TaxTMI 
TaxTMI 
2023 (11) TMI 1105
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....ssee filed its return of income on 06.10.2018, reporting total income at Rs. 2,76,33,600/-. Ld. AO having taken note of details submitted in the course of assessment proceeding, completed the assessment u/s. 143(3) of the Act on 19.02.2021 at an assessed total income of Rs. 5,52,64,107/-. Subsequently, Ld. Pr. CIT called for and examined the case records and formed a prima facie view that impugned assessment order passed u/s. 143(3) of the Act dated 19.02.2021 is erroneous insofar as it is prejudicial to the interest of the revenue. Accordingly, a notice u/s. 263 of the Act, dated 08.02.2023 was issued on the following two reasons, which are reproduced as under: "3.1. On examination of the assessment records and Books of accounts for the year ended 31.03.2018, it is observed that you M/s Bijni Dooars Tea Company Limited have proposed dividend of Rs. 90,00,000/- along with DOT of Rs. 7,32,875/- for the financial year 2017-18. From the Statement of particulars (Form 3CD) to Audit Report u/s 44AB. DOT of Rs. 7,32,875 for the distributed profit of Rs. 90,00,000/- has been paid on 28.09.2017. From the Annual Tax Statement in Form 26AS, it revealed that the Tax on distributed profit of....
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....the revenue. 5. From the above extraction of the two issues raised by Ld. Pr. CIT for the revisionary proceeding u/s. 263, we note that first issue is in respect of Dividend Distribution Tax (DDT) on proposed dividend of Rs. 90,00,000/- which has not been quantified in the return filed by the assessee as well as in the assessment order passed by the Ld. AO. According to the Ld. Pr. CIT, there was a short payment of DDT which attracts penal interest u/s. 115P which also was not quantified. Omission to quantify the actual amount of DDT and interest thereon resulted in short levy of DDT and interest, according to Ld. Pr. CIT. 5.1. On this issue, assessee has taken additional grounds of appeal. On the question of law, the additional grounds raised on this issue are reproduced as under: "1. That, on the facts and circumstances of the case, the Ld. CIT(A) erred in law in not considering that revision of an order u/s. 263 of the Act presupposes existence of an order and as such, there cannot be any revision of a non-existing order. 2. That the Ld. CIT(A) further erred in not appreciating that in the instant case the assessment order is passed u/s. 143(3) of the act, wherein the asse....
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....ent order is not erroneous in so far as prejudicial to the interest of the revenue. According to the assessee, only the amount of carried forward credit u/s.115JAA of the Act needs to be reduced which will be done in its return of income for A Y 2023-24. 6.3. Ld. Counsel submitted that power of revision can be exercised by Ld. Pr. CIT only if he forms a consideration on examination of records of any proceedings as to order passed is erroneous insofar as it is prejudicial to the interest of the revenue. According to him, the twin conditions must be satisfied in order to exercise the powers of revision. 7. For this, let us take guidance from judicial precedence laid down by the Hon'ble Apex Court in the case of Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordships have held that twin conditions need to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and in so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer's order w....
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.... the return by the assessee. Even assessee has admitted that it has wrongly adjusted the long term capital loss of Rs. 13,07,100/- twice, once with LTCG and again with STCG in its computation of total income as per the normal provisions of the Act. Assessee had also explained the reason of such a mistake that it occurred due to typographical error with regard to the date of sale of the relevant investments, hence, adjusted twice. For such a bonafide mistake, assessee has evidently demonstrated in the revisionary proceedings before the Ld. Pr. CIT that no additional tax liability arises for the year under consideration because of the said mistake in computation of total income. 7.3. Ld. Counsel of the assessee has made a detailed written submission on the facts of this issue which is reproduced for ease of reference:- "As per the original computation of total income as reflected in the ROI, after the wrong adjustment of LTCL of Rs. 13,07,100/- against STCG resulting in understatement of STCG to the tune of Rs. 13,07,100/-, Gross tax payable under normal provisions of Income Tax Act was arrived at Rs. 76,13,748/- and the tax payable u/s. 115JB of the Act was Rs. 52,27,263/-. Since....
