TaxTMI 
TaxTMI 
TaxTMI 
2019 (8) TMI 1509
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.... 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 should be excluded in computing Book Profit u/s 115JB. 3.0 That on the f....
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....vailable 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 the order u/s 143(3). 5.2 That on the facts and in the circumstances of the case and without prejudice to Ground No. 5.0 & 5.1....
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....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 assessment year 2009-10 and on which the Assessing Officer allowed depreciation in assessment year 2009-10 holding the same to be capital loss was wrong; c) that the issue of treat....
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....d 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 in the appeal proceedings various additions made by the Assessing Officer are deleted by CIT(A), the assessee will be liable to tax under Section 115JB of the Act and, therefore, the instant error wil....
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....issioner 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, as per the Commissioner, it is the computation of book profit under Section 115JB of the Act which is erroneous, but that has no relevance to the tax liability finally determined. In fact, as per the Commissioner, it is only after the order ....
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....e 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. 12,35,43,256/- during assessment year 2009-10 which was capitalised in the books of account; however in the income tax return, it was claimed as a revenue expenditure. In the course of assessment proceedings for assessment year 2009-10, the Assessing Officer noted the abov....
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....t 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 2009-10, and the same was accepted by the Assessing Officer in the assessment order passed for assessment year 2009-10. Since the foreign exchange fluctuation loss arose in the hands of the assessee in assessment year 2009-10, the treatment of the said amount has been discussed by the Assess....
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....ly 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 under Section 143(3) for the assessment year 20032004 continues to operate and no proceedings under the Act were initiated to disturb the same." 20. Further, in the case of Nutech Corporate Services Limited (supra), our co-ordinate Mumbai bench of the Tribunal held as under :- "30.....Thus, once t....
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....ssee 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 and sales tax incentives as part of the total income of the assessee. On this aspect, the assessee carried the matter in appeal before the CIT(A). By way of the impugned proceedings, the Commissioner observed that the Assessing Officer while passing the assessment order dated 28.03.2013 (supra) has dealt with the iss....
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.... 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 Commissioner under this sub-section shall extend [and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal.]" It is evident from the above that the Commissioner is not empowered to exercise his jurisdiction on an issue which is subject matter of appeal before the CIT(A). In the present case, it is undis....
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....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 Productions Ltd., [2015] 374 ITR 305 (Bombay) wherein the facts were as follows. The assessee in that case was engaged in production and distribution of films and had shown certain income from a film. Later, it claimed that the same was not an income from production of film, but a sum received as share application money. The Assessing Officer did not accept the assess....
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....ssue 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 from the export turnover. Thereafter, CIT passed an order u/s 263 holding that the profit for the purpose of sec. 80HHC should be computed after excluding export incentives and after allowing current years depreciation and as the assessee had incurred loss from the export business, deduction u/s.80HHC was erroneously allowed by the AO in the assessment year which caused prejudice to the interests ....
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....l, 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 High Court rejected the stand of the assessee that the assessment order was silent. As regards the allowability or otherwise of sec. 80I of the Act, it was inter alia, held that in view of clause (c) of explanation to sec. 263 of the Act, the order passed by the ld. CIT is not valid. 20. A similar view has also been taken by the ITAT Mumbai Bench in the case of Marico Industries Ltd. vs. ACIT (supra), w....
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..... 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 the same direction which was issued in the order of the first appellate authority and which was given effect to by the Assessing Officer. Meaning thereby, the contents of the remand report, giving effect to the order of the first appellate authority, as submitted by the Assessing Officer, came to be reconsidered and revisited. In addition thereto, one more aspect of sale of theatrical rights of "Darna Zaroori Hai" to M/s. RGV Enterp....
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....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 has dealt with only that particular aspect of the matter and has not touched upon the other aspects of the very same matter, then also it could be said that the entire matter has merged with the order of the appellate authority and therefore, clause (c) of Explanation 1 to Section 263(1) of the Act was very much applicable and the Commissioner had no jurisdiction to invoke Section 263 of the Act. 29. Since in the present case the Assessing Of....