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TaxTMI 
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2022 (3) TMI 471
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....alled the Act] and communicated to the Appellant on the same day, the Appellant appeals against and on the following amongst other grounds which are without prejudice to each other. 1. Setting aside of order under section 263 of the Act 1.1 On the facts and circumstances of the case and in law, the Pr. CIT erred in passing an order under section 263 setting aside the assessment order dated December 31, 2018 passed under section 143(3) r.w.s. 147 of the Act on the ground that the Assessing Officer in not examining the following issues has rendered the order as erroneous and prejudicial to the interest of the revenue: (a) Re-possessed vehicles to be treated as bad debts and not as a business loss (b) Non disallowance of unpaid leave encashment (C) Deduction claimed under section 36(1)(viii) 1.2 The Pr. CIT erred in not considering the alternative plea raised by the Appellant that revision on the aforesaid issues pertaining to loss on repossessed vehicles and unpaid leave encashment is time barred by limitation under section 263(2) of the Act as it is sought to be exercised, on issues both of which were covered in the original assessment order dated March 25, 2015 pas....
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.... On the facts and circumstances of the case and in law, the Pr. CIT erred in not appreciating that out of the unpaid leave encashment of Rs. 108,02,83,033, only Rs. 27,82,79,269 which was debited to the P&L account was disallowed by the Appellant in the return of income and the balance amount of Rs. 80,20,03,764 which had not been routed through P&L account was not claimed by the Appellant and hence the question of disallowing the same does not arise. 4. Deduction of Special Reserve under section 36(1)(viii) of the Act 4.1 The Pr. CIT erred on facts and circumstances of the case and in law, in holding that it is the gross lease rentals of Rs. 98,43,12,859 credited to the P&L A/c as against Rs. 89,85,60,025 being the net amount credited to P&L which ought to be reduced in working out the finance income for calculating the deduction under section 36(1)(viii) of the Act and the Assessing Officer by not considering the correct figure has resulted in the assessment order being erroneous in so far as prejudicial to the interest of revenue within the meaning of provisions of section 263 of the Act. 4.2 The Pr. CIT ought to have appreciated that interest on Income-tax refund of Rs.....
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.... u/s. 36(1)(viia) of the Act allowed in AY 2010-11, the loss was not allowable and required to be added to total income of the assessee. A.O. has failed to examine these facts. Failure of the assessing officer to examine the same has rendered the assessment order dated 31.12.2018 as erroneous in so far as it is prejudicial to the interests of the revenue. (ii) It is also observed that Annexure J clause 21 (1)(B) of Tax Audit Report (TAR) in 3 CD From that there was unpaid leave encashment of Rs. 108,02,83,033/- which was outstanding on date of reporting of TAR. Further no document available on records which shows that the said unpaid amount was paid on or before due date of filing of return. However from computation of income of the assessee it is revealed that the assessee had disallowed only Re. 27,82,79,269/ on account unpaid leave encashment which was accepted. As the deduction on account of leave encashment is available only on actual payment, the entire unpaid amount was required to be disallowed. A.O. has failed to examine these facts. Failure of the assessing officer to examine the same has rendered the assessment order dated 31.12.2018 as erroneous in so far as it is pr....
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....s for purchase of two wheelers as well as consumer vehicles, farm equipments and also for consumer durables to various parties comprising of mainly individuals. The said loan is given against hypothecation of the said asset to the Bank. The loan is generally given for a period of 3 to 5 years and EMIs are accordingly fixed over the tenure of the loan. In the event the bank is unable to recover its dues inspite of follow-ups, it finally resorts to last step that is possession and disposal of the vehicle. The outstanding loan amount as on the date of repossession along with the outstanding EMIs represent the total amount due from the borrower. On sale of the asset, the overdue EMI's are first adjusted against the sale proceeds and the balance of sale proceeds is then appropriated towards the principal portion. Thus the balance principal portion is then written off as a business loss on sale of repossessed assets. 1.3 As per the show cause notice, the contention of your Honour is that the loss on sale of repossessed assets amounting to Rs. 8.51,14, 124 is nothing but a part of bad debts as held by the Assessing Officer in the preceding assessment year 2010-11 and hence this l....
