TaxTMI 
TaxTMI 
2020 (1) TMI 1035
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....roneous and is not prejudicial to the interest of the Revenue. Your appellants therefore submit that the order of the Pr. CIT be quashed. 1.2. The learned Pr. CIT failed to appreciate the fact that in respect of all the issues, the learned Assessing Officer has adopted one of the possible views. 2. The learned Pr. CIT erred in holding that the amount of Rs. 402,26,72,141/- being the bad debts claim of the Appellant bank u/s 36(1)(vii) is not allowable. 2.1. The learned Pr. CIT failed to appreciate the fact that the 36(1)(viia)(a) is applicable only in respect of rural debts. 2.2. The learned Pr. CIT erred in not considering the binding decision of Hon'ble Supreme Court in the Catholic Syrian Bank [2012] 343 ITR 270 (SC). 2.3. Without prejudice to the above, the learned Pr. CIT erred in holding that the opening balance in the provision account as at 31-03-2013 is for rural advances only. 2.4. Without prejudice to the above, the learned Pr. CIT failed to appreciate the fact that the learned Assessing Officer allowed the deduction after verifying the submissions made by the Appellant bank. 3. The learned Pr. CIT erred ....
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..../2016 shall not be revised for the reasons stated in his show-cause notice. In the said show-cause notice, the Ld.PCIT observed that the assessment order passed by the Ld. AO is erroneous, insofar as, it is prejudicial to the interest of the revenue within the meaning of section 263 of the I.T.Act, 1961, because the Ld. AO has completed assessment proceedings, without conducting required enquiries to be conducted, in light of facts of the case along with specific provisions of the Act, dealing with issues, which rendered the assessment order is erroneous, insofar as, it is prejudicial to the interest of the revenue. The PCIT had questioned deduction allowed towards bad debts written off of Rs. 402,26,72,141/-, in respect of non-rural advances u/s 36(1)((vii), payment of Rs. 54 crores made towards contribution to gratuity fund, penalty payment of Rs. 2 crores paid to RBI for violation of KYC norms and provision for wage arrears amounting to Rs. 96 Lacs. In response, the assesee vide its letter, dated 09/02/2018, filed a detailed written submissions on the issues questioned by the Ld.AO and argued that the assessment order passed by the Ld. AO is neither erroneous, nor prejudicial....
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....o be debited to provisions for bad and doubtful debt accounts. Therefore, he opined that the allowances of bad debt of Rs. 402,26,72,141/- is not in accordance with the provision of Clause (vii) of sub section (1) of section 36 and Explanation 2 thereto. The aforesaid allowances has rendered the assessment order erroneous, insofar as it is prejudicial to the interest of the revenue as by excess allowance, the loss occurred to the revenue. Similarly, the Ld.PCIT, further noted that insofar as, advances payment of contribution to gratuity fund, although, the assessee has debited a sum of Rs. 5.94 crores into the profit and loss account, but deductions has been claimed towards total amount paid towards gratuity funds of Rs. 54 Crores, as per the provisions of section 43B of the I.T.Act, 1961. But, fact remains that if you go through the provisions of section 43B, it's start with the clause not withstanding anything contained in any other provision of this Act, a deduction allowable otherwise under this Act. It means deductions on account of payment is allowable u/s 43B, only when the same is otherwise allowable under the provision of the Act. Since, the assesee is maintaining its a....
