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2016 (11) TMI 1700
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....er of Assessing Officer as erroneous in so far prejudicial to the interest of Revenue. 3. Brief facts are that assessee in the present case is a Limited Company and engaged in manufacturing of cement, tyre, viscose filament, rayon yarn, transparent paper, cast iron spun pipe and certain chemicals. The assessee for the year under consideration filed its return of income on 30.09.2011 declaring total loss of Rs.369,67,31,212/- under the normal provision of the Act and book loss of Rs.960071348/- under the provision of Minimum Alternate Tax (MAT for short). Subsequently, case was selected for scrutiny under the CASS module. Accordingly, notice was issued u/s 143(2)/142(1) of the Act. The assessment was framed u/s. 143(3) of the Act at a total loss of Rs.3629585781/- after making several disallowances / additions to the total income of assessee. Thereafter on examination of assessment records, Ld. CIT u/s. 263 of the Act observed certain defects in the assessment order passed by Assessing Officer u/s. 143(3) of the Act, which are enumerated below:- 1) As per audited financial statement there was an addition of Rs.534,90,34,744/- in the fixed asset schedule of assessee. Howe....
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.... 5,360,061,703 5,370,497,010 21,462,266 Unrealised Gain on Foreign Exchange not Adjusted in Tax Audit Report 21,792,210 (as per clause 13(d) of Tax Audit Report) Difference due to addition to freehold Land & 329,944 Livestock (not included in the depreciable block of Assets in Tax Audit Report) It was further submitted that the effect on account of foreign exchange fluctuation in relation to capital goods imported was not given in tax audit report in pursuance to provisions of Sec. 43A of the Act. The difference was also arising on account of freehold land and livestock of Rs. 3,29,944.00 which was shown in the audited financial statement but the same was not shown in the depreciation schedule attached along with the tax audit report as these items were non depreciable assets. b) The assessee submitted that it has already disallowed a sum of Rs.1,16,731/- suo moto under the provision of Sec. 14A of the Act. The investment was not made out of the borrowed fund, therefore, there is no que....
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....t to my notice the relevant extracts of the Accounts. They argued that the unrealized Foreign Exchanges could not have been booked as per section 43A of the Act. However, I am of the considered opinion that the A/Rs have come up with the said explanation now, which had neither been examined nor considered during the Assessment proceedings by the AO. 8. I find that the figures of fixed assets (as shown at Schedule-5) as per books of account was Rs. 5,34,90,34,744/-. But, it was seen from the Depreciation Schedule (as shown at Appendix-III) of TAR that the total addition of fixed asset during the year was taken at Rs. 5,36,00,61,703/-. Thus in any case, it is evident that the Assessee had not disclosed the addition of fixed assets of Rs. 1,10,26,959/-, the difference between the two above, in the books of account. This appears to be not explained even before me now. The A/Rs have come up with a plea that "the difference was due to the Unrealized Gain on Foreign Exchange (Rs. 2,17,92,210) and Additions to Freehold Land & Livestock (Rs. 3,29,944) and that "additions to Freehold Land and Livestock have not been considered in the schedule of assets as per the Tax Audit Report si....
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....Hyderabad Tribunal in SpandanaSphoorty Financial Limited (ITA no. 1653/Hyd/2012). However, I find that the line of argument taken by the A/Rs and their reliance upon the judicial decision in the case of Trade Apartment (ITA No.1277/Kol/2011). The issue remains that the Assessee had not explained as to how the amount it had disallowed suo motu u/s. 14A. Similarly, the AO while resorting to his computation under Rule 8D had also snot taken the gross amount of interest spent. Thus, the point which was to be explained to me now as to how much exactly was to be held as attributable to the earning of the exempted Divided. The A/.Rs furnished nothing. They merely relied on the aforementioned judgment which does not speak of an obligation to net off the interest spent. Especially, in a case like this, where it is obvious that Rs. 239.82 crore of interest had been spent against an interest earning of Rs. 6.33 crore only. The figures are not proportionate even to imagine that amount borrowed had been invested in the amount advanced as loan and hence as though they had deserved to be netted off. Therefore, the logic of the A/Rs before me fails. They shall have to explain and show it by their ....
