TaxTMI 
TaxTMI 
2018 (10) TMI 1294
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....y evident scrutiny that was called for in the circumstances. That it was also noticed that such expenses were subjected to due verification and assessment in the contiguous Assessment Years 2011-12 & 2012-13. That in the present assessment year 2010-11 the Assessing Officer had neither called for any details of the said expenditure claims, nor subjected them to any apparent examination. 3. Therefore, notice was issued to the assessee proposing to treat the reassessment order to be an erroneous so far as it is prejudicial to the interest of the revenue in terms of section 263 of the Act. 4. Against the above, the assessee made an elaborate submission. 5. The assessee inter alia submitted that the special audit u/s. 142(2A) of the Act was done in this case subsequent to the assessment order passed originally. Following was also noted in the assessee's reply: The details in respect of all the expense's ware verified by the special auditors in detail and discussed in the special audit report dated 23.09.2014. The reference in the special audit report is tabulated hereunder: Expense Head Pg. No of Special Audit Report Software support charges Page 23 ....
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.... reasons for such issue have not been included in the reasons recorded. The ld. CIT found that the decision of the Hon'ble Apex Court in the case of Alagendran Finance Ltd. (supra) was rendered before the insertion of this Explanation. As regards the decision of the Hon'ble Bombay High Court in the case of Lark Chemicals Ltd. (supra), he distinguished the same by observing that the Hon'ble jurisdictional High Court had no occasion to consider the impact of this explanation. Thereafter, the ld. CIT made the following observations: Reverting to the facts of the case on hand, it is seen that the original return filed on 30/09/2010 and assessed by an order u/s 143(3) dated 17/01/2010, contained a claim for five items of expenses viz., [a] Software support charges, [b)] Shared service cost, [c] Legal & Professional charges, [d] Software license fees, and [e] SAP license fees, The subsequent Special Audit took into its sweep all the above items of expenditure. The reasons recorded for initiating the reassessment proceedings after the Special Audit, however, did not discuss [a] Software support charges, [b] Shared service cost, and [e] SAP license fees. Only the other ....
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....caps Engineering & Mahindra Construction Co. - 86 tax man, com 128 - 2017 ITAT Mumbai Bench. 10. It noted that this case law provided that the order did not become erroneous merely because there was no elaborate discussion. He noted that these case laws also mention that if two views are possible, the order did not become erroneous. Despite noting these case laws he held that in absence of any articulation of a view purportedly taken, it would be a case of non application of mind rather than taking one of the two possible views in the matter. The ld. CIT accordingly concluded as under: 8. In the light of the above, the order of reassessment dated 30/03/2016 is held (o he erroneous in so far as it is prejudicial to the interests of Revenue, in terms of section 263 of the Income Tax Act, 1961, for the omission to cause an examination of issues required to be examined in the circumstances of the case, and which were lawfully within the scope of such jurisdiction assumed. The order is therefore, set aside for the limited purpose set out above, with a direction (o the Assessing Officer pass a fresh order after calling for the details and examining admissibility of the follow....
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....ith respect to software support charges, shared support service and SAP License fees [Ref: Page No.85 to 95 of Paper Book] did not form part of reasons for re-opening of assessment of AY 2010-11. [Ref: 97 to 106 of Paper Book] • Ld. AO passed the reassessment order dated 30.03.2016 under section 143(3) r.w.s. 147 of the Act, making the following disallowances: a) Legal and Professional Charges - Rs. 1,40,000 (for want of documentary evidences) b) Software license fees - Rs. 1,55,18,705 (25% disallowance of expense) • Thereafter, notice under section 263 of the Act was issued seeking revision i) Software Support Charges, ii) Shared Service Cost, iii) Legal and Professional Charges and iv) SAP License fees. [Ref: Page No. 46 and 47 of Paper Book] 2. Appellant's Contention: Legal Arguments for notice issued under section 263 of the Act: The notice issued by Pr. CIT u/s 263 of the Act lacks jurisdiction on account of following two merits: A. Time barring; B. Change of opinion; A. Notice time barring: 2.1. When a notice under section 263 raises new issues, which are not subject....
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....barred as held by this court in CITv. Anderson Marine & Sons (P.) Ltd. [2004] 266 ITR 694/139 Taxman 16. Moreover, in view of the decision of the apex court in the matter of Alagendran Finance Ltd.'s case (supra) as well as our court in the matter ofAshoka "~ Buildcon Ltd.'s case (supra) the jurisdiction under section 263 of the Act cannot be exercised on issues which were not subject matter of consideration while passing the order of reassessment under section 143(3)/147 of the Act but a part of an assessment done earlier under the Act." c) CIT vs ICICI Bank Ltd. [2012] 19 taxmann.com 142 (Bom) ".....The order under section 143(3} passed on 10-3-1999 cannot stand merged with the orders of reassessment in respect of those issues which did not form the subject-matter of the reassessment Consequently, Explanation 3 to section 147 will not alter that position. Explanation 3 only enables the Assessing Officer, once an assessment is reopened, to assess or reassess the income in respect of any issue, even an issue in respect of which no reasons were indicated in the notice under section 148(2). This, however, will not obviate the bar of limitation under section ....
