AI Drafter 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2020 (5) TMI 645
X X X X Extracts X X X X
X X X X Extracts X X X X
....ection 144C(3) of the Act in due course. 3. Learned Commissioner of Income, in exercise of power under section 263 of the Act, called for the assessment records pertaining to the impugned assessment years and after perusing them found that in the years under consideration assessee had received excise duty exemption in respect of its plant at Gagal, Himachal Pradesh. However, in the returns filed assessee did not offer the excise duty exemption as income on the plea that it is capital receipt and the Assessing Officer has accepted it. Noticing this she was of the view that the assessment orders are erroneous and prejudicial to the interests of Revenue, as the Assessing Officer without conducting any enquiry has allowed assessee's claim of excise duty subsidy as capital expenditure. Accordingly, learned Commissioner of Income Tax issued notices under section 263 of the Act calling upon the assessee to show cause as to why the assessment orders should not be revised. In response to the show cause notice, the assessee filed its reply objecting to the initiation of proceedings under section 263 of the Act and submitted that the assessment orders passed cannot be considered to be erro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....N LAW: 1. On the facts and circumstances of the case and in law, the learned CIT erred in invoking the provisions of section 263 of the Income-tax Act, 1961 ("the Act"), for revising the draft order passed by Deputy Commissioner of Income-tax (LTU) ["the A.O"] u/s 143(3) of the Act dated December 30, 2016, ("the draft orde") on the alleged the ground that the said draft order was erroneous and prejudicial to the interest of revenue. 2. The Appellant therefore, prays that the order passed by the Ld. CIT revising the draft assessment order be held ab-initio and/or otherwise void and bad-in-law. WITHOUT PREJUDICE TO GROUND I and IV, GROUND V - CORRIGENDUM ORDER DATED APRIL 24, 2019 ('CORRIGENDUM') PASSED BY CIT IS BAD-IN-LAW: 1. On the facts and circumstances of the case and in law, the Ld. CIT erred in further passing the corrigendum to the original revision order dated February 04, 2019 and thus, its bad-in-law. 2. The Ld. CIT failed to appreciate and ought to have considered/held that: a. Corrigendum passed by the Ld. CIT is barred by limitation; b. Without prejudice, corrigendum passed without providin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the demand can be enforced as a consequential result only on revision of the final order. Thus, he submitted, the orders passed under section 263 of the Act should be declared void ab initio and quashed. In support of such contention, the learned Counsel relied upon the following decisions:- i) Apollo Tyres Ltd. v/s ACIT, [2017] 53 ITR (T) (Coch.) 548; ii) Bausch & Lomb India Pvt. Ltd. v/s ACIT, [2017] 189 TTJ 860 (Del.); and iii) Apollo Tyres Ltd. v/s ACIT, 108/Coch./2019, dtd 03.10.2018. 8. Shri Anadi Varma, the learned Departmental Representative submitted, the intention of learned Commissioner had always been to revise the final assessment orders. Therefore, the reference to the date of draft assessment order in the show cause notice as well as the orders passed under section 263 of the Act is inadvertent clerical/typographical error which should not and cannot vitiate the proceedings under section 263 of the Act. He submitted, the inadvertent mistake committed by learned Commissioner in show cause notice as well as revision orders now stand removed by virtue of the corrigendum issued by learned Commissioner rectifying the mistake by referring to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed Commissioner has referred to the date of draft assessment orders passed under section 144C(1) of the Act. The orders under section 263 of the Act for the assessment years 2013-14 and 2014-15 were passed by learned Commissioner on 4th February 2019 and 6th February 2019 respectively. The corrigendum were issued by learned Commissioner substituting the reference to the draft assessment orders with the final assessment order in the orders passed under section 263 of the Act, on 24th April 2019. As per section 154(7) of the Act, any mistake apparent from the record can be rectified suo-motu within a period of four years from the end of the financial year in which the orders sought to be amended was passed. However, the period of limitation gets curtailed to six months in a case where the order under section 154 of the Act is to be passed on an application for rectification filed by the assessee or deductor or the collector. Further, sub-section (3) of section 154 of the Act provides that if the amendment to be made has the effect of enhancing the assessment order or reducing the refund or increasing the liability of the assessee or the deductor or the collector, no order under secti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der section 263 of the Act, wherein, learned Commissioner again referred to the draft assessment orders, due to inadvertent error for which corrigendum were subsequently issued, the assessee in the appeals filed before the Tribunal raised the jurisdictional issue challenging the validity of the assessment orders on the plea that the draft assessment orders cannot be subjected to proceedings under section 263 of the Act. In our view, the aforesaid issue raised by the assessee is not bona fide. Had the assessee been honest and serious in its stand and approach, it should have raised this issue of validity of proceedings initiated against the draft assessment order at the first instance itself while replying to the show cause notices or even in the course of hearing of the revision proceedings. However, the assessee deliberately and consciously chose not to do so with the anticipation that the mistake committed in the show cause notices would also creep into the revision orders and, in fact, it did happen. Thus, the assessee was waiting for the mistake to be repeated in the orders passed under section 263 of the Act, so that, it can take advantage of