AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (8) TMI 1509
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.... the circumstances of the case, the Learned Commissioner of Income Tax - I, Thane (here-in-after referred to as 'Ld. CIT') was not justified in initiating proceedings u/s 263 of the Income Tax Act, 1961 without appreciating the fact that the order passed by the Assessing Officer (here-in-after referred to as 'AO') was neither erroneous nor prejudicial to interests of the Revenue and therefore the proceedings are bad in law. 1.2 That on the facts and in the circumstances of the case, the assessment u/s 143(3) having been made in accordance with law and after due consideration of the relevant facts through proper application of mind in relation to the issues mentioned in the order u/s 263, the proceedings are void ab initio and the order is to be set aside in full. 2.0 That on the facts and in the circumstances of the case and without prejudice to Ground No. 1.0 to 1.2 taken here-in-above, the Ld. CIT was not justified and grossly erred in contending that Sales Tax Incentive and Excise Duty Exemption availed by the appellant during the year, being in the nature of capital subsidy/incentive, amounting to Rs. 6,74,12,461/- and Rs. 15,67,00,636/- respectively s....
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....justified rather grossly erred in contending that the amount of Excise Duty paid over and above the Cenvat Credit available to the assessee can only be considered as Excise Duty Incentive without appreciating the fact that the appellant is not entitled to avail Cenvat Credit since the final goods manufactured by the appellant are exempt from the levy of Excise Duty. 5.0 That on the facts and in the circumstances of the case and without prejudice to Ground No. 1.0 to 1.2 taken here-in-above, the Ld. CIT was not justified rather grossly erred in contending that sales tax incentive received by the appellant during the year amounting to Rs. 6,74,12,461/- cannot be considered as capital receipt in computing its Total Income under the provisions of the Act other than sec. 115JB. 5.1 That on the facts and in the circumstances of the case and without prejudice to Ground No. 5.0 taken here-in-above, the Ld. CIT was not justified rather grossly erred in again adjudicating the issue of exclusion of Sales Tax Incentive as capital receipt in computation of total income under the provisions of the Act other than sec. 115JB when the said claim was already disallowed by the AO in....
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....ssessing Officer under normal provisions of the Act was higher, the final income was assessed under the normal provisions of the Act; and, the Assessing Officer did not discuss the computation of book profit under Section 115JB of the Act in the assessment order and accepted the computation of Book Profit under Section 115JB of the Act as filed by the assessee. The assessee preferred an appeal to the CIT(A) against the order of the Assessing Officer. 5. Subsequently, the Commissioner invoked his revisionary jurisdiction and issued a notice under Section 263 of the Act, dated 01.08.2013, proposing that the assessment order dated 28.03.2013 (supra), was erroneous in so far as it was prejudicial to the interests of the Revenue on the following points :- a) that book profit under Section 115JB of the Act to the tune of Rs. 22,31,13,097/- was under assessed on account of reduction of sales tax and excise duty incentives treating the same to be capital receipt by the assessee and the same was wrongly accepted by the Assessing Officer; b) that allowance of depreciation on the foreign exchange fluctuation loss of Rs. 12,35,43,256/- incurred by the assessee during asses....
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....ormal provisions of the Act, the Assessing Officer did not discuss anything regarding the assessee's computation under Section 115JB of the Act in the assessment order. The Commissioner has observed that the action of the Assessing Officer in accepting the assessee's computation of Book Profit under Section 115JB of the Act was erroneous and prejudicial to the interest of the revenue as the assessee cannot make additions / deletions other than those specifically provided for under Section 115JB of the Act. Thus, as per the Commissioner, the assessee had wrongly reduced the sales tax and excise incentives while computing book profit under Section 115JB of the Act. 9. In this regard, the learned Representative for the assessee submitted that the assessee had declared its income under Section 115JB of the Act, however assessment was completed assessing the income under normal provisions of the Act, and therefore the error sought to be pointed out with regard to computation of book profit under Section 115JB of the Act will not have any impact on the finally assessed income for the current year. Secondly, it was submitted that Commissioner has proceeded on the apprehension that if i....
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....the order of the Assessing Officer which was pending disposal at the time of examination of records by the Commissioner. As per clause (b) of Explanation 1 to section 263 of the Act, the expression 'record' means records available with Commissioner at the time of examination by him, and based on which he ought to arrive at a conclusion that the order passed by the Assessing Officer is erroneous and prejudicial to the interests of the revenue. Ostensibly, the order of the CIT(A) was not available with the Commissioner at the time of arriving at the conclusion that order passed by Assessing Officer is erroneous and prejudicial to the interests of the revenue; and, therefore, the expected decision or finding of the CIT(A) cannot be taken as basis to arrive at a conclusion envisaged in Section 263 of the Act by the Commissioner. Thus, it is only the order of Assessing Officer and other material on record, which can be taken as the basis to arrive at conclusion envisaged in Section 263 of the Act by the Commissioner. In the instant case, on the basis of assessment order and other records, it is evident that the assessment has been completed under normal provisions of the Act. In fact, a....