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....nitiate appropriate penalty proceedings for furnishing inaccurate particulars of income, as the patently wrong claim of deductions has been made by the assessee under clause (vii) of sub section (1) of section (36) of the I.T.Act, 1961. Aggrieved by the Ld.PCIT order, the assessee is in appeal before us. 7. The Ld. AR for the assesee submitted that the Ld.PCIT was erred in revision of assessment order passed u/s 143(3) of the I.T.Act, 1961, u/s 263 without bringing on record, how the assessment order is erroneous, insofar as it is prejudicial to the interest of the revenue. The Ld. AR, further submitted that if you go through four issues questioned by the Ld.PCIT in his order, all those issues were subject matter of consideration by the Ld. AO during the assessment proceedings, for which a detailed enquiry was conducted, in light of submissions of the assesee. The Ld. AO after being satisfied with explanation furnished by the assessee has accepted claim of deduction towards bad debt write off, in respect of non-rural advances and rural advances, even though the opening balance in provisions for bad and doubtful debt account is more than the amount of bad debt written off for the....
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.... (b) are relevant and the other 2 clauses are not relevant Clause (a) deals with circumstances where in the order has been passed without making enquiries or verification which should have been made. In this case, from the facts it can be seen that there was an enquiry by the learned Assessing Officer and the Appellant bank had also furnished a detailed reply Therefore, this clause is not applicable in this case. Clause (b) of the Explanation deals with circumstances where in the order has been passed allowing any relief without enquiring into the claim. In this case, from the facts it can be seen that the relief has been allowed only after making enquiries. Therefore, this clause is also not applicable ill this case. Since the conditions to invoke the powers u/s 263 are not satisfied, the passing of the impugned order u/s 263 is beyond the scope of the provisions of 263 and is not tenable. Reliance in this regard is placed on the following decisions: Case Law relied upon Citation Reference No Para Page CASA BUILDERS PVT. LTD. 201 9 (2) TMI 987 - ITAT MUMBAI 11, 14 11&14 SHRI ANIL L. TODARWAL 2018(1) TMI 660 -ITAT MUMBAI ....
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....at the non rural write off should have been adjusted against the Credit Balance in the provision a/c made u/s 36(1)(viia) To arrive at this conclusion, learned Commissioner has relied on the Explanation 2 to section 36{1)(vii)L The order of the learned Commissioner is against the Law and the decision of the Hon'ble Supreme Court in the case of Catholic Syrian Bank [2012] 343 ITR 270 (SC). It is our submission that the purpose behind the introduction of the Proviso to section 36(1)(vii) is that to avoid double deduction. It is a settled accounting principle that in respect of a bad debt, first provision is made in the accounts and subsequently, the debt is written off. Therefore, the allowance of a provision precedes the write off. Under this circumstance, in respect of a debt, if any deduction is allowed at the time of provision u/s 30(1Hvii#), then, when such debt is written off subsequently, deduction allowable u/s 36(1}(viI) is the amount write off which exceeds the amount allowed u/s 36(1)(viia). This can be explained with the following Example:; Amount (Rs.) Particulars Scenario - 1 Scenario - 2 Amount of debt outstanding in the books 200 20....
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....r providing a service has to be included in the value of service The dispute arose on account of The fact that the section 67 of the Finance Act, 1994 used the term 'the value of any taxable service shall be the gross amount charged by the service provider for such services provided .....,.' The Department contended that the reimbursement of expenses should also be included in the value of taxable service. However, The Assessee contended that the reimbursement should not be included in the value of taxable service since it is not for provision of such services. In this context, the Hon'ble Supreme Court had To deal with the significance of the term 'such' In para 24 of the judgment, the Court held as follows". "24. In this hue. The expression 'such' occurring in Section 67 of the Act assumes importance In other words, valuation of taxable services for charging service tax, the authorities are To find what is the gross amount charged for providing 'such' Taxable serviced. As a fortiori, any other amount which is calculated not for providing such Taxable service cannot a part of that valuation as that amount is not calculated for providing....
