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TaxTMI 
TaxTMI 
TaxTMI 
2018 (10) TMI 1294
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....ircumstances. 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 Shared service cost Page 26 Legal and professional charges Page 59....
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....ourt 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 two issues viz., [c] Legal and professional charges, and [d] Software license fees were referred to in the reasons recorded, and the reass....
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....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 following items of expenditure with reference to section 37(1) and section -40A(2)(b): a. Software support charges; b. Shared service cost; c. Legal & Professional....
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....e 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 matter of re-assessment proceedings, then two year period contemplated under sub-section (2) of section 263 of the Act would begin to run from date of original assessment order and not from date of re-assessment. This view is supported by following judicial decisions: a) CIT vs Alagendran Finance Ltd. [2007] 162 Taxmann.com 465 (SC) "...We, therefore, are clearly of the opinion that keeping in view the facts and ci....
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....sessment 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 263(2). Where the jurisdiction under section 263(1) is sought to be exercised with reference to an issue which is covered by the original order of assessment under section 143(3) and which does not form the subject-matter of the reassessment, as in the instant case, limitation must necessarily begin to run from the order under section 143(3)" [Emphasis Added] d) Indira Industries vs Pr. CIT [2018] 95 taxmann.com 103 (Madras) "...3 (xvi) In the instant cas....
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....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 Ltd. [2012] 19 taxmann.com 142 (Bom), discussed below) * It is submitted that matters which did not form part of reassessment proceedings should be considered to concluded in the original assessment order passed under section 143(3] of the Act. * The original assessment order cannot stand merged with order of reassessment in respect of those issues which did not form the subject-matter of the reassessment. Insertion of explanation 3 to section 147 of the Act does not alter the bar of limitation under section 263(2) of the Act. This view is supported by ....
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....ime 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. 5.2. The expressions 'erroneous1, 'erroneous assessment' and 'erroneous judgment' have been defined in Black's Law Dictionary. According to the definition, 'erroneous' means 'involving error; deviating from the law'. 'Erroneous assessment1 refers to an assessment that deviates from the law and is, therefore, invalid. Similarly, 'erroneous judgment' means 'one rendered according to course and practice of Court, but contrary to law, upon mistaken view of law, or upon erroneous application of legal principles'. 5.3. It is not a case where the claim of the Appellant is factually incorrect or not in accordance with law and hence, the sa....
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....ons 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 Legal and Professional charges The assessee's case is that the above items of expenditure except legal and professional charges were not subject matter of notice for reassessment issued. Hence, the assessee's plea is that the order u/s. 263 passed by the ld. CIT relate to the original assessment in this case passed on 17.01.2013. Hence, the assessee's plea is that the order passed u/s. 263 for this issue is time barred. In support of this proposition, the assessee has placed on record case laws from the Hon'ble jurisdictional High Court. In this context, we may gainfully refer to the decision of the Hon'ble jurisdictional High Court in the case of CIT vs. ICICI bank Ltd. [2012] 343 ITR 74 (Bom), wherein the Hon'ble High Court has referred to another decision in Ashoka Buildcon Ltd. vs. Asst. CIT [2010] 325 I....
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....ce 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 after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. The order of assessment under Section 143(3) in the present case allowed the deduction which was claimed under Section 36(1)(vii), Section 36(1)(viia) and in respect of foreign exchange rate difference. Neither in the first order of reassessment dated 22 February 2000 nor in the second order of reassessment dated 26 March 2002 were these aspects determined. In other words on the aforesaid three issues, the original order of assessment dated 10 March 1999 passed under Section 143(3) continued to hold the field. Once that is the position, then clearly the doctrine of merger would not apply. The order under Section 143(3) passed on 10 March 1999 cannot stand merged with the orders of reassessment in respect of those issues which....
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....its 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 charges of Rs. 8,73,38,646/- paid toMCX-SX CCL: 9. Deputation charges of Rs. 5,66,460/- paid to Financial Technology Knowledge Management Company (FTKMC) 10. Deputation charges of Rs. 9,25,844/- paid to Atom Technologies Ltd. (ATOM) 11. Payment Engine & Mobile Application - ATOM 12. VSAT Connectivity charges and Internet charges 13. Depreciation claimed on vehicle allotted to Mr. Tapas Das, who was not employee of the assessee 14. Software purchased from Reuters India Pvt. Ltd. 15. Advertisement expenses paid to Roshan Publicity. 16. Business and sales promotion expenses 17. Sponsorship expenses 18. Advertisement expenses paid to Takshashila 19. Legal and Professional fees 16. Apart from that at para 5 of the reason recorded following are mentioned: "Apart from the above, the special auditor has also pointed out various other discrepancies as mentioned in the special audit rep....
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.... 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 and, hence, the same is well within the period of limitation, qua these issues. 19. Now we come to the legal and professional charges. Here it is not the case of the assessee that these items were not mentioned in the reasons recorded for reopening. The assessee's case is that this matter was duly dealt with by the A.O. and the A.O. had disallowed a sum of Rs. 1,40,000/- out of the total expenditure claimed in this regard amounting to Rs. 7,53,56,610/-. This was for a want of documentation. The A.O's order in this regard reads as under: 11.15 Legal mid Professional fees: The special audit has pointed out that amount of Rs. 140,000/- paid to one Ms. Rohini Kadam on 13.05.2009 vide voucher no MCX-SX-JV-0112 has not been produced before the special auditor. Vide letter dated 18.03.2016 the assessee admitted that the vouchers is misplaced, but also stated that the sum was paid to the person for language translation and typesetting from MCXSX website matter in Punjabli & Assamese, The contention of the asse....