TaxTMI 
TaxTMI 
2021 (11) TMI 872
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.... dt. dt.30.03.2012. 2.1 The Commissioner of Income-tax erred in holding that assessment order u/s.143(3) r.w.s.263 dt 30.03.2013 was made without proper enquiry/verification without appreciating that the order was made after detailed enquiries and hence cannot be revised merely to superimpose the decision of the CIT over that of the AO. 2.2 The Commissioner of Income-tax failed to appreciate that twin conditionsfor invoking jurisdiction u/s.263 is absent in the present case as held by the Hon'ble Supreme Court in the case of Malabar Industrial Co Ltd v CIT 243 ITR 83(SC). 2.3 The Commissioner of Income Tax ought to have appreciated that where two views are possible and the assessing officer had taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the AO is unsustainable in Law. [CIT v Max India 295 ITR 282]. 2.4 The Commissioner of Income Tax ought to have appreciated that in the present case the order u/s.143(3) r.w.s.263 dt 30.03.2013 was passed pursuant to the directions of the CIT vide his order u/s. 263 dt.dt.30.03.2012 and hence cann....
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....t order u/s.143(3) r.w.s.263 dt 30.03.2012 the AO has omitted to examine and verify the issue of allowability of expenditure incurred towards premium on redemption of debentures. 4.2 The Commissioner of Income-tax failed to appreciate that the AO in the order u/s.143(3) r.w.s. 263 has disallowed the claim of Rs. 59.01 crores as deduction from book profits and added back the same to book profits. 4.3 The Commissioner of Income-tax ought to have appreciated that the above disallowance was subject matter of appeal before CIT(Appeals) and the CIT(Appeals) vide his order in ITA No.726/2013-14 dt 27.10.2014 held that assessee is eligible for reducing the amount of Rs. 59.01 crores from the net profit shown in the P&L account for the purpose of computing book profit u/s.115JB. 4.4 The Commissioner of Income-tax ought to have appreciated that he has no jurisdiction in respect of this issue which was subject matter of appeal before CIT(Appeals) under clause (c ) to Explanation 1 to sec 263 and hence the revision order dt 26.03.2015 is invalid. 5. INVESTMENTS 5.1 The Commissioner of Income-tax after erred in directing the assessing officer to veri....
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.... allowed appeal filed by the assessee and deleted additions made towards reversal of income arising on cancellation of sales-tax assignments. The Assessing Officer has passed order giving effect to the learned CIT(A) order on 13.07.2010 and determined total income u/s.115JB of the Act at Rs. Nil, after allowing set off of brought forward business loss. The case has been subsequently taken up for revision proceedings u/s.263 of the Income Tax Act, 1961 by the Principal CIT, Chennai-1, on the ground that assessment order passed by the Assessing Officer is erroneous, insofar as it is prejudicial to the interests of revenue on certain issues. The learned CIT, Chennai vide order u/s. 263 of the Act dated 30.03.2012 set aside assessment order passed by the Assessing Officer dated 22.12.2009 and direct him to examine all the issues and pass a fresh order in accordance with law. In the said 263 order, the learned CIT, Chennai has taken up three issues for examination, as per which, the Assessing Officer has not examined issue of deduction allowed towards premium paid on conversion of OCDs/Warrants, deduction of employees benefit from book profit u/s.115JB treating it as release of reserves....
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.... that the assessment order passed by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of revenue, because the Assessing Officer has not examined the issue of set off of brought forward losses against book profit computed u/s.115JB of the Act, without appreciating facts in right perspective of law, which rendered assessment order erroneous insofar as it is prejudicial to the interests of revenue. According to the Principal CIT, as per provisions of clause (iii) of Explanation 1 to section 115JB(1) of the Act, only least of brought forward losses or unabsorbed depreciation, as per books is to be set off against book profits. In this case, as per books brought forward businessloss was at Rs. 206.72 crores and unabsorbed depreciation was Rs. 118.71 crores. In the assessment order, the Assessing Officer has allowed set off of Rs. 198.43 crores as against Rs. 118.71 crores, which renders the assessment order as erroneous and prejudicial to the interests of revenue. The Principal CIT has also taken up issue of premium paid on redemption of FCCB /Debentures of Rs. 59.01 crores and observed that during the year, the assessee has claimed Rs. 59.01 crores towar....