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....th respect to which provision was made under Clause (viia) of the Income-tax Act? (* emphasis applied) While deciding the above question, the Hon'ble Supreme Court laid down the following Statutory pronouncements: (a) Clause 36(1)(viia)(a) applies only to rural advances (para 27) (b) The scope of the proviso to clause (vii of section 36(1) only shows that a double benefit in respect of The same debt is not given to a Scheduled Bank, (para 30) (c) The provisions of section 36(1)(vii) & 36(1)(viia) are distinct and independent items of deductions and operate in their respective fields (para 41) (d) The bad debts written off, other Than those for which the provision is made under clause (viia), will be covered under the main part of section 36(1)(vii). (para 41) (e) The proviso to section 36(1 )(vu) will relate to cases covered u/s 3G(1)(viia) and haste be read with section 36(2)(v) of the Act. (para 41) is respectfully submitted That all the above authoritative pronouncement of the Hon'ble Supreme (court are declaration of law as envisaged under Article 141 of The Constitution. In a recent decision, the Larger Bench of the Sup....
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....9;s 36(va) is given only for non rural debts. It is to avoid this unintended mischief The Explanation was introduced to state that the proviso covers non rural debt also The Explanation therefore, has to be read in the context of the Legislative intent behind the introduction of the proviso and the unintended hardship created by the Hon'ble Supreme Court In the case of Catholic Syrian Bank (supra). Even after the Introduction of the Explanation 2, the Legislative intent behind the introduction of the proviso is Unchanged. The proviso is to avoid double deduction is an accepted fact. Further, the fact that, the proviso will come into play only when an account is made under clause (viia) in respect of a debt by allowing the deduction at the provision stage is also not altered by the Explanation. Had the intention of the Legislature is to completely overrule the decision of the Hon'ble Supreme Court, they would have amended the proviso itself, or alternatively, amended the clause 36(1}[viia)(a). There is no amendment either to the proviso or to clause (viia)(a). Therefore, the authoritative pronouncement of the Hon'ble Supreme Court in the interpretation o the applicability of....
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....anation 2 is in such a way that it goes beyond the proviso and the section itself. This argument is fallacious and against the settled principles of law, As submitted earlier, the proviso shall itself be attracted only when the deduction for a debt is allowed u/s 36(1)(viia). It is clearly established that in respect of non rural advances, no deduction is allowed u/s 36(1)(viia) at the provision stage. Therefore, these debts are not even covered by the proviso. Even in view of this matter, on the facts of the case, the introduction of the Explanation 2 by the Finance Act, 2013 has not altered this position. Further, there is a fallacy in the argument of the Department that the non rural debts for which no deduction is allowed u/s 36(1)(viia) is also covered by the proviso. This argument runs counter to the scheme of the Act itself. As per section 41 (4), any recovery from a bad debt which was allowed as a deduction u/s 36(1 )(vii), is liable to be taxed as deemed income. Only if a deduction is allowed u/s 3G(1)(vii), the subsequent recovery has to be offered to tax Therefore, for a non rural debt for which no deduction is allowed u/s 36(1)(viia) has to be adjusted....
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....e previous year relevant to the Assessment year under appeal and the same was claimed as deduction u/s 43B on payment basis However, the Appellant bank debited only an amount of Rs. 5.94 Cr to the Profit & Loss Account The learned Commissioner in the impugned order held that the Assessee is following accrual system of accounting and only when the liability to pay the amount arises, the amount will be allowable deduction. He interpreted the words in section 43B that 'deduction otherwise allowable under the Act1 To reach his conclusion. It Is humbly submitted that the provisions of section 43B overrides other provisions of the Act. In respect of items covered by the section, the deduction is allowed only in the year of payment irrespective of the system of accounting followed by the Assessee The words 'deduction otherwise allowable under the Act' means only that it is not a disallowable expenditure such as Capital expenditure or any other expenditure specifically disallowed under the Act It is for that purpose, these words have been used in the section The intend behind the section is to allow the deductions only m the year of actual payment. This controversy has....
