TaxTMI 
TaxTMI 
TaxTMI 
2022 (7) TMI 1621
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.... The appellant craves leave to add to, amend, alter, modify or withdraw any or all the grounds of appeal before or at the time of hearing of the appeal, as they may be advised from time to time. 4. The assessee has raised the following grounds of appeal as under: 1) The learned Commissioner of Income Tax erred in passing an order u/s. 263, when the jurisdictional conditions were not satisfied. 2) The learned Commissioner of Income Tax erred in violating the principles of natural justice. 3) The learned Commissioner of Income Tax erred in assuming jurisdiction u/s. 263, when there was no prejudice to the interests of the revenue. 4) The learned Commissioner of Income Tax erred in assuming jurisdiction u/sec 263 even though a detailed inquiry was carried out by the Assessing Officer on the issue pertaining to the assessee's claim of long term capital loss on sale of land at Dahej. 5) The learned Commissioner of Income Tax erred in assuming jurisdiction u/s 263 merely on the basis of a difference of opinion with the Assessing Officer. 6) The learned Commissioner of Income Tax cried in holding that the sale of plot at Dah....
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.... disallowance of Rs. 3,76,545/- u/s 14A of the Act. The A.O. dealt on the provisions and financial statements and find that the assessee has incurred interest expenditure of Rs. 4,78,64,000/- on the borrowings and has not disallowed the proportionate interest expenses as per section 14A of the Act in respect of earning the exempted income. The A.O has issued a show cause notice on this disputed issue and the assessee has filed the explanations mentioning that assessee's own funds are more than the investments and therefore the assessee has not used borrowed funds for the purpose of investments and the assessee has made suo motto disallowance to the extent of exempted income. 7. Whereas the A.O. was not satisfied with the explanations and dealt on the applicable provisions and the judicial decisions and finally worked out the disallowance u/s 14A r.w.r 8D(2)(ii)&(iii) of I T Rules of Rs. 27,60,092 after giving the set off of suo moto disallowance made by the assessee, the net disallowance worked out to Rs. 23,83,547/-. The AO while calculating the book profits u/s 115JB of the Act has added the disallowance u/s 14A of the Act for the purpose of computing the book profits. (ii....
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....able against surrender of the plot was adjusted against the allotment of the same plot at Z-112. As per section 2(47) of the Act, transfer in relation to a capital asset includes any transaction involving in allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in 53A of the Transfer of property Act, 1882. The transactions not covered under section 2(47) of the Act is not considered a transfer. Further, as a maxim, notional incomes are not taxed and notional losses are not allowed under Income Tax Act'. Thus, the transaction could not be said to be a transfer as the possession of the land always remained with the assessee even before and after the transaction. As no transfer took place, the LTCL claimed and allowed on the said transaction was a notional loss only. Further, the assessee claimed and was allowed 80IA deduction of Rs. 41487701 on Incinerator facility. In the computation / P&L account for the incinerator unit, the assessee has asserted that the computation of profit has been arrived at by notional savings. As the said facility / incinerator was a cost centre....
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....e been virtually closed. b) Employees are permitted to attend only one day in the week c) We need to lead the details of the submissions in the original assessment, which are available in files stored in the godown We trust that your Honour shall accede to our above request, for which act of kindness our clients shall ever remain grateful. We also regret the inconvenience caused to your Honour and hope to be excused for the same. 10 . Whereas the Pr. CIT was not satisfied with explanations and dealt unilaterally on the facts of the case and the claim of deduction u/s 80IA of the Act and long term capital loss (LTCL) on surrender of plot. The Pr. CIT finally observed that the order passed U/sec 143(3) of the Act is erroneous and prejudicial to the interest of revenue and has set aside the assessment and issued the directions to the AO for de novo assessment. The observations of the Pr. CIT at page 2 Para 3 to 5 of the order are read as under: 3. Thus, as per explanation 2(a) to section 263(1), the Assessment order was held to be erroneous and prejudicial to interest of the revenue since the AO did not conduct adequate enquiry. Based on th....
