TaxTMI 
TaxTMI 
2020 (3) TMI 114
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....for AYs 2011-12 to 2013-14 and u/s 245D(6B) for the said former three AYs dated 25.03.2016, Central Excise Settlement Commission order u/s 32E of the Central Excise Act, 1944 for Units I & II alongwith copies of challans for payment of excise duty as well as compilation of various judicial precedents running into 125 and 84 page(s) coupled with taxpayer's additional paper book containing DCIT, Central Circle-3(1), order dated 27.11.2015 for AYs 2011-12 and 2012-13 followed by reconciliation of book profits stand perused. 2. We advert to the basic relevant facts. The assessee-company manufactures sponge iron and TMT bars / rods. It filed its return on 26.09.2014 stating loss of Rs.3,89,72,058/-. The Assessing Officer completed his regular assessment on 02.11.2016. He discussed relevant issue of "exceptional items" involving a sum of Rs.85,15,999/-. We notice from para-3(ii) page-2 of the assessment order dated 02.11.2016 that the assessee inter alia submitted break-up of said sum. It explained to have filed petition(s) before settlement commission disclosing the corresponding additional income(s) assessable in assessment years 2010-11 to 2013-14. The same stood disposed of on the o....
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.... paid in respect of settlement period Rs. 10,52,58,034/- Interest paid on excised duty Rs. 46,10,764/- Rs. 10,98,68,798/- Less: already claimed u/s. 43B in earlier years Rs. 4,70,00,000/- Rs. 6,28,68,798/- However, from the order of the Settlement Commission dated 15.09.2015, it was seen hat total non-remittance of Excise duty for the settlement period (AY 2011-12 to 2013-14) was Rs. 7,70,50,738/- out of which Rs. 4,70,00,000/- had already been claimed. Thus, only Rs. 3,00,50,738/- was available for deduction in AY 2014-15 on actual payment basis. Deduction of Excise duty of Rs. 6,28,68,798/- on payment basis instead of available unpaid excise duty of Rs. 3,00,50,738/- has resulted in underassessment of income of Rs. 3,28,18,060/- having potential undercharge of tax of Rs. 1,0647,819/- (under normal provision)." 4. The PCIT therefore issued his sec. 263 notice dated 04.10.2018. The assessee filed its detailed reply dated 20.11.18 contesting the PCIT's foregoing twin reasoning. Its explanation qua the former issue of prior period income of Rs.11,04,19,703/- on facts read as under:- "2. The assessee had made an application before the Hon'ble Settle....
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....tlement Application. In this regard, further note that the said income of Rs. 12,56,69,703/- and expense Rs. 1,52,50,000/- were not incorporated in the accounts of the respective years since the assessee had filed the settlement application offering its undisclosed income on 21-03-2014 i.e. after the close of those financial years. In other words, the accounts for the period AY 2010-11 to AY 2013-14 were audited and these audited accounts were already submitted before the Registrar of Companies and therefore no amendments to the said accounts were possible. Accordingly, the income of Rs. 12,56,69,703/- and expenses of Rs. 1,52,50,000/- was incorporated in the audited books of the current year. Here, please refer to the Statement of the Profit and Los A/c enclosed at page 7 and Note 29 of the audited accounts, refer page 19. Copy of the accounts is enclosed at page 1-22. On perusal of Note 29, it can be seen that an amount of Rs.(85,15,11/-) was shown as net expenses (Expenses / Losses Rs. 13,41,84,814/- less Income Rs. 112,56,69,703/-) under the head "Exceptional Income" as per item-wise details here under:- Particulars Income Expenses/losses i) Interest subsidy for earli....
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....n of taxable income under both normal provisions and MAT provisions under section 115JB of the Act. The said computations prepared by the assessee are in line with the computation of taxable income determined in the settlement order passed u/s 245(6B) of the Act. The said order is enclose at page 71-86. Here, please note that since tax liability was more under normal provisions than MAT provisions, the assessee paid tax on such additional income under normal provisions as per the requirement of law. Entire tax computed by the Hon'ble Settlement Commission was duly paid and the same is evident from the settlement order passed u/s 246D(6B) of the Act and the computation of income prepared by the assessee. The assessee has duly substantiated with the help of glaring evidences that the net income of Rs. 11,04,19,703/- is a tax paid income. In continuation to the above, the assessee further submits that since the net income of Rs. 11,04,19,703/- is a tax paid income relating to earlier years and was incorporated in the books in the current year, the same forms part of the capital in this year and therefore the sum of Rs. 11,04,19,703/- becomes a capital receipt. The said capital....