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....e following decisions of the Tribunal: Case law relied upon Citation Reference No Para Page BAPUNAGAR MAHILA COOP. BANK LTD. 2015 (7) TIMI 472-ITAT AHMEDABAD 19-21 166-167 DBS BANK LIMITED 2018(6) TMI 757-ITAT MUMBAI 12-15 171-172 5. ground No. - 5 - Provision for Wage Arrears: As per the agreement with the employees of the Appellant bank, the wage revision was due from 01-11-2012 onwards. Negotiations were going on between the Unions and the Management. The bank estimated a provision of Rs. 96 Cr based on the past practice and the expected increase. Finally the agreement was reached during Feb'15 and the disbursement was made during Aug'15. Since the liability had accrued, the amount was provided in the Books. The same is therefore, an allowable expenditure. The learned Commissioner in his impugned order held that unless the wage revision was notified, the exact liability was not ascertainable. He. therefore, observed that the provision was not allowable being contingent in nature. This issue is squarely covered by the following decisions: Case Law relied upon Cit....
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....unt by which such bad debts exceeds, the credit balance in the provision for bad and doubtful debt account made u/s 36(1)(viia), without any distinction between rural advances and other advances. Although, the submissions were called, in respect of claim of bad debts during the assessment proceedings, the Ld. AO has computed the bad debts claimed to be allowed in the assessment order without considering newly inserted Explanation (2) to section 36(1)(vii), which comes into effect for AY 2014-15. The Ld. DR, further submitted that although, the assessee has cited at length various case laws, including the Hon'ble Apex Court in the case of Catholic Syrian Bank, but, fact remains that the interpretation canvassed by the assessee is complete misinterpretation, because the memorandum clearly spells out, the mischief sought to be curbed and the judicial decisions and interpretations rendered inoperative. There is no doubt that the view expressed earlier decisions on the subject including the Hon'ble Apex court decisions in the case of Catholic Syrian Bank (supra) stands overridden by express explanation of intention of the legislature of insertion Explanation (2) to section 36(1)(vii). ....
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....Mumbai, dated 27.02.2016. The Pr. CIT has held that the following claims are incorrectly allowed and which renders the assessment order erroneous, insofar as, prejudicial to the interest of Revenue as excess allowances/claims have been allowed. (i) Bad debts Rs. 402,26,72,141/- claimed u/g 36(l)(vii) without setting it against provision u/s 36(l)(viia). (ii) Claim of Rs, 48,06,00,000/- u/s 43B in respect of advance payment towards gratuity fund. (iii) Penalty of Rs. 2,00,00,000/- as penalty levied by RBI for violation of KYC Norms. iv) Rs. 96, 00,00,000 /- claimed as provision for wages arrears. 2. Bad debts Rs. 402,26,72,141/- claimed u/s 36(1)(vii) 2.1. During the year, the Assessee has written off Rs. 478.85 crores of bad debts. As per the Assessee, Rs. 4.02 crores is towards advances by Rural Branches and Rs. 474.83crores is in respect of advances made by Non- Rural Branches. Rs. 4.02 crores shown as advances made by Rural Branches and Rs. 75.56 crores out of advances made by Non-Rural Branches have been set off against opening balance of provisions for bad debts u/s. 36{i)(viii} of Rs. 1235.74 crores. The balance bad debts ....
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....debts account made under section 36(1) (viia) of the Act. The provisions of section 36(1)(vii) of the Act are subject to the provisions of section 36(2) of the Act. The clause (v) of section 36(2) of the Act provides that the assessee, to which section 36(1)(viia) of the Act applies, should debit the amount of bad debt written off to the provision for bad and doubtful debts account made under section 36(1) (viia) of the Act. Therefore, the banks or financial institutions are entitled to claim deduction for bad debt actually written off under section 36(1)(vii) of the Act only to the extent it is in excess of the credit balance in the provision for bad and doubtful debts account made under section 36(1)(viia) of the Act. However, certain judicial pronouncements have created doubts about the scope and applicability of proviso to section 36(1)(vii) and held that the proviso to section 36(1)(vii) applies only to provision made for bad and doubtful debts relating to rural advances. Section 36(1)(viia) of the Act contains three sub-clauses, i.e. sub-clause (a), sub-clause (b) and sub-clause (c) and only one of the sub-clauses i.e. sub-clause (a) refers to rural....
