TaxTMI 
TaxTMI 
2015 (11) TMI 989
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....he order passed by the Ld.CIT-IV, Delhi u/s 263 of the Act on 27.3.2009 for the A.Y. 2004- 05. 1.1. As the issues arising in all these appeals are common, for the sake of convenience, they are heard together and disposed of by way of this common order. 2. We first take up assessee's appeal in ITA 2444/Del/2007 for the A.Y. 2003-03. 3. Facts in brief:- The assessee company is a Non-Banking Finance Company (NBFC) and is engaged in the business of financing consumer and auto products. It filed its return of income on 31.10.2002, for the A.Y. 2002-03, declaring total income of Rs. 96,28,250/- under the normal provisions of the Act. Book profits u/s 115 JB of the Income Tax Act 1961 (the Act) was declared at Rs. 7,35,87,254/-. The assessment was completed u/s 143(3) of the Act on 25.2.2005. The Ld.CIT, Delhi -IV revised the order, passed by the Assessing Officer u/s 143(3) of the Act on 25.2.2005, by invoking his powers u/s 263 of the Act. The revision was made on the following issues. (a) Allowability of loss incurred on sale of repossessed assets, as business loss. (b) Allowability of loss on sale of bad loan portfolio as business loss. (c) Allowabi....
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.... (a) There is no loss to the Revenue on any of these issues on which revision has been done by the Ld.CIT for the reason that, the assessee could have claimed 100% of the debt as bad debt, but instead had claimed only a limited amount by way of loss on sale of repossessed assets and had rightly claimed business loss, on sale of bad loan portfolio. As far as the allowability of excess provision made on securitised assets is concerned, he submitted that there was total non application of mind by the Ld.CIT for the reason that, the assessee himself had disallowed this amount while computing its income. (b) For the A.Y. 2004-05 and 2003-04 the allegation of "lack of enquiry by the A.O." during assessment proceedings is factually incorrect. Attention was drawn to the order sheet entry dt. 17th August, 2006, written submissions of the assessee dt. 4th October, 2006, which proves that an enquiry was made by the A.O. and detailed replies were furnished by the assessee. Just because the A.O. did not reflect the fact of verification, in the assessment order, it ipso facto does not lead to a conclusion that there was no enquiry by the A.O. (c) What are the proper, requisite and desire....
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....rniture and fixtures and the Ld.CIT has merely set aside the matter to the file of the A.O. for verification, which act is not in accordance with law. He relied on the following case laws. (i) CIT vs. Vikas Polymers reported in 341 ITR 537 (Del) (ii) CIT vs. Sunbeam Auto Ltd. Reported in 332 ITR 167 (Del.) (iii) CIT vs. Max India Ltd. Reported in 295 ITR 282 (SC) (iv) Hindustan Coca Cola Beverages P.Ltd. vs. DCIT in ITA 2274/Del/07 and 2038/Del/08 - ITAT Delhi Bench order dt. 25.8.2009 (v) CIT vs. Citi Financial Consumer Finance Ltd. Reported in 335 ITR 29 (Del.) (vi) Malabar Industrial Co.Ltd. vs. CIT reported in 243 ITR 83 (S.C.) 5. Smt.Sulekha Verma, Ld.CIT, D.R. on the other hand vehemently controverted the submissions of Shri Sanjeev Sabharwal, the Ld.Senior Counsel for the assessee. She argued that: (a) The Ld.CIT has not in principle, accepted that the loss on sale of repossessed assets and loss on sale of bad loan port folio, is business loss as claimed by the assessee. She relied on the order of the Ld.CIT and submitted that no such finding has been given. (b) That the assessee has not produced any evidence on actual sale of repossessed assets an....
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.... On a careful consideration of the facts and circumstances of the case, on perusal of material available on record, orders of lower authorities and case laws cited, we hold as follows. 7. We first take up the appeals for the A.Y. 2004-05 and 2005-06. Before we go into the legal arguments on the correctness of the action of the Ld.CIT, in invoking his powers u/s 263 of the Act, we cull out the facts from records. "Loss on sale of repossessed assets amounting to Rs. 497.77 lakhs: The assessee, an NBFC, is engaged in the business of providing financial assistance to customers in acquiring wide range of consumer and auto products. During the course of its regular business assessee had given certain auto/consumer loans and assets on hire purchase/lease during the previous year relevant to the A.Y. under consideration. In the case of hire purchase transactions the company does not claim any depreciation and reflects the hire purchase receivables from the hirers in the balance sheet as hire purchase receivables (refer schedule 10 of the audited accounts on record). In case of hire purchase, in the event the hirer defaults in payment of instalments, the compan....
