TaxTMI 
TaxTMI 
2022 (11) TMI 356
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.... income on 29/112012, declaring total loss of Rs. 130,64,21,515/- under normal provisions of the Act and book profit of Rs. 54,30,88,947/- u/s. 115JB of the Act. Thereafter, the assessee e-filed a revised return of income on 11/03/2014 declaring the total loss of Rs. 130,64,21,515/- under normal provisions of the Act and book profit of Rs. 54,35,88,947/- u/s. 115JB of the Act for rectifying the following:- * Disclosing the foreign bank details; * 14A Disallowance of Rs. 5,00,000 while computing book profits under Section 115JB Act 3.1. Subsequently, the case was selected for scrutiny assessment under section 143(2) of the Act vide notice dated 08/08/2013. During the assessment proceedings, the Ld. AO issued notices u/s. 143(2) and 142(1) of the Act dated 17/11/2014. In the said notice the Ld. AO had asked for report under section 115JB of the Act and various other details. The assessee submitted the report under section 115JB of the Act and various other details vide submission dated 21/01/2015. Further, various notices were issued under Section 142(1) of the Act, which were duly complied by the assessee and all the submissions were made in respect of details called for. The L....
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....computed under normal provisions of the Act, the Ld. AO failed to add back the same to book profit under section 115JB of the Act during reassessment proceedings. Accordingly, the assessee was issued show cause notice to explain why revision under section 263 of the Act should not be made. Subsequently, vide letter dated 07/05/2021, the assessee filed a detailed reply on the validity of proceedings under section 263 of the Act and explained that no disallowance to be made with regards to the provision for foreseeable loss while computing the book profit under section 115JB of the Act. It is pertinent to note that the assessee has always contested that the revision proceedings are time barred and thus are not valid. 3.5. Thereafter, the Ld. PCIT issued second notice under section 263 of the Act on 17/09/2021, wherein, the Ld. PCIT again mentioned about the details of earlier notice. The assessee filed a detailed response to the said notice vide its submission dated 13/11/2021 wherein the assessee explained the issues raised by the Ld. PCIT by relying on judicial precedents. 3.6. Thereafter the assessee was issued third notice u/s. 263 of the Act on 09/02/2022 asking to submit othe....
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....ions for foreseeable losses while computing book profits u/s. 115JB of the Act had arose only in the reassessment order dated 09/12/2019. This error, even if any, was present in the original assessment order dated 20/04/2016 itself. Hence, we hold that the Ld. PCIT's action in treating the reassessment order dated 09/12/2019 as erroneous and prejudicial to the interest of the Revenue as erroneous and prejudicial to the interest of the revenue, is not correct. Now the short point that arises for our consideration is as to whether the time limit for invoking revision jurisdiction u/s. 263(2) of the Act should be reckoned from the date of original assessment order dated 20/04/2016 or from the reassessment order dated 09/12/2019. We find that this issue is no longer res integra in view of the decision of Hon'ble Supreme Court in the case of Alagendran Finance Ltd., reported in 293 ITR 1 (SC) wherein it was held as under:- 7. A bare perusal of the order passed by the Commissioner of Income-tax would clearly demonstrate that only that part of order of assessment which related to lease equalization fund was found to be prejudicial to the interest of the revenue. The proceedings ....
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....he expression 'assess or reassess such income or recompute the loss or depreciation allowance' in section 147 after the conditions for reassessment are satisfied, is only relatable to the preceding expression in clauses (a) and (b), viz., 'escaped assessment'. The term 'escaped assessment' includes both non-assessment as well as 'under assessment'. Income is said to have 'escaped assessment' within the meaning of this section when it has not been charged in the hands of an assessee in the relevant year of assessment. The expression 'assess' refers to a situation where the assessment of the assessee for a particular year is, for the first time, made by resorting to the provisions of section 147 because the assessment had not been made in the regular manner under the Act. The expression 'reassess' refers to a situation where an assessment has already been made but the Income-tax Officer has, on the basis of information in his possession, reason to believe that there has been under assessment on account of the existence of any of the grounds contemplated by the provisions of section 147(b) read with Explanation (I) thereto." (p. ....
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....lowed a claim which he either failed to make or which was otherwise rejected at the time of original assessment which has since acquired finality. Of course, in the reassessment proceedings, it is open to an assessee to show that the income alleged to have escaped assessment has in truth and in fact not escaped assessment but that the same had been shown under some inappropriate head in the original return, but to read the judgment in Jaganmohan Rao's case, as [if] laying down that reassessment wipes out the original assessment and that reassessment is not only confined to 'escaped assessment' or 'under assessment' but to the entire assessment for the year and starts the assessment proceeding de novo giving the right to an assessee to reagitate matters which he had lost during the original assessment proceeding, which had acquired finality, is not only erroneous but also against the phraseology of section 147 of the Act and the object of reassessment proceedings. Such an interpretation would be reading that judgment totally out of context in which the questions arose for decision in that case. It is neither desirable nor permissible to pick out a word or a sente....