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....n the said facility. Rather, it went on to compute notional profit. As the Act allows only the actual profit and not notional profit for deduction, the deduction on the said facility under section 80IA was not in order. This aspect was not at all verified by the AO. The Hon'ble Supreme Court in case of Liberty India Ltd. Vs CIT [2009] 183 Taxman 349 (SC) brought out fine distinction between profit linked incentives and investment linked incentives and held that Chapter VIA which provides for incentives in the form of tax deductions essentially belong to the category of profit linked incentives. There is no enabling provision in the Act to allow the deduction computed on notional basis in respect of assesses engaged in infrastructure development. AO passed the assessment order u/s 143(3) on 29.12.2017 without making any specific inquiry about preference shares. In absence of any specific inquiry made by the AO or recording his reasons for accepting assessee's submission without any appropriate evidence, it can not be said that documents submitted by the assessee were duly verified by the AO. The AR of the assessee vide letter dated 17.3.2011 has sought more....
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.... accordance with law, which renders the claim made by order erroneous and prejudicial to the interest of the revenue. Nothing more is required to be established in such a case. If the Assessing Officer passes an order mechanically without making the requisite inquiries or examining the claim of the assessee in accordance with law, such an order will dearly be erroneous in law as it would not be based on objective consideration of the relevant materials. It is therefore, the mere failure on the part of the Assessing Officer in not making the inquiries or not examining the claim of the assessee in accordance with law that per se renders the resultant order erroneous and prejudicial to the interest of the revenue. Nothing else is required to be established in such a case to show that the order sought to be revised is erroneous and prejudicial to the interests of the revenue." (emphasis supplied) The Ld. ITAT, Mumbai in Anuj Jayaendra Shah vs PCIT- 35, Mumbai :2016 reported in 67 taxmann.com 38, held as under: 10. Now, as can be seen above, the amendment to section 263 of the Act by insertion of Explanation 2 to Section 263 is declaratory in nature and is inserted to ....
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....issioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation 1 .- For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the....
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.... 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. 14. We found the assessee has raised the additional ground of appeal on limitation period of issue of notice, since it was pandemic period and the Hon'ble High court has passed the order extending the limitation period and which has to be fallowed. Accordingly, we do not find merits in the additional ground of appeal and is dismissed. 15. On the merits of the case, At the time of hearing, the Ld.AR submitted that the Pr. CIT has erred in set aside the order u/s 143(3) of the Act, which does not satisfy the twin conditions of erroneous and prejudicial to the interest of the revenue and direct the A.O to do afresh assessment. The Ld.AR submitted that the explanation 2 to sec 263 of the Act ought to be considered only when the AO has not applied his mind, the facts are to be verified and no enquiry is conducted. The A.O in the course of the assessment proceedings has called for the details in respect of claim of deduction U/sec 80IA of the Act and the long term capital loss(LTCL) on the surrender of t....
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....ue. On the disputed issue of Claim of deduction U/sec80IA of the Act, the Ld. AR submitted and demonstrated page 57 of the paper book, where the reply to notice u/s 143(2) of the Act was filed and at point 5 of the reply contains filling of Form-10CCB along with Auditors certificate, Balance sheet and profit and loss account and notes to Accounts for claim of deduction u/s 80IA of the Act- power generation and infrastructure facility . The Ld. AR emphasized that the A.O. has raised the query in the course of assessment proceedings and the assessee has filed the reply on 03.10.2016. Further The A.O has issued a notice u/s 142(1) of the Act dated 16.10.2017 and at point 2 it was very clearly mentioned on these aspects of Claim u/sec 80IA of the Act read as under: "2. It Is seen that the assessee company has claimed deduction totaling to Rs. 5,11,96,658/- which includes deduction u/s 80IA of Rs. 4,14,87,701/- in respect of infrastructure facility incinerator and Rs. 91,52,577 in aspect of power unit at Lote. It is further seen that the assessee company has claimed exemption / deduction u/s 10AA of the Act of Rs. 16, 78,85,314/- in respect of SEZ Unit. In this regard, please f....