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....al power whereas provisions of section 154 gives power of rectification. It will not be correct to say that "rectification" is equal to "revision" under the Act. 7.4.2. Term "erroneous" used in the section 263 is to be read relating to jurisdictional error on the part of the Assessing Officer in exercise of his powers vested under the law. It cannot be read as to a "mistake" which is rectifiable under the provisions of section 154 either suo moto or on the application of the assessee. 7.4.3. Error committed by the Assessing Officer must be an error of jurisdiction, for if the order is not kept confined to jurisdictional error, no distinction would be left between the corrective powers conferred under section 154 and the revisionary powers exercisable under section 263. If such a distinction between the corrective powers and revisionary powers is not recognized, every incorrect order would become amenable to revisionary jurisdiction and the fall out would be that revisionary jurisdiction would then become exercisable even in case where the provisions for rectification are attracted. Such an exercise of provisions of section 263 will lead to making the provisions of section 154 re....
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.... by the assessee in the directors' report placed at page 23 of the paper book wherein while reporting operating results, assessee has made a disclosure of dividend paid for Rs. 90 lakh and dividend distribution tax on the same at Rs. 7,32,873/-. Similar disclosure is made in the statement of changes in equity, forming part of the audited financial statement in the year under consideration, placed at page 51 of the paper book. We also take note of financial statement at note no. 46 wherein, at point no. 3, disclosure has been made towards proposed dividend and tax thereon. However, on perusal of income-tax return form filed in ITR-6, we note that in the 'schedule DDT' which relates to 'details of tax on distributed profit of domestic companies and its payment' is left blank, which is placed at page 144 of the paper book. Thus, from the above observations and noting there are disclosures of proposed dividend and DDT thereon done by the assessee in its audited financial statement and audit report. However, the same remained to be included in the income tax return form which according to assessee, is an inadvertent mistake on its part. 9. Now, we delve on the question of law raised by....
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.... say, if the ITO fails to pass any order, the Commissioner is not empowered by the provisions of section 263 of the Act to compel the ITO to pass an appropriate order. 11. In the instant case, assessment was completed u/s.143(3) of the Act. In this context, it would be of relevance to reproduce sec.143(3) of the Act: Sec.143(3) of the Income Tax Act, 1961, reads as under: "143(3) On the day specified in the notice, issued under sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment: ......" 11.1. What emerges from the above is that in the assessment order passed U/S 143(3) of the Act, assessing officer is required to make assessment of the "total income or loss" of the assessee. That is to say the jurisdiction of Ld. AO u/s.143(3) of the Act is only to ....
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....ovisions of this section, in addition to the income-tax chargeable in respect of the total income of a domestic company for any assessment year, any amount declared, distributed or paid by such company by way of dividends (whether interim or otherwise) on or after the 1st day of June, 1997, whether but of current or accumulated profits shall be charged to additional income-tax (hereafter referred to as tax on distributed profits) at the rate of fifteen per cent. " 12.2. As seen from the above, section Il5-O comes under a separate Chapter XII-D and enacts provision of overriding nature which shall prevail over any other provision contained in the Act. 12.3. It may be noted here that interest payable for non-payment of DDT by domestic company and when it is deemed to be in default are defined under sections 115P of the Act, reproduced as under: "115P. Where the principal officer of a domestic company and the company fails to pay the whole or any part of the tax on distributed profits referred to in sub-section (1) of section 115-0, within the time allowed under sub-section (3) of that section, he or it shall be liable to pay simple interest at the rate of one per cent for every m....
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....der was passed u/s.143(3) of the Act where jurisdiction of Ld. AO is only to compute total income or loss of the assessee and determine the sum payable by him or refundable to him on the basis of such assessment. Levy of interest u/s.115P of the Act for short payment of DDT u/s.115-0, which comes under a separate Chapter, was not a part of the assessment order passed u/s.143(3) of the Act. Facts of the assessee's case reveal that no order u/s.115P was passed charging interest for short payment of DDT. He thus contended that under such circumstances, the impugned assessment order dated 19/02/2021 passed u/s.143(3) of the Act cannot be termed as erroneous in so far as is prejudicial to the interests of the revenue as section 115-0 was not a part of the said assessment order. Hence, in absence of order u/s.115P of the Act imposing interest for short payment of DDT, Ld. PCIT has no power to revise the assessment order passed u/s.143(3). 13.3. In support of his argument, he placed reliance on the decision of Hon'ble Jurisdictional High Court in the case of P.P. Dinwala v. Commissioner of Income-tax reported in 78 TAXMAN 421 (CAL.). 14. Per contra, Ld. CIT, DR vehemently suppor....