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....ion raised at the instance of an assessee was rejected by a 3-Judge Bench of this Court in CIT v. Shri Arbuda Mills Ltd. [1998] 231 ITR 50. This Court took note of the amendment made in section 263 of the Act by the Finance Act, 1989 with retrospective effect from 1-6-1988, inserting Explanation (c) to sub-section (1) of section 263 of the Act stating: "The consequence of the said amendment made with retrospective effect is that the powers under section 263 of the Commissioner shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in an appeal. Accordingly, even in respect of the aforesaid three items, the powers of the Commissioner under section 263 shall extend and shall be deemed always to have extended to them because the same had not been considered and decided in the appeal filed by the assessee. This is sufficient to answer the question which has been referred." (p. 52) We, therefore, are clearly of the opinion that in a case of this nature, the doctrine of merger will have no application. 14. The Madras High Court in A.K. Thanga Pillai's case (supra), in our opinion, has rightly considered the matter albeit un....
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....d by the Commissioner of Income-tax beyond the period of limitation, it was wholly without jurisdiction rendering the entire proceeding a nullity. (Emphasis supplied by us) 16. The Tribunal and the High Court, therefore, in our opinion, were correct in passing the impugned judgment. The appeal, therefore, being devoid of any merit is dismissed with costs. Counsel's fee assessed at Rs. 25,000. 3.8. Moreover, we further find that the Hon'ble Jurisdictional High Court in the case of Ashoka Buildcon Ltd., reported in 325 ITR 574 had also held as under: 10. The submission which has been urged on behalf of the revenue is that when several issues are dealt with in the original order of assessment and only one or more of them are dealt with in the order of reassessment passed after the assessment has been reopened, the remaining issues must be deemed to have been dealt with in the order of reassessment. Hence, it has been urged that the omission of the Assessing Officer, while making an order of reassessment to deal with those issues under section 143(3) read with section 147 constitutes an error which can be revised in exercise of the jurisdiction under section 263. The sub....
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.... the present case to indicate that there was any other income which had come to the notice of the Assessing Officer as having escaped assessment in the course of the proceedings under section 147 and when he passed the order of reassessment. The Commissioner, when he exercised his jurisdiction under section 263, in the facts of the present case, was under a bar of limitation since limitation would begin to run from the date on which the original order of assessment was passed. We must however clarify that the bar of limitation in this case arises because the revisional jurisdiction under section 263 is sought to be exercised in respect of issues which did not form the subject-matter of the reassessment proceedings under section 143(3) read with section 147. In respect of those issues, limitation would commence with reference to the original order of assessment. If the exercise of the revisional jurisdiction under section 263 was to be in respect of issues which formed the subject-matter of the reassessment, after the original assessment was reopened, the commencement of limitation would be with reference to the order of reassessment. The present case does not fall in that category.....
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....6 and not from the date of reassessment order dated 09/12/2019. Hence, the revision order passed by the Ld. PCIT u/s. 263 of the Act is hereby quashed. 3.11. Even on merits, we find that the Ld. PCIT had not conclusively stated as to whether the provision for foreseeable loss is an unascertained liability warranting to be added back while computing book profits u/s. 115JB of the Act. He has not even chosen to address the contentions of the assessee filed before him in this regard. We find the assessee had submitted that it executes fixed price contracts and accordingly, cost and revenue of the project for a particular year is recognized based on the percentage of completion method, being cost incurred to total cost of the project. Every year, basis the stage of completion, provision for foreseeable loss is created on basis of Accounting Standard (AS)-7 on Construction contracts. Para 35 of AS-7 provides that when it is probable that total contract costs will exceed total contract revenue, the expected loss should be recognized as an expense immediately. Thus, assessee is required to estimate its total contract costs (i.e., sum of costs incurred and expected future costs) and recog....
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....bsp; 3.12. Thus, it is clearly evident from the above, that the assessee has created provisions for foreseeable loss for complying with the requirements of AS-7 and hence is an allowable deduction as it is only an ascertained liability. The provision for foreseeable loss being an ascertained liability, the same is treated as an allowable expenditure while computing book profits under Section 115JB of the Act. We also find that the Ld. AR rightly placed reliance on the co-ordinate bench decision of this tribunal in the case of Summit Securities Ltd. in ITA No. 2336/Mum/2012 dated 05/10/2020 wherein this provision for foreseeable loss was accepted to be an ascertained liability and hence allowable as deduction. Moreover, even in the following judicial precedents, it has been held that provision for foreseeable loss created as per AS-7 is an allowable deduction under Section 37 of the Act under normal provisions of the Act: * Decision of Kolkata Tribunal in the case of SPMPL Infra Ltd. in ITA No. 1228/Kol/2018 dated 17/01/2020; * Decision of Pune Tribunal in the case of Ashoka Buildcon Ltd. reported in 61 taxmann.com 330 (Pune-Trib.) dated 31/12/2014; * Decision of this Tribuna....