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....for AY 2010-11 423,76,60,958 423,76,60,958 (A) Revised Bad debts 132,28,89,681 140,80,03,805 (B) Business loss 12,82,53,340 431,39,216 Total Bad Debts and business loss (A+B) 145,11,43,021 145,11,43,021 1.7 Without prejudice to the aforesaid, we respectfully submit that in respect of the above mentioned issue on which revision under section 263 of the Act is sought to be exercised, is on issues which were covered in the original assessment order dated March 12, 2013 passed under section 143(3) r.w.s 144C of the Act and hence the period of limitation as given in section 263(2) of the Act ought to be reckoned from the date of the original assessment order and not the reassessment order. This has been held by the Bombay High Court in the Bank's own merged entity case ICICI Limited vide order in ITA No. 6375/2010 dated February 8, 2012 for AY 1996-97 following the Supreme Court decision in the case of Alagendran Finance (2007) [293 ITR 1]. Hence the proposed revision on these issues is time barred by limitation under section 263(2) of the Act. 1. Unpaid leave encashment. 2.1 The Bank of Rajasthan Ltd. was amalgamated with ICICI Bank with effect from August 12, 20....
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....y High Court in the Bank's own merged entity case lClCl Limited vide order in ITA No. 6375/2010 dated February 8, 2012 for AY 1996-97 following the Supreme Court decision in the case of Alagendran Finance (2007) [293 ITR 1]. Hence the proposed revision on these issues is time barred by limitation under section 263(2) of the Act. 1. Deduction under section 36(1)(viii) 3. 1 With respect to the deduction under section 36(1) (viii) of the Act, the Assessing Officer in para 15 of the assessment order has allowed the same at Rs. 514,43,59,610. In the said working income from non finance such as rent and other charges, lease income, miscellaneous receipt, commission and brokerage and gains on trading aggregating to Rs. 2056,92,45,836 was excluded from the total business income computed at Rs. 7863,19,95,380 and the balance of Rs. 5806,27,49,544 was considered as business income from long term finance eligible for deduction under section 36(1)(viii). 3.2 As per the show cause notice your Honour's first observation is that the lease income to be reduced from the total business income should be Rs. 98,43,12,859 credited to the P&L A/c as against Rs. 89,85,60,025 taken by the ....
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.... error. 5. We reiterate that the order dated December 31, 2018 passed under section 143(3) rw.s. 147 of the Act is neither erroneous nor prejudicial and the proceedings under section 263 initiated are not valid they being either barred by limitation under section 263(2) or being a subject matter of appeal [Expl. 1 Sec. 263(1) and ought to be dropped." 07. Based on this, the learned PCIT passed an order under section 263 of the Act on 31st March 2021 holding as under:- "4.1 Deduction under section 36(1)(viia): The submission made by the assessee is perused but found not tenable as in computation of income the assessee had claimed business loss of Rs. 12,82,53,340/- which was accepted by the Assessing Officer. The said loss interalia included Repossessed vehicles of Rs. 8,51,14,124/-. This loss is nothing but part of bad debt only as held in AY 2010-11. As this loss along with other bad debts of Rs. 556,05,50,638/- does not exceed the credit balance allowed u/s.36(1)(viia) of the Act allowed in AY 2010-11, the loss was not allowable and required to be added to total income of the assessee. The AO in concluding the assessment, has not considered the above aspects and legal pos....
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....me of the assessee to arrive at the business income from long term finance business activity eligible for deduction u/s. 36(1)(viii) of the Act. However, this was done, leading to excess allowance of deduction by Rs. 14,58,62,181/-. The AO in concluding the assessment, has not considered the above aspects and legal position. Therefore the order passed is erroneous in so far as prejudicial to the interest of revenue within the meaning of provisions of section 263 of the Act. 5. In view of the above stated legal position the AOs action in not examining the above stated issues has rendered the assessment order dated 31.12.2018 as erroneous in so far as it is prejudicial to the interests of the revenue. Therefore the assessment order passed u/s.143(3) r.w.s 147 of the I.T. Act., 1961 dated 31.12.2018 without verification of this aspect is erroneous. Since the enquiries with regard to correctness of claim have not been made, the order passed u/s.143(3) r.w.s 147 of the I.T. Act., 1961 dated 31.12.2018 is prejudicial to the interest of revenue. Thus both the conditions specified u/s.263 of the Act are satisfied in this case and it is a fit case to invoke provisions of the said section....