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.... Ltd, reported in 62 Taxmann 465 and the decision of Hon'ble Bombay High Court in the case of CIT Vs. ICICI Bank reported in 343 ITR 74. As regards the third issue questioned by the Principal CIT regarding investments made in M/s. Janani Infrastructure Ltd., the assessee submitted that this issue was never a subject matter of appeal or revision proceedings or any other proceedings after original assessment proceedings and hence, this issue cannot be taken up for revision proceedings u/s.263 of the Act, because time limit for taking up 263 proceedings is lapsed. 6. The Principal CIT, after considering relevant submissions of the assessee and also relied upon certain judicial precedents, including the decision of the Hon'ble Supreme Court in the case of CIT Vs. Malabar Industrial Company Ltd. reported in 243 ITR 83 held that assessment order passed by the Assessing Officer is erroneous, insofar as it is prejudicial to the interests of revenue. Since the Assessing Officer has not examined the issues questioned in show cause notice issued u/s.263 of the Act in right perspective of law with necessary evidence on record, which rendered assessment order as erroneous, insofar as it ....
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....e Principal CIT observed that information was received by the Assessing Officer from DCIT, Circle-2(3), Hyderabad, which is subsequent to completion of order u/s.143(3) r.w.s 263 of the Act, as per which, the assessee has made investments in shares of M/s. Janani Infrastructure Pvt. Ltd. The information relating to investments made by the assessee in M/s. Janani Infrastructure Ltd. requires to be verified and examined by the Assessing Officer for appropriate necessary action and orders. The information available on record should also be considered in the revision proceedings u/s.263. The term reference includes all records available at the time of examination by the CIT as held by Hon'ble Supreme Court in the case of CIT Vs. Manjunatheeaswara Packing Products & Camphor works, reported in 253 ITR 53. Therefore, he opined that assessment order passed by the Assessing Officer u/s.143(3) r.w.s 263 of the Act dated 30.03.2013 on these issues is erroneous, insofar as it is prejudicial to the interests of revenue. Hence, set aside assessment order passed by the Assessing Officer and directed him to modify the assessment order and pass necessary orders in accordance with law, in accord....
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....l before the learned CIT(A) and the CIT(A) has allowed claim of the assessee . If you consider order giving effect date of the CIT(A) order, then brought forward loss to be set off against book profit shall be at original figure of Rs. 153.16 crores and hence, if you consider said amount of brought forward loss, which is in excess of amount considered by PCIT at Rs. 118.71 crores and hence, there is no error in the order of the Assessing Officer giving effect to the order of the CIT. 9. The learned A.R further submitted that as regards premium on redemption of debentures, the learned PCIT failed to appreciate that the Assessing Officer in the order passed u/s.143(3) r.w.s 263 has disallowed claim of Rs. 59.01 crores as deduction from book profit and the assessee has challenged the order before CIT(A). The learned CIT(A) vide his order dated 27.10.2014 has held that the assessee is eligible for reducing the amount of Rs. 59.01 crores from net profit shown in profit & loss account for the purpose of computing book profit u/s.115JB of the Act. Since the issue was subject matter of appeal before the first appellate authority, as per provisions of clause (c) to Explanation 1 to secti....
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.... unabsorbed depreciation, which caused prejudice to the interests of revenue. Likewise, the issue of investments made in M/s. Janani Infrastructure Ltd., the Assessing Officer has not examined issue in light of allowability of expenditure, even though the assessee has made investments in shares of M/s. Janani Infrastructure Ltd., which renders assessment order erroneous, insofar as it is prejudicial to the interests of revenue. It is well settled principle of law that when the assessment order passed by the Assessing Officer is erroneous and prejudicial to the interests of revenue, the Principal CIT has power to assume his jurisdiction to revise assessment order and hence, there is no error in the order passed by the Principal CIT u/s.263 of the Act. 11. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The provisions of section 263 of the Act, empowers the Principal CIT to revise assessment order passed by the Assessing Officer, if he satisified that assessment order passed by the Assessing Officer is erroneous, insofar as it is prejudicial to the interests of the revenue. From a plain reading of section 263 ....
