TMI Blog2019 (8) TMI 1509X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment order cannot be termed as prejudicial to the interests of the revenue, in so far as it was assessed under normal provisions of the Act. Even if addition is made in the book profit computed under Section 115JB of the Act, the same will result into equivalent MAT credit being available to the assessee, which can be utilized in subsequent assessment year. As such, at most this may lead to deferment of tax but it does not result in any loss to the revenue. Thus since there is NIL tax impact on the error noticed by the Commissioner at the time of his examination, the twin conditions of order being erroneous and prejudicial to the interests of the revenue are not satisfied on this issue and thus, the order of the Commissioner on this issue is set-aside. Excessive allowance of depreciation on the foreign exchange fluctuation loss - Quite clearly, the Assessing Officer, in the instant year, allowed the claim as a consequence of the assessment for the preceding assessment year of 2009-10. It is also not the case of the Commissioner that at the time of invoking of Section 263 by him, the assessment order for assessment year 2009-10 had been altered by any higher authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be said to be prejudicial to the interests of the revenue. Since in the present case the Assessing Officer has already analysed one aspect of the matter which was pending before the CIT(A), the matter cannot be again relooked by the Commissioner on any other aspect as the order of the Assessing Officer gets merged with the order of CIT(A) in view of the decision of K. SERA SERA PRODUCTIONS LTD. [ 2015 (5) TMI 937 - BOMBAY HIGH COURT] - Decided in favour of assessee. - ITA NO. 532/MUM/2014 - - - Dated:- 21-8-2019 - SHRI G.S. PANNU, VICE PRESIDENT AND SHRI RAM LAL NEGI, JUDICIAL MEMBER For the Appellant : Shri Soumeh Adak Shri Ashish Jhawar For the Respondent : Shri A. Mohan (CIT) ORDER PER G.S. PANNU, VICE PRESIDENT This appeal by the assessee is directed against the order passed by the CIT I (in short the Commissioner ), Mumbai, dated 25.11.2013, holding the assessment order passed by the Assessing Officer under Section 143(3) of the Act, dated 28.03.2013,as erroneous in so far as it was prejudicial to the interest of the Revenue under Section 263 of the Income-tax Act,1961 (in short the Act ). 2. The Grounds raised by the assessee in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the facts and in the circumstances of the case and without prejudice to Ground No. 1.0 to 1.2 taken here-in-above, the Ld. CIT was not justified and grossly erred in contending that the Excise Duty Exemption granted to the appellant during the year amounting to ₹ 15,67,00,636/- cannot be considered as capital receipt in computing its Total Income under the provisions of the Act other than sec. 115JB. 4.1 That on the facts and in the circumstances of the case and without prejudice to Ground No. 4.0 taken here-in-above, the Ld. CIT was not justified rather grossly erred in again adjudicating the issue of exclusion of Excise Duty Exemption as capital receipt in computation of total income under the provisions of the Act other than sec. 115JB when the said claim was already disallowed by the AO in the order u/s 143(3). 4.2 That on the facts and in the circumstances of the case and without prejudice to Ground No. 4.0 4.1 taken here-in-above, the Ld. CIT was not justified rather grossly erred in contending that the Excise Duty Exemption granted to the appellant cannot be considered as capital receipt when the allowance of the same while computing Total Income under the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Companies Act, 1956 and is, inter-alia, engaged in the business of manufacturing of asbestos cement sheets and accessories and pre-engineering buildings products. It filed its return of income for assessment year 2010-11 on 30.09.2009 declaring total income at NIL under the normal provisions of the Act and at ₹ 18,17,26,878/- under Section 115JB of the Act. Subsequently, the return was revised, wherein a loss of ₹ 1,38,24,200/- was declared under normal provisions of the Act and book profit at ₹ 19,32,01,238/- under Section 115JB of the Act. An assessment under Section 143(3) of the Act dated 28.03.2013 was finalised wherein, inter-alia, additions relevant for the present purpose, on following aspects were made :- a) Amount of sales tax incentives availed under New Packages Scheme of Incentives 1992 amounting to ₹ 6,74,12,461/- was treated as revenue receipt by the Assessing Officer as against capital receipt declared by the assessee; and, b) Amount of Excise duty incentives of ₹ 15,67,00,636/- was treated as revenue receipt by the Assessing Officer as against capital receipt declared by the assessee. 