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....f the Act, in case of failure of A.O. to make proper enquiry before accepting the statement made by the assessee/assessment completed in a perfunctory manner and without verifying the nature of expenditure and eligibility of the claim. Gee Vee Enterprises v. Addl. CIT(1975) 99 ITR 375 (Del)m Addl. CIT v. Mukur Corporation (1978) 111 ITR 312 (Guj), Duggal and Co. v. CIT (1996)220 ITR 456 (Del) and CIT v. South India Shipping Corporation Ltd. (1998) 233 ITR 546 (Mad). In the case of Duggal & Co. V/s. CIT 220 ITR 456 (Del), it is also held that word "erroneous" used in Section 263 of the Act, includes the failure to make enquiries as it is incumbent on the A.O. to investigate the facts stated in the return. The ITAT, Ahmedabad in the case of Nakland Diamonds vs. ACIT 67 TTJ 388 (Ahd) has also held that when assessment order is made without proper enquiries on certain points, such assessment was erroneous and prejudicial to the interest of revenue. (iv) In case of Swarup Vegetable Products Industries Ltd., 187 ITR 412 (All.), the Hon'ble Allahabad High Court has held that the Commissioner does have the power to set aside the assessment order and sent for fresh assessment if he i....
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....to the interests of the revenue." (Emphasis supplied) (vii) In M/s. Subhalakshmi Vanijya Pvt. Ltd. vs. CIT (ITA No. 1104/Kol/2014) where the Hon'ble ITAT held it would be totally untenable to hold that once the Assessing Officer as per his wisdom had enquired into certain aspects of assessment which he considered relevant, and thereafter the Commissioner cannot intervene. This view has been endorsed in a recent decision of the Hon'ble Supreme Court in Daniel Merchants Private Ltd vs. ITO (SC 23976/2017). In that case, the Commissioner of Income-tax had passed an order u/s. 263 with the observation that the Assessing Officer did not make proper enquiry while making the assessment and accepting the explanation of the assessee in so far as receipt of share application money was concerned. On that basis, the Commissioner, after setting aside the order of the Assessing Officer, had directed him to carry out a thorough and detailed enquiry on the issue as above. This order was upheld by the Hon'ble High Court, and the Apex Court had seen no reason to interfere with the same. The ratio decided in these judicial authorities are equally applicable here. (viii) Here, it is wo....
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....anation." 08. Therefore, the assessee is aggrieved with the order of the learned PCIT has preferred this appeal. The assessee has also filed a detailed chart along with paper book containing 44 pages. 09. The learned Authorised Representative submitted that original assessment order under section 143(3) was passed on 25th March, 2015 and reassessment order was passed on 31st March, 2018. She also referred to the order passed under section 263 of the Act and submitted that it has held that the order of reassessment passed on 31st March, 2018 is erroneous and prejudicial to the interest of the Revenue. She therefore submitted that only the issues which were part of reopened assessment could be revised under section 263 of the Act. She submitted that all the issues which are connected by the original assessment order passed on 25th March, 2015 are no longer allowed to be revised in order passed under section 263 of the Act. She therefore submitted that issue pertaining to [1] loss on reprocessed vehicles and [2] unpaid leave encashment are issues arising out of the assessment order passed on 25th March, 2015 u/s 143 (3) of the Act and therefore, these issues cannot be subject matter....
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....ence revision cannot be permitted as issues is considered and decided by the ld CIT (A). Accordingly, it was submitted that the order passed by the learned PCIT is not sustainable in law. 015. The learned Authorised Representative also submitted a note of two pages on the various issues. 016. The learned CIT Departmental Representative, vehemently supported the order of the learned PCIT. He referred to the paragraph No. 3.3 of the order and stated that assessee himself has accepted that income tax refund interest is required to be reduced while calculating deduction under section 36(1)(vii) of the Act is erroneous . He further referred to the paragraph No. 4.3, the lease rental income has also been reduced to the extent of only Rs. 89,85,60,025/- instead of Rs. 98,43,12,859/- and therefore, there is an error of excess allowance of Rs. 75,97,701/-. He therefore also stated that there is no infirmity in the order passed by the learned PCIT. 017. We have carefully considered the rival contention, perused the orders of the learned assessing officer passed u/s 143 (3) of the act dated 25/3/2015, u/s 143 (3) read with Section 147 of the act dated 31/12/2018 and order passed u/s 263 of....