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....ions made by the Assessing Officer towards disallowance of brought forward loss of amalgamated company and withdrawal amount from reserves account and set off of expenditure incurred towards premium paid on FCCB/Debentures. Therefore, in order to consider present assessment order passed by the Assessing Officer as erroneous and prejudicial to the interests of revenue, it is necessary to keep in mind the earlier assessment proceedings of original assessment order passed by the Assessing Officer u/s.143(3), 263 order passed by the learned CIT and further consequential assessment order passed by the Assessing Officer u/s.143(3) r.w.s. 263 of the Income Tax Act, 1961. 13. In the present proceedings, first and foremost issue questioned by the Principal CIT is carry forward and set off of loss in terms of section 115JB(1) of the Act. According to the Principal CIT, the Assessing Officer has allowed set off of excess loss over and above loss allowable, as per books, in terms of provisions of clause (iii) of Explanation (1) to section 115JB(1) of the Act. We have given our thoughtful consideration to the reasons given by the Principal CIT in light of arguments advanced by the learned A.....
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....above, it is clear that brought forward business loss or unabsorbed depreciation, as per books of account remained at the original figure at 153.16 crores. In the present proceedings, allegations of the Principal CIT is that the Assessing Officer has allowed set off of brought forward business loss or unabsorbed depreciation at Rs. 198.43 crores as against available brought forward unabsorbed depreciation of Rs. 120.46 crores. The said findings of the ld. Pr. CIT is not correct, because, final brought forward loss or unabsorbed depreciation set off against book profit, after giving effect order passed by the ld. AO dated 27- 10-2014, is only at Rs. 88.75 crores. This is because, as per Assessment order dated 30/03/2013 passed u/s 143(3) rws 263, the AO had determined book profit u/s 115JB of the Act, at Rs. 198.43 crores by making additions towards release of reserves on premium for FCCB/Debentures and release of reserves on account of employees benefits, as per the directions of the CIT u/s 263 of the Act. The assessee has challenged said order before ld. CIT(A). The CIT(A), vide his order dated 27-10-2014, has deleted additions made by the AO towards release of reserves on premiu....
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....nd deductibility of expenditure and thus, not made any addition in the assessment order passed u/s.143(3) of the Act. Further, the same issue has been taken up in 263 proceedings by the CIT in his order dated 30.03.2012 and directed the Assessing Officer to examine whether expenditure is capital or revenue in nature and correctness of deduction claimed for relevant assessment year. The Assessing Officer in the consequential assessment order passed in pursuant to directions of the CIT u/s.263 of the Act, has once again examined the issue and has concluded that no disallowance is called for towards expenditure incurred for premium on redemption of debentures/FCCB. In other words, there has been application of mind not once, but twice by the Assessing Officer on the issue in right perspective of law and hence, taking up very same matter once again by the Principal CIT u/s.263 of the Income Tax Act, 1961, clearly indicates that this is an abuse of power, inasmuch as power u/s.263 is not meant to be a substitute for the power of Assessing Officer to make assessment . The power u/s.263 can only be exercised, when order of the Assessing Officer is erroneous and prejudicial to the interest....
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....om share premium account is actually reduced from OCDs redemption expenditure of Rs. 59.01 crores debited into profit & loss account and thus, there is no expenses debited into profit & loss account . From the above, it is clear that the assessee has not claimed any deduction for expenditure incurred on redemption of FCCB/Debentures. Therefore, once no deduction was claimed for any expenditure by debiting into profit & loss account, the question whether it is capital or revenue in nature does not arise. 15. As regards arguments of the Principal CIT that whether total amount incurred for premium paid on redemption of debentures is deductible or not, the Hon'ble Supreme Court has considered an identical issue in the case of M/s. Taparia Tools Ltd. vs. JCIT reported in 372 ITR 605 (SC) , where it is clearly held that there is no estoppel against the statute. The Income Tax Act, enables and entitles the assessee to claim the entire expenditure in the manner it is claimed. In other words, the Hon'ble Supreme Court clearly held that whether expenditure has been claimed when it was paid at once or has been spread over period of debentures is not relevant and further, the assess....