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.... assessee company." Being aggrieved by this order of Ld. CIT assessee came in appeal before us. 7. Before us Ld. AR of assessee filed two paper books which are running pages from 1 to 140 and 1 to 149 and brought out elaborately submission before Bench as under:- i) The Ld. CIT in its show cause notice dated 17.02.2016 issued u/s 263 of the Act sought clarification on the amount of difference to the addition of fixed assets between audited accounts and tax audit report. Accordingly, assessee clarified the difference in response to notice issued u/s 263 of the Act but Ld. CIT changed the tack and held the order of AO as erroneous and prejudicial to the interest of revenue on account of non-verification of the facts by the AO. The Ld. CIT did not consider at all the submission made by assessee in the form of reconciliation statement which is placed on page 43 of the paper book. Ld. AR further on merit submitted that as per Accounting Standard-11 (the effect of changes in foreign exchange rate) is to be applied in the preparation of financial statement on the date of the balance sheet. Accordingly, the effect was given in the books of account but such effect was not given ....
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.... into consideration for making disallowance u/s. 14A of the Act. 3) It was submitted that order of AO is silent about the trade discount claimed by assessee in its profit and loss a/c vis-à-vis it was reduced from the sale amount of assessee. 4) Ld. DR for the excess claim of depreciation agreed with the view of Ld. CIT. The ld. DR vehemently supported the order of the ld. CIT passed under section 263 of the Act. In rejoinder Ld. AR submitted that Ld. CIT sought clarification in its show cause notice issued u/s. 263 of the Act about the difference in the amount of addition between audited accounts and tax audit report but in its order set aside the issue before AO for further verification without giving any comment regarding the submission of assessee. Ld. CIT, in the instant case raised one issue in its show cause notice but set aside the order of AO on some other grounds which was not case as per the notice. 8. We have heard rival contentions of both the parties and perused the materials available on record. The order under section 143(3) of the Act has been held as erroneous and prejudicial to the interest of Revenue on account reasons as discussed ab....
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....s a case for revision on the ground of unexplained investment under section 69B of the Act or non-verification of certain aspects. The reason given in the show-cause notice is different for which revision powers are finally exercised in the impugned order. Now the issue before us arises so as to whether such an exercise of revision powers, on the ground other than the grounds mentioned in the show-cause notice, could be held to be sustainable in law. We find support and guidance from the case Vesuvius India Limited Vs CIT 54 SOT 172, where the juridictional Coordinate Bench of Tribunal has held as under : "6. We find that the impugned revision order is indeed not sustainable in law for the very elementary reason that the grounds on which order was subjected to revision are different, vis-a-vis the grounds on which revision proceedings were actually initiated. A plain reading of the impugned revision order clearly shows that the conclusions drawn in the revision proceedings, which are extracted earlier in this order, are materially different than the reasons for which revision proceedings were initiated. While in the show-cause notice, learned Commissioner states that "the ....
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....ar, as the then was, speaking for the bench, observed as follows :- "..........In CIT v. G.K. Kabra (1995)211 ITR 336 the Andhra Pradesh High Court was dealing with an application seeking reference under section 256(2), inter alia, of the following question : "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in holding that the Commissioner of Income-tax lacks initial jurisdiction, particularly when the conclusion made by the Commissioner of Incometax in the order under section 263 was on the basis of the information furnished in response to the initial notice?" While declining to refer the above question, the High Court held as under (pages 339- 340) : "The necessary implication in the expression" after giving opportunity of being heard" relates to the point on which the Commissioner considers the order to be erroneous and prejudicial to the interests of the revenue. In other words, it is necessary for the commission to point out the exact error in the order which he proposes to revise so that the assessee would have an adequate opportunity of meeting the error before the final order is ma....