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....20J4-15, the assessment year before the assessing officer in this case, totally escaped the attention of the AO, The AO has neither considered, nor applied his mind on application of explanation 2 to sec, 36(l)(vii) in the facts of the case of the assesse. 2.4. The assessee has cited at length various case laws including the Apex Court decision in the case of Catholic Syrian Bank and has claimed that the decision rendered by the Apex Court still holds field even after the explicit amendment to the law. It is submitted that this is a totally incorrect interpretation canvassed by the assessee and is a complete misinterpretation where the statute is clear and explanatory. The Memorandum clearly spells out the mischief sought to be curbed and the judicial decisions and interpretations rendered inoperative. There is no doubt that the view expressed in the earlier decisions on the subject including the apex court decision in the case of Catholic Syrian Bank stands overridden by explicit expression of intention of the Parliament through which the section has been amended. It is to be noted that the assessee has not submitted any decision rendered after the amendment and insertion....
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....es was not allowable and was against the law. This renders the assessment order erroneous, in so far as, prejudicial to the interest of Revenue as incorrect claim has been allowed. 2.7. The Authorised Representative has also argued that the show Cause Notice issued u/s 263 indicates the prejudicial and biased mindset of the Principal CIT This contention is again devoid of merit. The show cause notice provides an opportunity to the appellant to rebut the views expressed in the Show Cause Notice, Naturally the SCN will indicate the basis for the issue of show cause and the order has been passed only after hearing the assessee. 2.8 The assesses has also contended that jurisdiction under section 263 is available only if explanation 2 to section 263 applies to the facts of the case. It has also been contended that in this case this is not an order passed without making enquiries or investigations which should have been made. It is humbly submitted that the inherent scope of revision orders u/s 263 is based on subsection (1) of section 263, The explanation 2 only further elaborates the kinds of Orders which shall be deemed to be erroneous insofar as it is prejudicial to....
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....claim-263 valid. > (2014} 44 taxman.com 319 (Kerala HC) CIT, Cochin V/s Abad Constructions P.Ltd.: Lack of proper enquiry in allowing deduction u/s 80IB (10)-263 valid. It is urged that the ground raised by the assessee in this regard be dismissed. 3. Claim of Rs. 48,06,00,000/- u/s 43B in respect of advance payment towards gratuity fund, penalty of Rs. 2,00,00,000 levied by RBI for violation of KYC norms and Rs. 96,00,00,000/- claimed as provision for wages arrears. 3.1. The other items covered in the order under section 263 is discussed next. The general arguments and case Jaws mentioned earlier in respect of incorrect claim of bad debts with regards to invoking section 263 and its validity, is equally applicable here. Further, in respect of these three items it is pointed out that there is no explicit discussion in the assessment order indicating any opinion expressed in this regard, unlike the issue of bad debts write off claim discussed above. Routine submissions were filed by the assessee during the assessment proceedings. Thus, these errorsinn assessment order again are also covered by explanation 2 sub-section (a) and (b) of Section 263.T....
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....claim of another Rs. 48.06 crores not otherwise allowable under the Act cannot be claimed by resorting to section 43B. Refer 306 ITR 54 (Ker) CIT v Kerala Solvent Extractions Ltd. where It was held that Sec. 43B in itself is not 3 provision providing tor deduction of any item of expenditure which is otherwise not allowable under any of the provisions of the Act. The opening words of s. 43B dearly show that the section is dealing with deductions otherwise allowable under provisions of the Act. The section only lays down conditions for eligibility for deduction of certain allowances which are otherwise admissible under the Act. The scheme of s. 436 Is to allow the deductions referred to in cls. (a) to (f) only on payment basis, even though assesses is following mercantile system of accounting. In other words. It ts an exception to s, 145 inasmuch as even If the claim is an allowable deduction of the assesses, based on system of accounting followed by the assessee, it will still be inadmissible under s. 43B, if it is not paid on or before the end of the relevant previous year or at least before date of filing of the return. Therefore, s. 43B is only supplementary to ....