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....deducted an amount of Rs. 6,28,68,798/- from income as payment of excise duty in respect of earlier years now allowable. However, form the order of the Settlement Commission dated 15-09-2015 it was seen that total remittance of excise duty for the settlement period (AY 2011-12 to 2013-14) was Rs. 7,70,50,738/- out of which the sum of Rs. 4,70,00,000/- had already been paid. Thus only Rs. 3,00,50,738/- was available for deduction in the current year. Deduction of excise duty of Rs. 6,28,68,789/- on payment basis instead of available unpaid excise duty of Rs. 3,28,18,060/- has resulted in underassessment of income having potential undercharge of interest. In this regard, please note that the assessee had made an application before the Hon'ble Customs and Central Excise Settlement Commission, Kolkata on 19-11-2013 for the period December 2009 to July 2011 for Unit-2 admitting liability on account of non-payment of Central Excise duties of Rs. 8,18,22,881/- and interest liability of Rs. 71,64,290/-, refer page 104. For Unit 1 the application was filed on 02-07-2014 for the period April 2010 to July 2011 admitting the liability on account of non-payment of Central Excise duties of....
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....8,68,792/-, the sum of Rs. 5,82,58,034/- was paid in the current year and only the sum of Rs. 46,10,764/- was paid against interest liability on 01-07-2014 i.e. before the date of filing the return and thus was claimed u/s. 43B of the Act. As such, since the entire liability of Rs. 6,28,68,792/- was crystallized during the current year, therefore the assessee has rightly claimed the deduction of excise duty inclusive of interest paid during the year. Here, please note that the assessee has duly submitted before the learned AO the deduction claimed Rs. 3,07,03,929/-, being excise duty payment made during the year and no discrepancy was found in this regard. The same is evident from the copy of the submissions filed before the learned AO. Hence, this case is clearly not a case of lack of enquiry on the part of the AO and as already discussed in the preceding paras, "it is only in cases of lack of inquiry that proceedings u/s 263 of the Act would be open." Here reliance is placed on the judgment of the Delhi High Court in the case of Commissioner of Income tax vs. Ashish Rajpal (2010) 320 ITR 0674 (Del) wherein it was held that, "The fact that a query was raised during the course ....
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....ssessee's foregoing detailed averments as follows:- 5. I have considered the facts of the case and submission of the assessee. Two issues were raised in the show-cause notice, which are considered as under: (i) Prior period income of Rs. 11,04,19,703/- which is not admissible u/s. 115JB of the Income Tax Act, 1961. It is seen that the assessee had deducted net credit amount of Rs. 4,1l,53,335/- i.e. Rs. 11,04,19,703/-less Rs. 6,92,66,368/- to arrive at book profit. The figure of Rs. 11,04,19,703/- has been arrived at by the assessee by deducting an expenditure of Rs.l,52,50,000/- from the total additional income of Rs. 12,56,69,703/- offered by the assessee for AY 2010-11, AY 2011-12 & AY 2012-13 before the Hon'ble Settlement Commission. Hence, at the first instant, the prior period income should be taken as per declared Rs. 12,56,69,703/-. So, there is no reason to give the benefit of the "expenditure incurred but was not claimed as deduction offered before the Settlement Commission" of Rs.l,52,50,000/- at this late juncture. Secondly the sum of Rs. 85,15,111/- is shown by assessee as a debited exceptional item in the P&L A/c. which represented net of debit item of sho....