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....the Act is of a special nature or, in other words, the Commissioner has the exclusive jurisdiction under the Act to revise the order of the ITO if he considers that any order passed by him was erroneous insofar as it was prejudicial to the interests of the Revenue. Before going so, he is also required to give an opportunity of being heard to the assessee. If after hearing the assessee in pursuance of the notice issued by him under section 263(1) of the Act, he is not satisfied, he may pass the necessary orders. Of course, the order thus passed will contain the grounds for holding the order of the ITO to be erroneous, as contemplated under section 263(1) of the Act. . . . The Tribunal cannot uphold the order of the Commissioner on any other ground which, in its opinion, was available to the Commissioner as well. If the Tribunal is allowed to find out the ground available to the Commissioner to pass an order under section 263(1) of the Act, then it will amount to a sharing of the exclusive jurisdiction vested in the Commissioner, which is not warranted under the Act. It is all the more so, because the revenue has not been given any right of appeal under the Act against an order of th....
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....ature. He simply asked the ITO to re-examine the matter that, in our opinion, is not permissible. Further inquiry and/or fresh determination can be directed by the Commissioner only after coming to the conclusion that the earlier finding of the ITO was erroneous and prejudicial to the interests of the revenue. Without doing so, he does not get the power to set aside the assessment". After analysing the above facts & case laws we are of the view that unless ld. CIT points out errors in the order of Assessing Officer, which has not been pointed out before us, he cannot invoke his powers under section 263. Having said so, we may also make it clear that in view of the judgment of the Hon'ble Delhi High Court in the case of CIT -vs.-Vee Gee Enterprises [99 ITR 375],an assessment order is rendered erroneous and prejudicial to the interest of revenue in a situation in which Assessing Officer remains passive in the face of a return which is apparently in order but calls for further enquiry. However, the facts of the present case are distinct from this judicial precedence on two material counts. Firstly, in the present case, proceedings were not initiated on the grounds that adequate....
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....port from the judgment of Hon'ble Allahabad High Court in the case of Principal Commissioner of Income Tax vs. M/s Ashok Handloom Factory Pvt. Ltd. in ITA No. 19 of 2016 dated 01.02.2016 wherein the Hon'ble High Court has held that it is settled law that the commissioner of income tax can exercise his jurisdiction u/s 263 of the Act only in cases where no enquiry is made by the Assessing Officer. In the instant case, it is admitted by the Income Tax Department that the Assessing Officer had made some enquiries though according to them it was not a proper enquiry. In view of the above facts that some enquiry was made is sufficient to debar the authorities from exercising the powers u/s 263 of the Act. The Tribunal was accordingly justified in setting aside the order passed u/s 263 of the Act. 10. We do not find any substantial question of law arising for consideration and so the appeal is accordingly dismissed. In the case one hand, the AO has made an addition by disallowing the commission expenses after making the necessary enquiry. The instant case is duly covered with the decision of Hon'ble Allahabad High Court M/s Ashok Handloom Factory Pvt. Ltd. (supra) as discussed above, ....
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....& circumstances has decided the issue in favour of assessee in the case of DCIT Vs. Trade Apartments limited 1277/Kol/2011 dated 31.03.2012 ITAT Kolkata Bench as detailed below: "4. As learned CIT(A) has rightly observed, once there is no net interest expenditure, as is the case before us - upon setting off interest credited to profit and loss account, no part of interest debited can be disallowed as attributable to earning tax free dividend. The CIT(A) was thus quite justified in deleting the interest disallowance. We have also noted that entire expenses incurred by the assessee have been offered for disallowance, and once that happen, nothing remains for further disallowance u/s. 14A. The disallowance under section 14A can come into play only out of expenses claimed for deduction and expenses have been claimed for deduction, there cannot be any disallowance either. The conclusions arrived at by the CIT(A) are, therefore, correct and admit no interference by us. We, approve and confirm the order of the CIT(A)." Similarly we also find that Hon'ble Gujrat High Court in the case of CIT Vs. Deep Industries Limited 238 taxman 198 has held as under : "Thus, the Asse....