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....erpreted the Law that only where criminal proceedings can be launched, disallowance u/s, 37(1) can be made. Thus the claim made in respect of Rs. 2 crores was clearly not allowable, but was erroneously allowed by the A,O. 3.4, Rs. 96.00.00,000/- claimed as provision for wages arrears. 3,4.1. As regards the claim of provision of Rs. 96 crores the assessee has submitted that wage revision was due from 01.11.2000 onwards. However, the admitted fact is that wage revision had not occurred at the time when the assessment order was passed and the claim was contingent in nature. Furthermore, the submissions filed in the assessment proceedings did not give any details as to how provisions were computed, nor did the AO examine the computation. Even as on date, the assessee has not furnished the date of actual revision of wages and the actual wage arrears for A.Y. 2014-15 based on the same. Failure of the A.O. to examine this issue clearly falls within the purview of order passed which are erroneous and prejudicial to the Revenue. Thus the claim made in respect of Rs, 96 crores was clearly not allowable, but was erroneously allowed by the A.O. 10. We have heard b....
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....tual payment, in light of provisions of section 43B of the Act, Similarly, the assessee has also narrated the facts and how, said payment is allowable u/s 37(1), in respect of penalty paid to RBI for violation of KYC norms. Likewise, a detailed note has been annexed regarding deductibility of provision for wage arrears amounting to Rs. 96 crores, these are part of assessment records. Therefore, we are of the considered view that it is not a case of the Ld.PCIT that the Ld. AO had not considered those issues at all, at the time of assessment proceedings, which results in erroneous order passed by the Ld. AO, which caused prejudice to the interest of the revenue. In any way, all the four issues questioned by the Ld.PCIT were thoroughly examined by the Ld.AO during the assessment proceedings, and after considering relevant facts and explanations furnished by the assessee has chosen to accept the claim of the assessee and hence, the same cannot be termed as non consideration of issues or the Ld. AO has failed to carry out required enquiries, which ought to have been carried out in accordance with law. 11. The language used by the Legislature in s. 263 is to the effect that the Ld....
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....r item of income and he does not make an enquiry as expected, that would be a ground for the PCIT to interfere with the order passed by the ITO since such an order passed by the ITO is erroneous and prejudicial to the interests of Revenue, but, the ITO had made enquiries in regard to the nature of the expenditure incurred by the assessee who had given detailed explanation in that regard by a fetter in writing and all these are part of the record of the case and the claim was allowed by the ITO on being satisfied with the explanation of the assessee such, decision of the ITO cannot be held to be erroneous simply because in his order he did not make elaborate discussion in that regard 13. It is a settled principle of law that in order to invoke, the provisions of section 263 of the I.T.Act, 1961, the Ld.PCIT shall ascertain from the records that twin conditions embedded in said provision i.e, the order of the Ld. AO is erroneous and it is prejudicial to the interest of the revenue are to be satisfied. The term erroneous has been subject matter of litigation and in order to put an end to the same, the legislature vide Finance Act, 2013 inserted Explanation (2) to section 263 in whi....
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.... laws relied upon by the assessee. The assesee has relied upon the decision of ITAT, Mumbai, in the case of Casa Builders Pvt.Ltd. vs PCIT-6 (supra). We find that the Tribunal has considered an identical issue, in light of provisions of section 263 and also by following various judicial precedents, including the decision of Hon'ble Bombay High Court, in the case of CIT vs Gabriel India Ltd 203 ITR 108 held as under:- 11. The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue as a consequence of an order of AO cannot be treated as prejudicial to the interests of the Revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the ITO is unsustainable in law . An order of assessment passed by the ITO without making necessary enquiries on certain important points connected with the assessment would be erroneou....
