TaxTMI 
TaxTMI 
2018 (7) TMI 2060
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....orm of Paper Book in light of Rule 18(6) of ITAT Rules. Judicial decisions relied upon were carefully perused. 4. Briefly stated, the facts of the case are that the assessee is engaged in the business of providing support and other services to international companies in oil and gas sector, aviation, trading in paper, chartering and leasing of aircrafts. Return of income was Efiled declaring income u/s 115JB of the Act at Rs. 66.45 crores and the taxes were paid accordingly. The return was selected for scrutiny assessment and accordingly, statutory notices were issued and served upon the assessee. 5. During the course of assessment proceedings, the assessee was asked to furnish certain details/information relating to capital loss claimed by it. The assessee filed a detailed reply on various dates. After considering the detailed reply of the assessee, the AO came to the conclusion that the capital loss of Rs. 133.77 crores which included loss of Rs. 92.91 crores with respect to extinguishment of shares in Enpro Oil Ltd approved under Capital Reduction Scheme was disallowed. The assessee preferred appeal before the CIT(A).&....
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.... Subsequent to this, a scheme of arrangement {scheme} involving EOPL, Jubilant Industries Ltd, and Jubilant Agri& Consumer Products Ltd. was approved by the Hon'ble High Court wherein the retail division of EOPL was demerged into JACPL and Equity Shares of JIL were issued to the shareholders of EOPL. Consequently, the assessee company received 35,96,837 Listed Equity Shares of JIL, valuing Rs,60.99 crore {on the basis of market price) during the year. The valuation was approved by the Hon'ble Court in such a manner that the shareholders of demerged entity I.e. EOPL may not suffer lass, it was noticed that when the assessee company has itself added back the expenditure of Hs 118.45 crores towards "loss on transfer/write off of investments", in its computation of income under normal provision and same was also treated as reduction in value of investment of shares, the same should have been treated as diminution in value of investment of shares as held by Principal Bench of ITAT, Mumbai in the case of ITO Vs. TCFC Finance Ltd.-iTA No. 1299/Mum./2009 dated 09.03.2011 and added back to the book profit under Section J151B." The notice under Section .154 was iss....
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.... that the issues which prompted the PCIT to assume jurisdiction u/s 263 of the Act are the same which prompted the AO to issue notice u/s 154 of the Act. Ironically, as stated by the ld. AR, no order u/s 154 of the Act has been framed till date by the AO. Be that as it may, coming to the assumption of jurisdiction by the PCIT, it is a settled position of law that powers u/s 263 of the Act can be exercised by the Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and prejudicial to the interest of the Revenue. By 'erroneous' is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in....
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....ncome-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent--if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-- recourse cannot be had to section 263(1) of the Act. 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 ". 10. In the light of aforesaid judicial discussion, let us now consider the facts of the case in hand. 11. Exhibit 29 is the notes to the financial statements having details of n....
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....nt to which, the paid up Share Capital of EOPL was from Rs. 4258.79 Lacs (4,25,87,944 Equity Shares of Rs. 10 each) to Rs. 843.78 Lacs (84,37,765 Shares of Rs. 10 each) with a corresponding decrease in share premium from Rs. 14572.98 8308.69 Lacs leading to a net decrease of Rs. 9679.30 Lacs. Consequently, reduction of :o cancellation of specified shares held by the Company in EOPL has been charged to Profit and Loss by Rs. 9291.43 Lacs." 13. The details of other expenses are given in Exhibit 33 which are as under: For the Year ended 31st March, 2012 2011 2.26 OTHER EXPENSES Travelling & Conveyance 256.73 259.11 Auditors' Remuneration - Audit Fee 8.50 8.00 - Tax Audit Fee 1.75 2.75 - Certification & Other Services 0.88 0.17 - Out of pocket expenses 0.23 0.33 Legal & Professional Expenses 304.40 297.04 postage. Telegram & Telephones 59.01 75 35 Rent = Rates & Taxes 599.31 7.65 594.52 15.28 -epair & Maintenance Charges - Others 175.65 161.73 Donations 8 28 17.17 Insurance/Expenses 54 27 46.27 Vehic;e .Running ....