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....by assessee before the Settlement Commission (C&E) and what was the enhancement if any. Furthermore assessee states that the application for AY 2010-11 relating to the unpaid duty of Rs. 47,26,402/- was not considered by the Settlement Commission (C&E) as no proceeding was pending on that date. Copy of the order of Settlement Commission (C&E). was not provided by assessee as already stated. In fact both issues raised in this show cause notice will have a bearing on each other. The assessee has questioned the present proceedings. It need not be emphasised that the assessing officer should have ascertained the facts before mechanically accepting the contentions of the assessee for the role of AO is not only as an adjudicator but also an investigator. Last but not the least, the function of a tax authority is to levy and collect tax in accordance with law on facts of each case. Hence an order which causes lawful loss of tax revenue is not only erroneous but also prejudicial to the interest of revenue, as would be evident from the discussions on pre- pages. 6. Hon'ble Delhi High Court in the case of GEE VEE Enterprise vs. Addl.CIT reported ITR 99 ITR 375. 386 (Del) has held tha....
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.... obvious. The position and function of the Income-tax Officer is very different from that of civil court. The statements made in the pleading proved by the minimum amount of evidence may be adopted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which come before it. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when. circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an inquiry has not be made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct." 10. Further to this it is noticed that there is no appeal right availabl....
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....etween the parties that about the settled legal proposition that before the learned CIT or the PCIT seeks to exercise his revision jurisdiction vested u/s. 263 of the Act, the assessment concerned ought to be both erroneous as well as prejudicial to the interest of the Revenue. ; simultaneously. And that each and every case causing loss to the Revenue need not come under the purview of revision jurisdiction in case the assessing authority concerned adopts one of the two possible views. Both the learned representatives are ad idem during the course of hearing that whether or not the various judicial precedents quoted in the PCIT's revision direction apply in each and every case, has to be examined as per the relevant factual backdrop involved in a lis. We therefore deem it appropriate to revert back to the detailed facts involved herein once again. 8. Coming to the former issue of the alleged under assessment of the prior period income's assessment of Rs.11,04,19,703/- for the purpose of sec.115JB computation as per the PCIT's above extracted directions, case file suggests that the clinching factual position herein is that the assessee had declared additional income of Rs.12,56,69,....
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....than MAT assessment, there is hardly any scope left of under-assessment on impugned prior period income going by the PCIT's observations. We wish to re-emphasise here that PCIT has raised the issue of prior period income of Rs.11,04,19,703/- for sec. 115JB computation only relating to the relevant previous year. We thus are of the opinion that once the said prior period income stood assessed under normal provisions in the corresponding earlier assessment year(s) 2010-11 to 2013-14, The Assessing Officer's alleged inaction in not disallowing the very sum(s) as prior period income for the purposes of MAT computation could neither be termed as erroneous nor causing prejudiced to interest of the Revenue going by the foregoing settled legal proposition (supra). 11. Next comes yet another significant aspect for this former issue. The assessee had admittedly incorporated its additional income of Rs.12,56,69,703/- in its books of account of the relevant previous year in the nature of its capital. The same therefore acquired the character of a capital receipt routed in profit and loss account as per part- I and part-II of the schedule-VI of the Company's Act. That being the case, we hold t....
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....to Rs.628,68,798/- on payment basis instead of the available excise duty of Rs.30,05,078/-as well. It is not in dispute that the assessee had actually paid the impugned excise duty of Rs.628,68,798/- as per the corresponding challens (pages 109 to 125 of the paper book). We find that apart from all other technical aspects, sec. 43B makes it clear such a deduction of excise duty under sub-sec.1 thereof is allowable only on actual payment irrespective of previous year in which the liability to pay the same as arose to the assessee as per the method of accounting regularly employed. The Revenue's stand questioning liability of assessee's excise duty; whether for factual re-verification or on legality, deserves to be rejected on this sole ground. 14. Learned counsel drew our attention to assessee's settlement application dated 19.11.2013 for its unit-II admitting unpaid central excise liability of Rs.818,22,881/- with interest of Rs.71,64,290 (page 104 in paper book) for the period from December, 2009 to July 2011. It had also admitted a similar liability of Rs.162,70,862/- with interest of Rs.46,10,764/- for unit-I for the period from April, 2010 to July, 2011 (page 90 in paper book)....