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....g an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimates himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and, ITA 2463/Mum/2015 left to the Commissioner, he would have estimated the income at a higher figure than the one determined by the ITO. That would not vest the Commissioner with power to re- examine the accounts and determine the income himself at a higher figure. It is because the ITO has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interest of the Revenue. But that by itself will not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, namely, the order is erroneous, is absent. Similarly if ....
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.... Parashuram Pottery Works Co. Ltd, vs. [TO 1977 CTR (SC) 32 : (1977) 106 ITR 1 (SC), Sirpur Paper Mills Ltd, vs. ITQ 1977 CTR (AP) 138 : (1978) 114 ITR 404 (AP), Dawjee Dadabhov & Co. vs. S.P. Jain & Anr. (1957) 31 ITR 872 (Cal) and Russell Properties 1M. Ltd, vs. A. Chowdhury, Addl. CIT (1977) 109 ITR 229 (Cal) relied on ." 13. The assesse also relied upon the decision of Hon'ble Delhi High Court in the case of CIT vs Sunbeam Auto Ltd (supra). The Hon'ble Delhi High Court in the said judgment held that if the AO while making assessment has made an inadequate enquiry, that would not, by itself, give rise to Commissioner to pass ITA 2463/Mum/2015 order u/s 263, merely because he has different opinion in matter. It is only in case of lack of enquiry that such a course of action would be open. The relevant observations of the Hon'ble Court are as under:- "The submission of the revenue was that while passing the assessment order, the Assessing Officer did not consider the aspect specifically whether the expenditure in question was revenue or capital expenditure. That argument predicated on the assessment order, which apparently did not give any reason whil....
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.... revenue in nature. No doubt, in certain cases it may not be possible to come to a definite finding and, therefore, it is not necessary that in all cases the Commissioner is bound to express final view, but the least that was expected was to record a finding that order sought to be revised was erroneous and prejudicial to the interest of the revenue. No basis for that was disclosed. In sum and substance, accounting practice of the assessee was questioned. However, that basis of the order vanished in thin air when it was ITA 2463/Mum/2015 found that very accounting practice followed for a number of years had the approval of the income-tax authorities. Interestingly, even for future assessment years, the very same accounting practice was accepted. [Para 16] It was in that context, the question that assumed importance was as to whether powers could be exercised under section 263 when two views were possible. [Para 17] The matter could be looked from another angel. What was the material/ information available with the Assessing Officer on the basis of which he allowed the expenditure as revenue? It was disclosed to the Assessing Officer that the assessee was a manufacturer of ....
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....or fresh inquiry. [Para 20] Thus, the conclusion would be that the order of the Tribunal did not call for any interference, as the question of law had rightly been decided. [Para 21]" 14. In this view of the matter and respectfully following the ratios of case laws discussed hereinabove, we are of the considered view that the ITA 2463/Mum/2015 assessment passed by the AO is neither erroneous nor prejudicial to the interest of the revenue. Hence, we set aside the order passed by the PCIT and restore the assessment order passed by the AO u/s 143(3) of the Act. 15. The assessee has relied upon the decision of ITAT, Kolkata, in the case of Om Foregoing & Engineering Pvt.Ltd. vs PCIT-1, Kolkata (2017) 12 TMI 100. We find that the co-ordinate bench has considered an identical issue, in light of newly inserted Explanation (2) to section 263 and after considering the decision of Hon'ble Supreme Court in the case of Malabar Industrial Company limited vs CIT (surpa) held as under:- 26. The CIT has made reference to Explanation 2 to sec. 263 of the Act introduced by the Finance Act, 2015. Explanation-2 so introduced sets out cases in which order of the AO can be deemed as....