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....if erroneous being not prejudicial to the interest of the Revenue, is not open to revision under section 263 of the Act. We vacate the directions of Commissioner of Income Tax under section 263 on this issue." 14. We also find substance in the other argument of the appellant to the effect that even if addition is made in the book profit computed under Section 115JB of the Act, the same will result into equivalent MAT credit being available to the assessee, which can be utilized in subsequent assessment year. As such, at most this may lead to deferment of tax but it does not result in any loss to the revenue. 15. In light of the above discussion, since there is NIL tax impact on the error noticed by the Commissioner at the time of his examination, the twin conditions of order being erroneous and prejudicial to the interests of the revenue are not satisfied on this issue and thus, the order of the Commissioner on this issue is set-aside. 16. The second issue pertains to excessive allowance of depreciation on the foreign exchange fluctuation loss of Rs. 12,35,43,256/-. The relevant facts in this regard are that the assessee incurred foreign exchange fluctuation loss of Rs. 12....
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....tive for the assessee relied on the following judgments to contend that the Assessing Officer has to allow the depreciation on the brought forward Written Down Value ('WDV'), and he is precluded in the present assessment year to dispute the opening WDV of the block of asset and he also cannot examine the correctness or otherwise of opening WDV :- a) DIT (IT) vs. HSBC Asset Management (I) Pvt. Ltd. (ITA No. 254 of 2012)(Bom)(HC) b) DCIT vs. Nutech Corporation Services Ltd (ITA No. 6091/Mum/2007) 18. On this aspect, the learned CIT-DR has defended the impugned stand of the Commissioner and contended that the depreciation in earlier assessment year of 2009-10 was wrongly allowed, and, therefore the Commissioner was justified in treating the allowance of depreciation as an error. 19. We have carefully considered the rival submissions and perused the relevant material on record. Undisputedly, the claim of depreciation made by the assessee in its revised return of income for assessment year 2010-11, i.e. year under consideration, relates to the depreciation allowed on the component of cost of asset which was added in the previous year relevant to assessment year 2....
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....t (I) Pvt. Ltd. (supra) are quite relevant :- "9. Having perused this Appeal Memo including the impugned orders, we are of the opinion that the Delhi High Court judgment has been delivered on 5th November 2012 and the impugned order was passed on 15th June 2011. The Tribunal has essentially based its conclusion on the consistent stand of the Assessee and that of the Assessing Officer. In dealing with the shift in stand for the subject assessment year, the Tribunal found that this claim of depreciation was raised in the assessment year 20032004. The Assessee claimed that it is allowable as per the provisions of Income Tax Act on block of assets under the head "intangible assets". The Assessing Officer allowed the claim for that assessment year by an order under Section 143(3) dated 28.03.2006. The Tribunal then, proceeds to hold that when the Assessing Officer had to allow depreciation on the written down value of the block of assets, then, it cannot in the present assessment year dispute the opening written down value of the block of assets nor can he examine the correctness or otherwise of the opening written down value brought forward from the earlier year. The order und....
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....essing Officer was required to revisit or relook at his own order for earlier assessment year while passing the order of assessment in the instant year, wherein the findings of the earlier order have merely been given effect to, as we have discussed in the earlier part of this order. Thus, on this aspect also, assessee succeeds. 22. The other two aspects raised by the Commissioner relate to amounts received on account of sales tax and excise duty incentives. The assessee claimed both the incentives as capital receipts and excluded the same from its income while computing the total income as per the normal provisions of the Act. However, in the course of assessment proceedings, the Assessing Officer show caused the assessee as to why the aforesaid incentives be not treated as revenue receipts and added to the total income of the assessee. The assessee furnished written submissions to the Assessing Officer justifying the treatment of excise duty and sales tax incentives as capital receipts not chargeable to tax. The Assessing Officer, however, differed with the assessee and while computing the total income under the normal provisions of the Act, included the amount of excise duty ....
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....ther hand, the learned DR appearing for the revenue reiterated the stand of the Commissioner by pointing out that the assessment order has been framed on the aspect of excise duty and sales tax incentives in a routine manner and, therefore, in order to fortify the stand of the revenue, the impugned invocation of Section 263 of the Act by the Commissioner is justified. 25. We have considered the rival stands on this aspect carefully. Factually speaking, it is quite evident that the issues raised by the Commissioner with regard to the treatment of excise duty and sales tax incentives was indeed dealt with in the course of assessment proceedings by the Assessing Officer. It is also clearly emerging that the stand of the assessee was not accepted by the Assessing Officer and the matter has travelled to the CIT(A) for consideration. In this context, the implications of clause (c) of Explanation 1 to Section 263 of the Act, which read as under is quite relevant. "(c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal [filed on or before or after the 1st day of June, 1988], the powers of the Commissione....