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....ntion in the IT Act anywhere that to invoke provisions of 1150 and 115P, separate mechanism is required and that the issues cannot be dealt with while passing an order of assessment. Imposition of penalty u/s 115P forms part of the assessment order like imposition of interest u/s 234A/B/C. The assessee is required to file particulars of dividend declared in the return of income itself. In fact, in response to the show cause notice of the PCIT u/s 263, it was submitted, " ... The details of the same payment of DOT were duly disclosed in the Form No. 3CD filed by the assessee company, however, the same was omitted to be disclosed in the Return of Income filed for the relevant year due to a clerical mistake." (page 21 of the Paper book) Further, the assessee submitted, "the assessee company had wrongly adjusted the Long Term Capital Loss of Rs. 13,07,100/- incurred during the year twice, once with Long term Capital Gain and again with Short Term Capital Gains as per the normal provisions of the Act.. .. there was no malafide intention of the assessee company to make such a mistake." (page 22 of the Paper Book) First of all, the AR of the assessee admits that mistakes have been mad....
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.... u/s 143(3) dated 19/02/2021. He has rightly observed that the decision of the Supreme Court in the case of Malabar Industrial Co Pvt Ltd vs CIT and other decisions on similar issues as referred to in the 263 order apply. It seems that the AR of the assessee tried to misdirect the Court by first citing the instance of Jayshree Tea where Calcutta High Court had pronounced an order holding that additional tax can be levied only on the 40% of the dividend income and the SLP of the department was dismissed on the ground of delay on 28/07/2006. The Supreme Court decided identical issue vide order dated 20/09/2017 where CA No. 9178 pertaining to Tata Tea Co Ltd, CA No. 9179 pertaining to George Williamson (Assam) Ltd and CA No. 9180 pertaining to Apeejay Surendra Corporate Service Ltd was considered and the decision of the Calcutta High Court in Jayshree Tea case was reversed. It is in this backdrop that the AR came up with his absurd idea of requirement of separate 1150 and 115P orders by filing additional grounds since there is hardly any scope to disagree that the order of the AO was erroneous and prejudicial to the interest of revenue, requiring intervention of the PCIT u/s 263." 14....
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....ct for any sum which is payable by the assessee under the Act. 15.2. Contrary to the provision of section 143(3) read with section 156, we notice that DDT is a tax payable on distribution of profits and it is in no way connected to the determination of total income. Though, ld. CIT, DR has pointed out that the computation sheet annexed to the assessment order passed u/s. 143(3) contains details pertaining to DDT as stated above, yet we note that thrusting the assessee with DDT liability along with interest thereon cannot be said to be arising out of regular assessment proceedings u/s. 143(3) of the Act. Liability towards DDT and interest thereon gets fastened on the assessee by provisions contained under Chapter XIID by way of sections 115-O, 115P and 115Q. 15.3. To deal with the above stated contentions on the issue, we refer to the provisions of appeal available to the assessee in this respect as well as we draw analogy from the provisions relating to failure/shortfall to deduct tax at source. 15.3.1. When we refer to the provisions as contained in section 246A dealing with filing of appeal by the assessee. In section 246A(1)(a), there are various types of orders passed by the....
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.... 115O, makes it clear that even if there is no income-tax payable by the domestic company on its total income then also tax on distributed profits shall be payable by it. This leads us to a gainful understanding that even in a situation where case of assessee is not selected for regular assessment u/s. 143(3) and where no income-tax is payable by the assessee on its total income, then also, assessee has to discharge its liability of tax on distributed profits, if it distributes profits. Thus, this clearly lays down that provisions relating to DDT liability contained under Chapter XIID are independent of the section relating to assessment of total income contained in section 143(3). 15.5.1. In absence of any regular assessment undertaken of a domestic company u/s. 143(3), if no income-tax is payable on its total income but if domestic company has distributed profits and there is a demand on its distributed profits u/s 115O and 115P, then, for recovery of the same, the assessee is to be held as 'assessee in default' which can happen only by passing an order to that effect is required by invoking the provisions of section 115Q. 15.5.2. For this DDT liability, after holding the asses....