it before the higher appellate ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... original as well as revised computation of income and also in the notes appended to computation of income. He submitted, in the course of assessment proceedings, the Assessing Officer has raised specific query with regard to the nature of excise duty exemption. In this context, he drew our attention to the notice dated 24th October 2016, issued under section 142(1) of the Act, a copy of which is at Page-10 of the paper book. He submitted, in response to the specific query raised by the Assessing Officer, the assessee in its reply dated 26th December 2016, explained the reason for not offering excise duty exemption as income. He submitted, in support of its claim, the assessee also furnished various documentary evidences including the industrial policy resolution, exemption notification issued by the Government of Uttarakhand and Himachan Pradesh. Further, to support its claim, the assessee relied upon a number of judicial precedents. He submitted, after conducting detailed and thorough enquiry, the Assessing Officer completed the assessment by treating the excise duty exemption as capital receipt. Thus, he submitted, the observation of the learned Commissioner that the Assessin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ditions of erroneous as well as prejudicial to the interests of Revenue have to be fulfilled. He submitted, when the assessment orders passed by the Assessing Officer on the issue of excise duty exemption are in conformity with the principle laid down by the Hon'ble Supreme Court as well as different High Courts, such order cannot be held to be erroneous even if there may be prejudice caused to the Revenue. For such proposition, he relied upon the following decisions:- i) CIT v/s Gabriel India Ltd., [1993] 203 ITR 108 (Bom.); ii) CIT v/s Paul Brothers, [2005] 216 ITR 548 (Bom.); iii) Russel Properties Pvt. Ltd. v/s ACIT, [1977] 109 ITR 229 (Cal.); and iv) Hindustan Construction Co. Ltd. v/s DCIT, [2008] 25 SOT 359 (Mum.). 18. The leaned Counsel for the assessee submitted, there is no requirement in law that the Assessing Officer has to pass a detailed order covering all aspects examined during the course of assessment proceedings. He submitted, in any case, the assessee does not have any control over the way the assessment order is drafted. He submitted, generally the issues which are accepted by Assessing Officer do not find mentioned in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ii) CIT v/s Ponni Sugars & Chemicals Ltd, [2008] 306 ITR 392 (SC); and iii) CIT v/s Chaphalkar Brothers, [2018] 400 ITR 279 (SC). 21. Drawing our attention to the industrial policy resolution and exemption/subsidy scheme of the Government of Himachal Pradesh and Uttarakhand and similar scheme issued by the Jammu & Kashmir Government, the leaned Counsel for the assessee submitted, the nature of excise duty exemption is identical, hence, the decisions of the Hon'ble Supreme Court and different High Courts would squarely apply to assessee's case as well. Thus, he submitted, due to all these factors, the assessment orders can neither be held as erroneous nor prejudicial to the interests of Revenue so as to empower learned Commissioner to revise them under section 263 of the Act. Thus, he submitted, the revision orders passed under section 263 of the Act should be quashed. 22. The learned Departmental Representative submitted, though, the Assessing Officer at initial stage of the proceedings might have raised a query in the notice issued under section 142(1) of the Act, but such query is general in nature and after receiving the reply of the assessee, the Asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the Act. It is fairly well settled that for exercising power under section 263 of the Act, twin conditions of erroneous and prejudicial to the interests of Revenue have to be satisfied cumulatively. The factual matrix would reveal that in the return of income filed for the assessment year 2013-14, the assessee did not offer the following income/receipt, as noted below, on the plea that they are in the nature of capital receipts. Sales Tax Incentives Rs. 99,17,41,517 Excise Duty Incentives Rs. 254,44,56,144 Refund of Royalty Rs. 25,17,62,233 24. Even while computing book profit under section 115JB of the Act, the assessee excluded the aforesaid income/receipt. Factual position is more or less similar in assessment year 2014-15, except, the figures. While completing the assessment for the A.Y. 2013-14, the Assessing Officer held that the sales tax incentive and incentive in the nature of refund of royalty are revenue receipt, hence, taxable under the normal provisions of the Act. Whereas, while computing book profit under section 115JB of the Act, the Assessing Officer included all the three items of income viz. sales tax incentive, excise duty incentive an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al receipt. When the Assessing Officer has treated the sales tax incentive and refund of royalty as revenue receipt, he should have provided proper reasoning and justification why he omitted the excise duty exemption from being considered as revenue receipt. The aforesaid omission on the part of the Assessing Officer is glaring considering the fact that in the preceding assessment years including A.Y. 2008-09 and 2012-13, the Assessing Officer had added back all the three items of receipts viz. sales tax incentive, excise duty incentive as well as refund of royalty both under the normal provisions as well as under section 115JB of the Act by treating them as revenue receipt. Therefore, if the Assessing Officer wanted to deviate from the decision taken by him in the earlier assessment years on the very same issue, he should have provided adequate reasoning/justification for doing so, that too, by referring to the change in facts which persuaded him to take a different view from the view taken by him on the very same issue in the earlier assessment years. Such reasoning of the Assessing Officer is all the more required considering the fact that while computing book profit under secti....