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....ding that the same needs more careful examination on the part of the Assessing Officer. This itself indication of the fact that this is not the case of lack of enquiry, but at the highest it can be a case of inadequate enquiry. It is settled position in law that inadequate enquiry by itself would not justify invoking the jurisdiction under Section 263 of the Act unless the order is erroneous. In the present facts, the CIT has not exercised jurisdiction under Section 263 of the Act on the ground that the order is erroneous. We find that the impugned order has correctly applied the principles laid down by this Court in Gabriel (I) Ltd. (supra). Accordingly, the question as formulated does not give rise to any substantial question of law. Thus not entertained." [underlined for emphasis by us] Quite clearly, the ratio laid down by the Hon'ble Bombay High Court in the case of Shreepati Holdings and Finance (P.) Ltd. (supra) is attracted in the present case and the assumption of jurisdiction by the Commissioner in the instant case is untenable. 28. Before parting, we may also refer to the judgment of the Hon'ble Bombay High Court in the case of CIT vs. K. Sera Sera....
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....ce it merged in the appellate order and hence the original order cannot be revised under the revisional jurisdiction of the Commissioner u/s 263 of the Act. It is relevant to state that the ld. CIT(A) passed the order on 12-10-2011 that is much before the notice u/s 263 dated 9-3-2012 was issued by the ld. CIT. 17. At the time of hearing Ld. DR also made a submission that if the issue has not been considered in entirety of applicability of Rule 9A, ld. CIT u/s 263 of the Act can also exercise his revisional jurisdiction. As mentioned hereinabove there is no dispute to the fact that AO as well as ld. CIT(A) considered the applicability of Rule 9A of I. T. Rules while allowing the cost of production of film as claimed by the assessee. 18. A similar issue came before the ITAT Mumbai Bench in the case of Sonal Garments vs. JCIT (supra), wherein the income of the assessee was assessed u/s 143(3) after allowing the deduction u/s.80HHC. On appeal, the assessee agitated the computation of deduction u/s.80HHC on the ground that AO erred in deducting certain amounts from export turnover. The CIT(A) allowed the appeal of the assessee and directed the AO to reduce FOB value f....
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....as claimed by the assessee without any disallowance. Subsequently, CIT u/s 263 of the Act disallowed the claim u/s 80I on the ground that the asset used by the assessee in the new industrial undertaking had formed part of old plant & machinery and the new industrial undertaking of the assessee was formed by reconstructing or restructuring or splitting up of the old business. In appeal before the Tribunal, the Tribunal rejected the contention of the assessee that the revisional order had been made without jurisdiction but allowed the appeal on merits. In further appeal before the Hon'ble High Court, it was held in para-19 thereof that when deduction u/s 80I of the Act was granted by the AO after disallowing a part of the claim which was carried in appeal before the CIT(A), the appellate authority was duty bound to examine whether the claim made by the assessee was in accordance with and subjection to the provisions of sec. 80I of the Act. The requirement of fulfillment of condition stipulated by sub-sec(2) of sec. 80I of the Act, is therefore, very much subject matter of the appeal in relation to the income from warehousing which had been disallowed by the AO. The Hon'ble Hi....
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....mand report is reproduced in para 2.3 of the first appellate authority's order. Once the copy of the remand report was given to the Assessee for his comments and the Assessee agreed with the remand report, then, barring the addition of Rs. 4,01,467/-, the balance addition made by the Assessing Officer came to be deleted. Thus, as against the expenses or cost of production to the tune of Rs. 27,19,28,504/- only a sum of Rs. 4,01,467/- was deleted. 10. We find that despite this position emerging from the record and being undisputed, the order under section 263 of the Income Tax Act makes detailed reference to the show cause notice. The show cause notice as also this order passed under section 263 make detailed reference to the claims of the Assessee and which were part of the Appeal before the Commissioner and dealt with by him in his order dated 12th October, 2011. The order of the Commissioner under section 263 dated 29th March, 2012, from paras 8 onwards, makes extensive reference to these aspects. In the circumstances, what further emerges is that not only did the revisional authority purport to revise the Assessing Officer's order, but he purported to deal with ....
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....ry much part of the revisional authority's order dated 29th March, 2012. The attempt to reopen them cannot be saved as clause (c) of Explanation below sub-section (1) of section 263 of the Income Tax Act, 1961 had no application." In the case of K. Sera Sera Productions Ltd. (supra), the Tribunal in its order, which has been affirmed by the Hon'ble High Court, extensively discussed the meaning of the expression "matter" contained in clause (c) of Explanation 1 to Section 263 of the Act. The Tribunal, after referring to an earlier decision of co-ordinate bench in case of Sonal Garments vs. JCIT[2005] 95 ITD 363 (Mum.) and the decision of Hon'ble Gujarat High Court in the case of CIT vs. Nirmal Chemical Works Pvt. Ltd. [2009] 182 taxman 183 (Gujarat) held that a 'matter' might have many aspects and the appeal before the appellate authority might be for one of the aspects of the matter, but not the entire matter itself; yet, the 'matter' refers to even one aspect of the entire issue pertaining to particular allowance or disallowance. Thus, even though the assessment order has dealt with one aspect of the particular matter and appellate authority while deciding the matter ha....