TaxTMI 
TaxTMI 
2021 (9) TMI 394
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....oneous but it is prejudicial to the revenue - recourse cannot be had to Section 263 of the Act as held by Hon'ble Supreme Court in Malabar Industrial Co. Ltd. V/s CIT [243 ITR 83 10/02/2000] & noted by Hon'ble Delhi High Court in CIT V/s Vikas Polymers [194 Taxman 57 16/08/2010]. The Hon'ble Supreme Court in Malabar Industrial Co. Ltd. V/s CIT (supra) has held that the phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of the revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue, unless the view taken by the Income-tax Officer is unsustainable in law. The said principal has been reiterated by Hon'ble Court in its subsequent judgment titled as CIT V/s Max India Ltd. (295 ITR 282). ....
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....itrary power. The exercise of the power is limited to cases where the Commissioner on examining the records comes to the conclusion that the earlier finding of the Income-tax Officer was erroneous and prejudicial to the interest of the revenue and that fresh determination of the case is warranted. There must be material to justify the Commissioner's finding that the order of the assessment was erroneous insofar as it was prejudicial to the interest of the revenue. 1.4 The Hon'ble Delhi Court, in the cited decision, further observed that there is a fine though subtle distinction between "lack of inquiry" and "inadequate inquiry". It is only in cases of "lack of inquiry" that the Commissioner is empowered to exercise his revisional powers by calling for and examining the records of any proceedings under the Act and passing orders thereon. In Gabriel India Ltd. (supra), it was expressly observed: - "The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, t....
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....ades of power conferred on different authorities under the Act has to be exercised within the areas specifically delineated by the Act and the exercise of power under one provision cannot trench upon the powers available under another provision of the Act. In this regard, it must be specifically noticed that against an order of assessment, so far as the revenue is concerned, the power conferred under the Act is to reopen the concluded assessment under section 147 and/or to revise the assessment order under section 263. The scope of the power/jurisdiction under the different provisions of the Act would naturally be different. The power and jurisdiction of the revenue to deal with a concluded assessment, therefore, must be understood in the context of the provisions of the relevant sections. While doing so, it must also be borne in mind that the legislature had not vested in the revenue any specific power to question an order of assessment by means of an appeal. Regarding applicability of Section 263, what has to be seen is that a satisfaction that an order passed by the Authority under the Act is erroneous and prejudicial to the interest of the revenue is the basic pre-condition for....
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....e and in law, the learned Principal Commissioner of Income tax, Mumbai 3 (hereinafter referred to as PCIT-3) - Order u/s.263 of the Act is bad in law, illegal and ultra-virus 1. Erred in passing the order under section 263 of the Act, setting aside the assessment order dated 31.12.2008 passed u/s 143(3) r.w.s 147 of the Income tax Act, 1961 (Act) by holding that it is erroneous and prejudicial to the interest of the revenue; 2. Failed to appreciate that the assessment order was neither erroneous nor prejudicial to the interest of the revenue and thus order u/s 263 is bad in law, illegal, ultra-virus, in excess of and/or in want of jurisdiction and otherwise void; 3. Erred in holding that AO has not applied his mind on the issue under consideration of taxability of principal component of lease rent without appreciating that said issue was one of the reasons for reopening of the assessment and for which specific query was raised in the assessment proceedings and all relevant details in response thereof was filed; Taxability of principal component of lease rent of Rs. 24,97,13,828/- under section 115JB of the Income Tax Act 4. Erre....
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....It was further submitted that lease term was for major part of the economic life of the asset and it was a case of finance lease. As per AS-19, the assessee as a lessor was to recognize such asset in its Balance Sheet as 'lease receivable' under the head loans and advances which would be at an amount equal to the net investment in the lease. Whenever lease installments were received, the principal portion of lease rent received was to be reduced from 'Lease Receivable'. Since the aforesaid treatment was in accordance with mandatory AS-9 and therefore, the principal portion was not routed through Profit & Loss Account. However, interest portion of lease rent was credited to Profit and Loss Account and the same was offered to tax while computing income under normal provisions as well as while computing Book Profits under MAT Provisions. On the other hand, since no fixed asset was appearing in the books of the assessee (based on AS-19), no depreciation was claimed in the books of the assessee and therefore the principal portion of lease rent was not considered for computing Book Profits u/s 115JB of the Act. The principal component of lease rent was reduced from the total lease rent r....
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....omputed to the extent of Rs. 2497.13 Lacs. Accordingly, a show-cause notice was issued to the assessee on 18/03/2020 proposing to set aside / cancel the order, on this issue. 3.2 In response, the assessee reiterated its stand that the accounting treatment was in accordance with mandatory AS-19. The assessee consistently followed this accounting practice over the years in accordance with AS-19. The assessee also drew attention to the fact that Ld.AO accepted the issue on merits and applied his mind on the basis on the issue and found that no income had escaped assessment. The view taken by Ld. AO was one of the possible view and therefore, the revision was not valid as per the decision of Hon'ble Supreme Court in Malabar Industries Co. Ltd. (243 ITR 83). The attention was also drawn to the fact that similar adjustment was proposed by way of rectification u/s 154 by Ld. AO for immediately preceding AY 2010-11 vide rectification notice dated 21/05/2017. However, after considering the submissions of the assessee, Ld.AO, vide order dated 30/11/2018, accepted the accounting treatment of lease income as adopted by the assessee and again decided not to make any such adjustment to the Bo....
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.... computation. However, it is not routing this income through P & L account by taking shelter behind AS-19. However, it may be mentioned, that as per the provisions of section 115JB, statement of Profit and loss account is required to be prepared in accordance with schedule III of the Companies Act, 2013. If one goes through the said schedule, it becomes clear that a company is expected to include all its income, whether operational or other income on credit side of P & L account. This being the position, there is no justification for not including principal component of lease rent, which is undisputedly in nature of income, in book profit. 5.2. It is thus clear, that the assessing officer had, after obtaining reply from the assessee on the aforesaid point did not properly apply his mind thereto, the order passed by him become erroneous and prejudicial to the interest of revenue. It has been held, by Hon'ble High Court of Calcutta in the case of Rajmandir Estates P. Ltd. Vs. PrCIT-Kolkata -III [2016] 386 ITR 162(Cal.) that where assessing officer had, after obtaining details by way of notice u/s 142(1) did not apply his mind thereto, the order passed by him become erron....
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.... & Loss Account. This practice was being followed consistently over various years. Therefore, since the income was not to be routed through Profit & Loss Account, the same was not added back to the Book Profits under MAT provisions as per the decision of Hon'ble Supreme Court in Apollo Tyres Ltd (255 ITR 273) as affirmed in the case of Malayala Manorama Co. Ltd (300 ITR 251). Upon perusal of assessment order, it could be seen that the case was reopened for various specific reasons, one of which was the fact that income from lease assets was not added in Book Profits. However, no such adjustment has finally been made in the assessment order. Pertinently, Ld.AO, in para-7, observed that on the remaining issues, the submissions made by the assessee are considered and accepted on the basis of merit of the issues and stand taken by the department in earlier years. Therefore, it could very well be said that Ld.AO duly applied his mind to the issue under consideration and took a possible view in the matter which is not contrary to law. Therefore, the observation of Ld. Pr. CIT that Ld. AO did not applied his mind to the issue, is without much substance. Merely because similar adjustment w....