TaxTMI 
TaxTMI 
TaxTMI 
2021 (7) TMI 569
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....ount of Rs. 4,23,84,000/- declared by the assessee-company as deduction while computing the book profit u/s 115JB of the Act on account of "unrealized gain on mutual fund" was wrongly allowed by the AO as the same was nowhere covered as in allowable item of deduction in clauses (i) to (viii) of Explanation 1 below Section 115JB of the Act. He accordingly treated the assessment order dated 29.12.2017 as rectified on 03.07.2018 as erroneous as well as prejudicial to the interest of the revenue and issues a notice u/s 263 giving the assessee an opportunity to show cause as to why the same should not be revised, which read as under: "Sub: Opportunity of being heard u/s 263 of Income Tax Act, 1961, in respect of order passed u/s 143(3) of Income Tax Act dt. 29/12/2017 (as rectified u/s 154 on 03.07.2018) A.Y. 2015-16, PAN:: AABCB 2880 M - In your case return of income for A.Y. 2015-16 declaring total income of Rs. Nil (Normal computation) and Book Profit u/s 115JB of Rs. 79,52,383/- was filed on 30.09.2015. It was assessed vide order u/s 143(3) dt. 29.12.2017 determining assessed total income at Rs. Nil (Normal computation and assessed Book Profit u/s 115JB of Rs. 79,52,383/- . The....
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....s were made on behalf of the assessee-company in writing: "A. (i) The Assessee Company during the previous year relevant to A.Y. 2015-16 did not receive any income amounting to Rs. 4,23,84,000/- by way of redemption of Mutual Fund. The said amount credited to the profit and loss account was only a provision for notional amount based on the NAV as on 31.03.2015. The said amount being a notional amount and did not accrue to the assessee company in the year under consideration, was not chargeable to tax. The said amount was invested in Birla Sunlife fixed Term Plan - Corporate Bind Series A (1170 days). The maturity of the said investment was on 04.04.2017. ii. The aforesaid investment was made in a FMP (Fixed Maturity Plan) which is a debt fund and said fund only matures after a pre-specified period only on maturity date of the fund (i.e. 04.04.2017 in company's case) iii. The said details were duly explained at Note 34 of the Audited Financials of the assessee-company. A copy of the said financials has been filed along with reply dated 14.02.2020 in the notes, it was duly mentioned that the said investment was made as a tool for interest arbitrage and the units have been pledg....
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....e, was in accordance with law, he was under no obligation to justify as to why he was satisfied. The fact that the details of notional income amounting to Rs. 4,23,84,000/- by way of redemption of Mutual Fund were duly explained at Note 34 of the Audited financials of the assessee-company and which was before the Assessing Officer show that the view taken by him is a possible view. It is a settled law that if the Assessing Officer has taken a possible view, it cannot be said that the view taken by him is erroneous nor the order of the Assessing Officer in that case can be set aside in revision. As per AR, it has to be shown unmistakably that the order of the Assessing Officer is unsustainable in law. C. Ld. AR concluded his written submission stating that the assessment order passed by Assessing Officer under section 143(3) of the Act on dated 29.12.2017 (as rectified u/s 154 of the Act on 03.07.2018) is neither erroneous nor prejudicial to the interest of revenue and therefore the proceedings under section 263 initiated may be dropped." 4. The Ld. Pr. CIT did not find merit in the above submissions made on behalf of the assessee-company and rejected the same for the following r....
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....JB book profits, once it was undisputed fact that corresponding amount of Rs. 4,23,84,000/- was in fact credited to profit and loss account of assessee-company for period ending on 31.03.2015, which was prepared under provisions of company Act. Once the amount under consideration of Rs. 4,23,84,000/- was credited in P&L account then any deduction could have been allowed to assessee-company if the same was allowable under provision of explanation 1. Clause (i) to (viii) as appeared in section 115JB of the Income Tax Act. No such deduction is found to be allowable to the assessee-company under any of the clause (i) to (viii) of explanation 1 therefore, the argument taken by Ld. AR that the notional provision under the head "unrealized gain on mutual fund" is not chargeable under provision of section 115JB of the Act, is not found to be legally tenable. iii. The third issue raised by Ld. AR on which heavy reliance was placed is that the benefit of claim can be allowed to assessee-company under explanation (iie)(B) of explanation 1, which reads as under: - (iie) the amount representing - A. notional gain on transfer of a capital asset being share of a special purpose vehicle to a b....
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....sed by the AO on incorrect application of law therefore the assessment order dated 29.12.2017 passed by AO (revised on 03.07.2018) is definitely an erroneous order. If due to that erroneous order passed by AO, the revenue is losing the lawful taxes payable by the assessee-company then the order passed by AO is certainly prejudicial to the interest of Revenue as well. Here also the argument taken by Ld. AR that the view taken by AO was a possible view, is not found to be legally tenable as the view taken by the AO is not found to be permissible view under the provision of law as contained in explanation 1 below section 115JB of the Act." 5. For the reasons given above and by relying on the decision of Hon'ble Calcutta High Court in the case of CIT vs Maithan International (2015) 56 taxmann.com 283 (Calcutta), the Ld. Pr. CIT held the assessment order passed by the AO dated 29.12.2017 u/s 143(3) for the year under consideration as erroneous as well as prejudicial to the interest of the revenue vide his order dated 28.02.2020 passed u/s 263 with the direction to the AO to frame the same afresh after making proper verification and enquiry on the issue of allowability of assessee's cla....
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....e issue relating to the assessee's claim for deduction on account of "unrealized gain on mutual fund" as allowed by the AO u/s 143(3) is not decided on merit by the Ld. Pr. CIT vide his impugned order passed u/s 263. He invited our attention to the notice issued by the Ld. Pr. CIT u/s 263 to point out that the order passed by the AO u/s 143(3) was sought to be held as erroneous as well as prejudicial to the interest of the revenue on the ground that the claim of the assessee for deduction on account of unrealized gain on mutual fund while computing the book profit u/s 115JB of the Act was allowed by the AO without making any enquiry whatsoever. He also invited our attention to the finding record by the Ld. Pr. CIT in paragraph No. 5(i) of the impugned order, after considering the submissions made on behalf of the assessee-company and examining the relevant assessment records, that while finalising the scrutiny assessment, the AO had simply accepted the returned income without necessary application of mind and without raising any enquiry whatsoever on the assessee, on the aspect of allowability of deduction on account of "unrealized gain on mutual fund" for the purpose of computatio....
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....ry raised by the bench, he has not been able to bring anything on record to show that any enquiry whatsoever was made by the AO during the course of assessment proceedings before allowing the claim of the assessee-company for deduction on account of "unrealized gain on mutual fund" while computing the book profit u/s 115JB of the Act. As held by the Hon'ble Calcutta High Court in the case of Maithan International (supra) relied upon by the Ld. Pr. CIT in his impugned order, the role of the Assessing Officer is that of an investigator as well as adjudicator and where relevant enquiry was not undertaken before allowing the claim of the assessee for deduction, the order become erroneous as well as prejudicial to the interest of the revenue calling for revision u/s 263. Moreover, as specifically provided in clause (a) of Explanation 2 below Section 263 if in the opinion of Pr. CIT, an order passed by the AO is without making enquiries or verifications, which should have been made, the same shall be deemed to be erroneous in so far as it is prejudicial to the interest of revenue for the purpose of Section 263 calling for exercise of revisionary power 10. As regards the contention raise....