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....orrect and based on the actual sale of repossessed stocks and bad loan portfolios during the year under consideration. Similarly, the AO also does not appear to have verified the fact as to whether the excess provision of Rs. 32 lakhs on securitised assets was added back to the total income by the assessee company itself as is being claimed in the present proceedings before me. Accordingly, the assessment order dt. 25.2.2005 u/s 143(3) of the Act for the AY 2002-03 is held to be erroneous and prejudicial to the interests of revenue. In the circumstances, it is considered fair and reasonable to set aside the assessment on the limited point for verification of correctness of deductions claimed at Rs. 497.77 lacs on account of loss on sale of repossessed stocks and of Rs. 209.05 lacs on account of loss on sale of bad loan portfolios as also for carrying out verification of the claim that the excess provision of Rs. 32 lacs on securities assets was added back to the total income by the assessee company itself. The AO is directed to decide these issues afresh as per law and after giving reasonable opportunity to the assessee company of being heard." 7.2. A perusal of the above findin....
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....consisting mainly of non-performing assets, as otherwise the assessee would have suffered higher losses. The loss incurred on sale of loan portfolio represents the outstanding dues from defaulting customers less the sale proceeds recovered, which is written off and claimed as business loss by the assessee. 8. We now consider the specific arguments on the jurisdiction of the Ld.CIT to invoke the powers u/s 263 of the Act. 8.1. For the A.Y. 2003-04 and 2004-05, the A.O. has, during the course of assessment proceedings raised specific queries on these issues on allowability of business loss in both these issues from the assessee and thereafter accepted its claim. 8.2. For the A.Y. 2004-05 the A.O. vide order sheet entry dt. 17th August, 2006 had raised a specific query in respect of allowability of loss on sale of repossessed assets amounting to Rs. 11,14,37,000/-. The assessee vide reply dt. 4th October,2006, made detailed factual and legal submissions on the allowability of the claim. A copy of these are furnished as part of the paper book. We have perused the same. 8.3. After considering these submissions of the assessee in response to the query which included, party wi....
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....Ld.CIT to vary that opinion and ask for fresh enquiry. 8.5. The Hon'ble High Court in the case of CIT vs. Anil Kumar Sharma reported in 335 ITR 83 (Del) has held as follows. "Held, dismissing the appeal, that the present case would not be one of 'lack of inquiry' even if the inquiry was termed inadequate. The Tribunal found that complete details were filed before the AO and that he applied his mind to the relevant material and facts, although such application of mind was not discernible from the assessment order. The Tribunal held that the Ld.CIT in proceedings u/s 263 also had all these details and material available before him, but had not been able to point out defects conclusively in the material, for arriving at a conclusion that particular income had escaped assessment on account of non application of mind by the AO. The Tribunal was right and the order of revision was not valid." 8.6. The Hon'ble Delhi High Court in the case of CIT vs. Vikas Polymers reported in 341 ITR 537 (Del) has held as follows. "Held, that the Commissioner had mentioned that the A.O. had not examined the cash credits of the partners or deposits of chit fund. Assuming this to be ....
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....at it is only depreciation of furniture and fixtures he remanded the issue to the file of A.O. for verification, without pointing out as to what is the prejudice caused to revenue. This in our opinion is bad in law. 10.1. The Hon'ble Delhi High Court in the case of CIT vs. Kelvinator of India Ltd. (2002) reported in 256 ITR p.1.(Del)(FB), held as follows: "it is well known that a presumption can also be raised to the effect that in terms of clause (e) on S.114 of the Indian Evidence Act, judicial and official Acts have been regularly profound. If it be held that the order which has been passed purportedly without application of mind would itself confer jurisdiction upon the A.O. who reopen the proceedings without anything further, the same would amount to be a prejudicial authority exercising quasi judicial function to take the benefit of its own wrong." 10.2. In this case, the Ld.CIT has not referred to any material from which it could be said that the acceptance of the assessee's submissions and details by the A.O. was not warranted, either in law or on facts. The Ld.CIT has not given any material or evidence which would contradict the assessee's version and which aspect ha....