to the son of the assessee and M/s. Logotech (I) Pvt. Ltd. have been made from business receipts from......and explained in writing". 13. From this we noted that it is apparent that the Assessing officer has after examining t....
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....urt in the case of CIT -vs.- Goyal Private Family Specific Trust, 171 ITR 698 (Alld.) has held under para no. 12 as under:- "As held by this Court in the case of Goyal Private Family Specific Trust (supra), we are of the considered opinion that merely because the ITO had not written l engthy order, it would not establish that the assessment order passed under section 143(3)/148 of the Act is erroneous and prejudicial to the interest of the Revenue without bringing on record specific instances, which in the present case, the CIT has failed to do". No contrary decision was brought to our knowledge by either of the sides. 16. We noted that Hon'ble Delhi High Court in the case of CIT -vs.- Leisure wear Exports Ltd., 341 ITR 166 (Del.) has clearly held as under:- "The power of revision is not meant to be exercised for the purpose of direction the AO to hold another investigation without describing as to how the order of the AO is erroneous. From this it also follows that where the assessment order has been passed by the AO after taking into account the assessee's submissions and documents furnished by him and no material whatsoever has been brought on record by the CIT w....
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....win conditions, namely, (i) the order of the assessing officer sought to be revised is erroneous; and (ii) is prejudicial to the interests of the revenue. If one of them is absent- if the order of the Assessing office is erroneous but is not prejudicial to the revenue - recourse cannot be had to section 263(1). There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the assessing officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interest of the revenue' has to be read in conjunction with an erroneous order passed by the assessing officer. Every loss of revenue as a consequence of the order of the assessing officer cannot be treated as prejudicial to the interests of the revenue. for example, if the assessing officer has adopted one of the courses permissible in law and it has resulted in loss of revenue,....
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....he AO has also randomly selected two labourers and examined them and their statements were recorded under s. 131. Since all necessary details were furnished by the assessee, there was no reason for the CIT to invoke the revisional jurisdiction under s. 263. The CIT has not stopped merely by issuance of notice under s. 263. Once compliance is made, he went on issuing notice after notice and certain adverse inference were drawn by him from the details collected by him during the revisional proceedings. Those details were thoroughly checked and examined by the Tribunal and it arrived at a factual finding that there was no illegality committed by the assessee in entrusting the work to sub-contractors nor there was any illegality in making all due payments to them. The Tribunal has also given specific finding to the effect that there was no evidence on record that these contractors were related to the assessee or were associates or sister concerns of the assessee. The Tribunal has also given finding that the Revenue has not discharged the onus that the payments to sub-contractors were not genuine. Thus the Tribunal has come to the conclusion that no disallowances can be made merely on t....
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....he CIT." 23. In CIT vs. Arvind Jewellers, 259 ITR 502 (Guj), Hon'ble Gujrat High Court has held as under:- "It is the finding of fact given by the Tribunal that the assessee has produced relevant material and offered explanation in pursuance of the notices issued under s. 142(1) as well as s. 143(2) and after considering those materials and explanation, the ITO has come to a definite conclusion. The CIT did not agree with the conclusion reached by the ITO. Sec. 263 does not empower him to take action on these facts to arrive at the conclusion that the order passed by the ITO is erroneous and prejudicial to the interest of the Revenue. Since the material was there on record and the said material was considered by the ITO and a particular view was taken, the mere fact that different view can be taken, should not be the basis for an action under s.263 and it cannot be held to be justified. Having regard to the facts and circumstances of the case, the Tribunal was justified in setting aside the order passed by the CIT under s. 263. - Malabar Industrial Co. Ltd. vs. CIT (2000) 159 CTR (SC) 1: (2000) 243 ITR 83 (SC) followed. 24. In the case of Income-tax Officer v. DG Housing Proje....
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....atter. It is only in cases of lack of inquiry that such a course of action would be open. An order cannot be termed erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, it cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. Section 263 does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer who passed the order unless the decision is held to be erroneous. Where the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion such a conclusion cannot be found to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. The assessee was a manufacturer of car parts. Its return for the assessment year 2001-02 was....
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....he opinion of the Assessing Officer in treating the expenditure as revenue expenditure was plausible and thus there was no material before the Commissioner to vary that opinion and ask for fresh inquiry". 26. In view of the aforesaid decisions, we are of the view that the order passed by the CIT under section 263 is beyond the jurisdiction and cannot be sustained. If the order passed by the CIT is sustained, then it legality will be allowed to be continued. On this basis itself, we quash the order of the CIT under section 263. Ld. A.R. before us has also taken an alternative argument that both the issues on the basis of which the jurisdiction under section 263 have been considered and decided by the CIT(Appeals). This is a fact that the original assessment passed under section 143(3) has been rectified by the Assessing Officer vide order dated 24.05.2013 and in the order passed under section 154, the Assessing officer disallowed the excise duty payment of Rs. 29,17,01,515/- as well as the interest amounting to Rs. 12,93,62,086/-. The assessee went in appeal before the CIT(Appeals). CIT(Appeals) duly considered the submissions of the assessee whether the deduction is available to ....