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.... of the company and are not intended to be used for any other purpose, the disclosure requirements of the applicable accounting standards may not have been complied with. Therefore, these extracts from the financial statements should be read together with the relevant annual financial statements of the company. 2. The extracts from the financial statements have been prepared based on the books of account maintained by Rallis India Ltd. The same are prepared based on each cost centre extract available in companies accounting system and other information available with the company. The basis of allocation of expenditure, assets and liabilities to incinerator-2 is explained as follows. a. Direct expenses such as production cost consisting of fuel consumption and maintenance of Incinerator- 2 have been extracted from the books of account as referred above. Expenditure not directly attributable to Incinerator-2 has been allocated to the Incinerator-2 in the following manner; i. Security Service - Payment pertaining to 1 securing person for the year. ii. Canteen expenses - estimated cost of the food provided by the canteen for the running and ....
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....he opinion of the Assessing Officer, the computation of the profits and gains of the eligible business in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation .- For the purposes of this sub-section, "market value", in relation to any goods or services, means- ii. From the plain reading of the section it is clear hat the section specifically provides for the situation where any goods held for the purpose of the eligible business are transferred to any other business carried on by the assessee. In this case the power generated from the eligible business was transferred for consumption to any other business of the appellant. It is further not the facts of the case or the findings of the AO that the captive power generation until of the appellant is not an eligible business in terms of section 80IA of the Act. iii. It is further seen from the facts of the case that the AO denied the deduction claimed u/s 80IA on the basis of his observation that in respect of revenue generated by the said captive power plant, the narration used in....
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....hich the per unit price is fixed. The tariff fixed for sale by the state power distribution agency for industrial consumers could not be called as market price as the regulators fix the tariff considering the wheeling charges. Transmission loss due to leakage, past losses of the distribution agency, etc. Under such circumstances it is arrived at the computation of profits and gains of the eligible business in the manner provided in the main sub section presents exceptional difficulty and accordingly the proviso to Sec. 80IA(A) would be invoked. vii. Since the amendment to Sec. 80A(6) has been specifically made retrospective from a specific date i.e. w.e.f 01.04.2009, the same would apply with respect to the A.Y 2009-10 onwards. Further, as per the explanation to Sec. 80A(6) the market value means the price the such goods or service would fetch it these if these were sold by the undertaking or nit or enterprise or eligible business in the open market, subject of statutory or regulatory restrictions, if any. In the present case, in the absence of any market the price profit of the appellant from its eligible business will have to be determined as a result of any statutory or....
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....essee has filed the details on the land transaction and the long term capital loss(LTCL) working on surrender of the plot. The assessee was allotted the plot of land Z-112 in Dahej by the Dahej SEZ Ltd in the year 2010 as per the terms and conditions mentioned in the allotment letter. And on the conditions of the lease that the assessee should start its manufacturing unit within the specified time limit. But the assessee could not start the operations for various reasons and the Ld. AR submitted that the land was surrendered and re allotted to the assessee on fresh terms and conditions and referred to page 5 of the paper book the computation of income for F.Y.2014-15 reflecting the long term capital loss. The assessee has computed the index cost of purchase cost of plot and worked out the long term capital loss (LTCL) of Rs. 7,05,38,459/- placed at page 7 of the paper book. The Ld.AR submitted that the Assessing officer has raised the query in the course of hearing on the land transaction/allotment and computation of LTCL. The assessee has filed a detailed reply with the Annexures vide letter dated 23.11.2017 placed at page 64 of the paper book explaining the vital facts on surrend....
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....cts and passed the order. The Ld.AR has referred and demonstrated the submissions, financial statements and explanations filed before the A.O. We find the Hon'ble High Court Bombay in CIT Vs. Gabriel India Ltd.(203 ITR 108).(Bom) has observed on the discussions/ findings of the Assessing officer read as under: Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment year 1973-74 - Assessee claimed a sum of Rs. 99,326 described 'as plant relay out expenses' as revenue expenditure and ITO, after making enquiries in regard to nature of said expenditure and considering explanation furnished by assessee in that regard, allowed assessee's claim - Subsequently, Commissioner, exercising powers under section 263, cancelled order of ITO observing that order of ITO did not contain discussion in regard to allow ability of claim for deduction which indicated non-application of mind and that claim of assessee required examination as to whether expenditure in question was a revenue or capital expenditure and directed ITO to make a fresh assessment on lines indicated by him - Whether under section 263 substitution of j....