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....income u/s 115JB of the Act has only the power of examining whether the books of account are certified by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. The AO, thereafter, has limited power of making increases and reductions as provided for in Explanation 1 to section 115JB of the Act. Thus, it can be safely concluded that the AO does not have jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in Explanation 1 to section 115JB of the Act. For this proposition, we draw support from the judgment of the Hon'ble Supreme Court in the case of Apollo Tyres Ltd 255 ITR 273. Before the Hon'ble Supreme Court, the following issue arose for consideration: "Can an Assessing Officer while assessing a company for income tax under Section 115-J of the Income Tax Act question the correctness of the profit and loss account prepared by the assessee company and certified by the statutory auditors of the company as having been prepared in accordance with the requirements of Parts II and III of Schedule VI to the Companies Act ? For....
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....ts General Meeting and thereafter to be filed before the Registrar of Companies who has a statutory obligation also to examine and satisfy that the accounts of the company are maintained in accordance with the requirements of the Companies Act. Inspite of all these procedures contemplated under the provisions of the Companies Act, we find it difficult to accept the argument of the Revenue that it is still open to the assessing officer to re-scrutinize this account and satisfy himself that these accounts have been maintained in accordance with the provisions of the Companies Act. In our opinion, reliance placed by the Revenue on Sub-section (1A) of Section 115-J of the IT Act in support of the above contention is misplaced. Sub-section (1A) of Section 115J does not empower the assessing officer to embark upon a fresh inquiry in regard to the entries made in the books of account of the company. The said sub-section, as a matter of fact, mandates the company to maintain its account in accordance with the requirements of the Companies Act which mandate, according to us, is bodily lifted from the Companies Act into the IT Act for the limited purpose of making the said account so maintai....
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....sory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision under this subsection, viz., (i) the order is erroneous; (ii) by virtue of the order being erroneous prejudice has been caused to the interests of the Revenue. It has, therefore, to be considered firstly as to when an order can be said to be erroneous. We find that the expressions "erroneous", "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 assessment" refers to an assessment that deviates from the law and is, therefore, invalid, and is a defect that is jurisdictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. 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". 12. From the aforesaid definitions it is clear that an order c....
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....re must be material before the Commissioner to consider that the order passed by the Income-tax Officer was erroneous in so far as it is prejudicial to the interests of the Revenue. We have already held what is erroneous. It must be an order which is not in accordance with the law or which has been passed by the Income-tax Officer without making any enquiry in undue haste. We have also held as to what is prejudicial to the interests of the Revenue. An order can be said to be prejudicial to the interests of the Revenue if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realised or cannot be realised. There must be material available on the record called for by the Commissioner to satisfy him prima facie that the aforesaid two requisites are present. If not, he has no authority to initiate proceedings for revision. Exercise of power of suo motu revision under such circumstances will amount to arbitrary exercise of power. It is well-settled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on record t....
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....passed there were two views on the word "profits" in that section. The problem with Section 80HHC is that it has been amended eleven times. Different views existed on the day when the Commissioner passed the above order. Moreover, the mechanics of the section have become so complicated over the years that two views were inherently possible. Therefore, subsequent amendment in 2005 even though retrospective will not attract the provision of Section 263 particularly when as stated above we have to% take into account the position of law as it stood on the date when the Commissioner passed the order dated March 5,1997, in purported exercise of his powers under Section 263 of the Income Tax Act. 3. For the above reasons, civil appeals filed by the department stand dismissed." 22. Considering the facts of the case in totality from all possible legal angles, we failed to persuade ourselves to accept the order of the PCIT framed u/s 263 of the Act, which, in our opinion, has to be set aside. We accordingly set aside the order of the PCIT and restore that of the AO framed u/s 143(3) of the Act. 23. In the result, the appeal of the assessee in ITA No. 3927/DEL/2016....