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....roceedings, time limit of two years as prescribed Under the provisions of Section 263 (2) run from the end of the financial year in which the order u/s 143 (3) of the act was passed. Further, when assessment is reopened and reassessed, the time limit for revision of reassessment order would run from the end of the financial year in the order of reassessment was passed. Therefore, the natural corollary shows that there is no merger of the original order passed u/s 143 (3) of the act when the assessee is reassessed u/s 143 (3) of the act read with Section 147 of the act. Thus only on the issues for which the assessment was reopened u/s 147 of the act, learned PCIT is empowered to exercise the provisions of revision. 020. In the case before us, the reassessment order passed u/s 143 (3) read with Section 147 of the income tax act 1961 considered the following additions:- a. disallowance of interest u/s 43D read with rule 6EA amounting to Rs. 50,596,549/- b. disallowance of write off of credit cards amounting to Rs. 476,331,562/- c. restriction of allowance of deduction u/s 36 (1) (viii) of the act from Rs. 3,797,060,858/- claimed by the assessee to Rs. 3,778,145,600/- d. consi....
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....ed assessing officer allowed the claim of Rs. 3,778,145,600/-. 025. The learned principal Commissioner of income tax assumed revisionary jurisdiction holding that while working out the income eligible for deduction from long-term finance, the learned assessing officer has not reduced the lease income fully. The learned assessing officer considered such income to the extent of only Rs. 898,560,025/- against the total receipt of Rs. 984,312,859/- and therefore the order passed by the learned assessing officer is erroneous and prejudicial to the interest of revenue. 026. Assessee explained that that a net lease income of Rs. 898,560,025/- has been credited to the profit and loss account, which includes the total rental income of Rs. 984,312,859 and interest on arrear of lease rent amounting to Rs. 68,931,400, which has been reduced by interest expenses of Rs. 154,684,234. Thus the net resultant figure resulted into net credit of Rs. 898,560,025/- . Same has been reduced as lease income from the total income from long-term finance. Therefore, there is no error in the assessment. 027. There is one more component of deduction u/s 36 (1) (viii) of the act. Assessee has earned interest ....
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....f revision u/s 263 of the act. 030. The learned departmental representative vehemently supported the order of the learned principal Commissioner of income tax and stated that the assessee has claimed excess deduction u/s 36 (1) (viii) of the act by reducing lesser income of lease rent income from the long-term finance income. He further submitted that interest on income tax refund of Rs. 164.63 crores has not been reduced as non finance income computing the above deduction clearly shows that the order passed by the learned assessing officer is erroneous and prejudicial to the interest of the revenue. He further stated that merely because the appeal has been filed before the learned CIT - A, the revisionary powers cannot be said to have ousted. 031. We have carefully considered rival contention and perused order of the learned principal Commissioner of income tax as well as the order of the learned assessing officer wherein the computation of deduction u/s 36 (1) (viii) of the act has been made, The first issue that arises is whether the correct lease rental income has been reduced by the assessee and ld AO in computing the income from long-term finance or not. In para number [5] ....
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....nce income of the assessee. 033. Therefore on both these issues, the learned assessing officer has failed to make any enquiries to examine whether the correct lease rental income as well as interest on income tax refund should have been included in the long-term finance income of the assessee for working out deduction u/s 36 (1) (viii) of the act. Hence, on both these issues, we do not find any infirmity in the order of the learned principal Commissioner of income tax in invoking jurisdiction u/s 263 of the income tax act. Accordingly the action of the learned principal Commissioner of income tax u/s 263 of the act is confirmed to that extent only. 034. The learned authorised representative has also stated that assessee has filed an appeal before the learned CIT - A against the same order of the assessing officer where the issue involved is deduction claimed u/s 36 (1) (viii) of the act and therefore as per explanation 1 (c) to Section 263 (1) of the Act, the learned PCIT does not have any jurisdiction to revise such issues. We have carefully considered this aspect and find that the matter must be 'considered and decided' by the CIT - A for ousting the jurisdiction of the learned....