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....es were made. 2.3. Original assessment order was passed on 17.01.2013 of the Act, which was subject to revision under section 263 of the Act upto 31.03.2015 in terms of provisions of section 263(2] of the Act, whereas the notice for revision was issued on 28.06.2016, which is beyond the period of limitation. Hence, time barred. 2.4. Pr. CIT has made following contentions against our submissions as under: [Ref: 6.4 to 6.7, Page 19 to 21 of Paper Book] a) After the insertion of explanation 3 to Section 147 of the Act [Vide Finance Act, 2009, with retrospective effect], the AO can assess / re-assess any matters which come to their notice during proceedings, even though the same did not form part of reasons for re-opening. b) Further, decision of CIT vs Alagendran Finance Ltd. (supra] was passed in year 2007 i.e., before the amendment to section 147 of the Act. c) In the case CIT vs Lark Chemicals Ltd. (supra), Hon'ble Bombay HC had no occasion to consider the impact of amendment enacted in 2009, with retrospective effects. Arguments against the above observations are as under: (Relying on decision of CIT vs ICICI Bank ....
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....nt proceedings, special audit proceedings and re-assessment proceeding. 3.3. Hence, revision of aforesaid expense will tantamount to change of opinion. This view is supported by decision of Indira Industries vs Pr. CIT (supra), wherein it is observed that: "....The Principle of law is, it can be construed to be 'Change of Opinion' only when the same issue dealt with in re-assessment is raised again in proceedings under section 263." 4. Legal Position discussed in paras 2 and 3 above is summarized below: s. Nature of Expense Amount (In Rs.) Remarks 1 Software Support Charges 12,00,00,000 Time barring 2 Shared Support Services 4,20,00,000 Time barring 3 SAP License Fees 3,89,391 Time barring 4 Legal and Professional 7,53,56,610 Change of Opinion 5. Other Contentions: 5.1. Without prejudice to above, it is hereby submitted that inquiry in respect of expenses were made during the original assessment proceedings, special audit proceedings and re-assessment proceedings, thus it is not a case of'lack of inquiry'or'inadequate inquiry'made by Id. AO. ....
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....hat the items upon which the ld. CIT has exercised his jurisdiction u/s. 263 were not part of the original assessment. He submitted that even the issue of legal and professional fee was not logically dealt with. He submitted that all the issues submitted by the ld. Counsel of the assessee have been duly dealt with by the ld. CIT. The ld. Counsel of the assessee further placed reliance upon the decision of Hon'ble Apex Court in the case of Amitabh Bachchan 389 ITR 200 (SC), and the Hon'ble Apex Court in the case of Deniel Merchants P. Ltd. & Anr. Vs. ITO (in Special Leave to Appeal (C) Nos.23976/2017) and Kolkata Tribunal decision in the case of Rising Tracom Pvt. Ltd. & Ors. Vs. CIT (2015) 45 CCH 201 Kol/Trib vide order dated 3.11.2015. 14. We have carefully considered the submissions and perused the records. We find that in this case, the reassessment order was passed on 30.3.2016. The ld. CIT is of the opinion that following expenditure which were subject matter of the special audit have not been properly enquired into by the A.O. These expenditures are as under: 1 Software Support Charges 2 Shared Support Services 3 SAP License Fees 4 Le....
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....xercised his jurisdiction under Section 263, in the facts of the present case, was under a bar of limitation since limitation would begin to run from the date on which the original order of assessment was passed. We must however clarify that the bar of limitation in this case arises because the revisional jurisdiction under Section 263 is sought to be exercised in respect of issues which did not form the subject matter of the reassessment proceedings under Section 143(3) read with 147. In respect of those issues, limitation would commence with reference to the original order of assessment. If the exercise of the revisional jurisdiction under Section 263 was to be in respect of issues which formed the subject matter of the reassessment, after the original assessment was reopened, the commencement of limitation would be with reference to the order of reassessment. The present case does not fall in that category." 15. Thereafter, the Hon'ble High Court has held as under: Sub-section (2) of Section 263 stipulates a period of limitation of two years within which an order under sub-section (1) has to be passed. Under sub-section (2) no order under Section 263(1) can be made a....
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....e is nothing on record of the present case to indicate that there was any other income which had come to the notice of the A.O. as having escaped assessment in the course of proceeding u/s. 147 and when he passed the order of the assessment. The assessee in the present case has accepted the proposition and its case is that since the above items of expenditure were not mentioned in the notice of reassessment, there was no occasion for the A.O. to consider the same. In this regard, we may gainfully refer to the reasons recorded for reopening as provided to the assessee submitted in paper book page nos. 97 to 106. The said reasons inter alia referred to the observation made in the special audit report. In this regard following items are dealt with under relevant heading: 1. Admission Fees and Application Processing Fees. 2. Refundable Deposits 3. Software License Fees - ODIN 4. Fixed Assets - Computer Hardware 5. Deputation charges of Rs. 4,56,32,648/- paid to MCX 6. Office Rent of Rs. 3,26,16,740/- paid to MCX 7. Reimbursements and other petty expenses of Rs. 39,80,782/- paid to MCX 8. Clearing & Settlement charg....
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.... of the appeal. This aspect has also escaped the attention of the ld. CIT who has justified the power to invoke section 263 otherwise on the plank that Explanation 3 of section 147 which in his opinion empowers him to do, despite the issue not being subject matter of reassessment. However, this Explanation 3 alone cannot empower the ld. CIT to exercise the jurisdiction over items which are not subject matter of the reassessment as held by the exposition of the Hon'ble jurisdictional High Court in the case of ICICI Bank Ltd. (supra). However, as evident from the above details, the entire premise that these items were not made subject matter of reassessment fails inasmuch as these items were duly mentioned in the special audit report and all the items dealt in the special audit report were made part of the reasons recorded and the assessee is very much aware about the page numbers of the special audit report where these items are dealt with. Hence, the entire plea of the assessee that the order passed u/s. 263 of the Act on the above items is time barred fails as these were subject matter of reassessment order passed on 30.03.2016. The notice for revision was issued on 28.06.2016....