TaxTMI 
TaxTMI 
2022 (12) TMI 678
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....rejudicial to the interest of the Revenue for the reasons set out in the show cause notice. 2. For that on the facts and in the circumstances of the case and in law, the Ld. Pr. CIT failed to appreciate that the issue raised in the SCN as well as the impugned order had already been examined and enquired into by the Assessing Officer in the original assessment completed u/s 143(3) of the Act and the order of the AO could not be held to be erroneous and prejudicial to the interests of the Revenue. 3. For that on the facts and in the circumstances of the case and in law, the assessee having substantiated before the Ld. Pr. CIT that the debentures held by way of inventory were valued on the principle of lower of cost or market value resulting in the impugned write-off, the Ld. Pr. CIT was unjustified in setting aside the assessment and directing the AO to re-verify the said claim, without first himself pointing out the infirmity in the submissions of the assessee which clearly proved that the assessment order was neither erroneous nor prejudicial to the interest of the Revenue. 4. For that the assessee craves leave to submit additional grounds and/or amend or....
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.... to show cause as to why the impugned assessment order passed u/s 143(3) of the I T Act, 1961 by the DCIT, Circle-7(1), Kolkata on 27.12.2019 for A.Y. 2017-18should not be held as erroneous in so far as it is prejudicial to the interests of the revenue. You may accordingly furnish your written submissions u/s 263(1) of I.T. Act, 1961 by 21.03.2022 in this regard, elaborating and/or evidencing your contentions/submissions. Considering the pandemic situations arising due to COVID-19, physical attendance is not considered necessary and you are requested to make written submissions with necessary details through E-mail ID: [email protected] it will be treated as compliance to this notice u/s.263(1)." 6. During the course of revisionary proceedings, the assessee submitted that the amount invested in debentures of M/s. Amtek Auto Ltd. at Rs. 5 Cr. in May, 2015 was due to mature on 20th September, 2015 but the company i.e. M/s. Amtek Auto Ltd. defaulted to pay both the maturity and interest proceeds. Various communications were made. However, the assessee received only part of the sum at Rs. 46 lakh towards its pending dues. Since there was no further payment/realisatio....
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....ayment of outstanding interest of the Debentures; -Complaint No. SEBIP/HY16/000084/1 dated 25th July 2016 lodged with the SEBI regarding non-payment of redemption proceeds and interest thereon. 4. Notice dated 09.10.2019 issued u/s 142(1) by the DCIT, Circle 7(1), Kolkata along with the reply dated 19.10.2019 furnished in response thereto. 5. Show cause notice dated 14.03.2022 issued u/s 263(1) by the Pr.CIT-1, Kolkata. 6. Reply dated 21.03.2022 furnished in response to the above SCN inter alia including the following documents: -Notice issued u/s 142(1) of the Act by the AO along with the replies furnished thereto; -Copy of the Public Announcement dated 29th July 2017 made by M/s Amtek Auto Ltd declaring insolvency which further corroborated the valuation exercise undertaken by the company as on 31.03.2017. Extracts of audited financial statements for FY 2021-22 evidencing that the recoveries/receipt upon completion of insolvency proceedings was credited in the P&L A/c and offered to tax in that relevant year. 7. Chainrup Sampatram Vs. CIT (24 ITR 481) [SC] 8. Investment Ltd. Vs. CIT (77 ITR 533) [SC]....
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....bentures were held as 'inventory' and therefore the valuation loss / write-off arisen at the year-end was in the revenue field and not capital. Attention is further invited to Note No. 2.25 of the Financial Statements from which it is again abundantly clear that the company had held these debentures as 'stock-in-trade'. Even in the Profit & Loss Account, the purchase and valuation of these debentures were routed through 'Inventory' [Refer Note No. 15 of Financial Statements], This issue was specifically enquired into by the AO as well in the course of assessment and the company vide reply dated 20th December 2019 had explained the same. In the circumstances your allegation that it is not clear that these debentures were held in capital account or as stock-in-trade is wholly unjustified on facts and in law. 8. The company had acquired the debentures of M/s Amtek Auto Ltd in the regular course of business on 19th May 2015. The said debentures fell due on 20th September 2015 and the said issuer company failed to redeem the debentures and also defaulted in payment of interest. The company wrote several communications/letters to the issuer company. Inspi....
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....e before him and provisions of the Act, formed his considered view that the said valuation loss was indeed on revenue account and accordingly no adverse inference was drawn. From the facts as narrated in the foregoing, it shall therefore be noted that the AO had indeed made proper enquiries on this issue. ................ The company therefore submits that for the reasons set out in the show cause notice, its assessment order u/s 143(3) of the Act for A.Y. 2017-18 cannot be held to be erroneous and prejudicial to the interests of the Revenue within the meaning of Sec. 263 of the Act. 16. For the reasons set out above, it is prayed that the proceedings so initiated u/s 263 of the Act be dropped and/or filed. We request you to take the above on record. In case your goodself is not agreeable to the above submissions, then an opportunity of personal hearing may kindly be afforded to the company." 10. We further find that the provisions of Section 263 of the Act have direct bearing on this issue and the same is reproduced below: "263(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order ....
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....es of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded." 11. On a bare perusal of the sub section-1 would reveal that powers of revision granted by section 263 to the learned Commissioner have four compartments. In the first place, the learned Commissioner may call for and examine the records of any proceedings under this Act. For calling of the record and examination, the learned Commissioner was not required to show any reason. It is a part of his administrative control to call for the records and examine them. The second feature would come when he will judge an order passed by an Assessing Officer on culmination of any proceedings or during the pendency of those proceedings. On an analysis of the record and of the order passed by the Assessing Officer, he formed an opinion that such an order is erroneous insofar as it is prejudicial to the interests of the Revenue. By this stage the learned Commissioner was not required the assistance of the assessee. Thereafter the third stage w....
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.... issue before him; [because AO has to discharge dual role of an investigator as well as that of an adjudicator] then in aforesaid any event the order passed by the ld. AO can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the ld. AO can be termed as prejudicial to the interests of Revenue. When this aspect is examined, one has to understand what is prejudicial to the interests of the Revenue. The Hon'ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. "prejudicial to the interests of the revenue" has to be read in conjunction with an erroneous order passed by the ld. AO. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of ld. AO cannot be treated as prejudicial to the interests of the Revenue. When the ld. AO adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the ld. AO has taken one view with which the ld. PCIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue "unless the view taken by the ....