4. In the computation prepared by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoking of Section 263 of the Act can be justified only on satisfaction of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and, (ii) it is prejudicial to the interests of the Revenue. It is a trite law that even if one of the aforesaid conditions is absent in a given case, then invoking of Section 263 of the Act is untenable in law. In this background, we may now examine the manner in which the Commissioner has dealt with the conditions prescribed under Section 263 of the Act in his order. 8. The first issue for which the Commissioner has invoked his revisionary jurisdiction is that assessee while computing the book profit under Section 115JB of the Act reduced the sales tax incentives of ₹ 6,74,12,461/- and excise duty incentives of ₹ 15,67,00,636/- from the profit declared in its Profit Loss Account for the purposes of computing Book profit . Notably, in the return of income, the assessee declared the final income as per Section 115JB of the Act, whereas in the assessment finalised under Section 143(3) of the Act, the Assessing Officer completed the assessment under the normal provisions of the Act as after var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based on records , which are not available before the Commissioner at the time of his examination of record. In this regard, reliance has been placed on the following decisions :- 1) Panyam Cements and Mineral Industries Ltd. vs. Addl. CIT (ITA no. 706/Hyd/2013) 2) Jolly Engineers and Contractors (P) Ltd vs. ITO (1982) 2 ITD 92 (Asr -ITAT) 3) Punjab Wool Syndicate vs. ITO (2012) 17 ITR 0439 (Chd. ITAT) 4) Ganga Properties vs. ITO (1979) 118 ITR 447 (Kol) (HC) 5) Jai Kumar Kankaria vs. CIT (2001) 251 ITR 707 (Kol) (HC) It was also submitted that even if the book profit is recomputed in terms of the directions of the Commissioner, the assessee will be entitled for MAT credit of equivalent amount which will be eligible for set-off in subsequent years, thereby resulting in neutralising of tax liability. Therefore, the instant assessment order dated 28.03.2013 (supra) cannot be said to be prejudicial to the interest of revenue since the instant addition made is tax neutral over the period of time. 10. On the other hand, the learned CIT-DR defended the order of the Commissioner by placing reliance on the same. 11. We find that in the present case, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stries Ltd. (supra), relied on by the assessee wherein it was held as under :- 6. In our view, since the income determined and tax computed under the normal provisions is much more than the book profit and tax thereon u/s 115JB , action of the AO in not computing/ enforcing the tax demand on the profit computed u/s 115JB cannot be considered to be prejudicial to the interests of revenue. Only because subsequently, ld. CIT(A) while considering assessee s appeal against assessment order has held that capital gain is taxable in AY 2006-07 and as a result of which income returned by assessee was restored, that will not render assessment order erroneous and prejudicial to the interest of revenue. 7. While assuming jurisdiction u/s 263 ld. CIT has to examine the error and prejudice caused to revenue by virtue of assessment order on the basis of the facts and materials on record as on the date of completion of assessment. He cannot take into consideration any event subsequent thereto.. 13. Further, in the case of Punjab Wool Syndicate (supra), the Chandigarh Bench of the Tribunal held as under :- 12. .the powers under section 263 of the Act are to be invoked on satisfactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 allowed the claim of further depreciation made by the assessee in its revised return of income. In the instant order, the Commissioner observed that the loan on which assessee incurred foreign exchange fluctuation loss was for the purpose of business of the assessee and not for the purpose of acquisition of any capital assets and thus, no depreciation on this amount could not have been allowed. The Commissioner further observed that the assessee has increased the WDV based on the order of the Assessing Officer for assessment year 2009-10 but the findings in the assessment order for assessment year 2009-10 on this issue is erroneous and not sustainable in law. The Commissioner in his order has categorically stated that steps are being taken to set right the wrong findings given by the AO in AY 2009-10. According to the Commissioner, each assessment year is different and the Assessing Officer is duty bound to check correctness of the claim made by the assessee in its return of income for each year which has not been done in the present case, and thus the order of the Assessing Officer dated 28.03.2013 (supra) on this issue is erroneous and prejudicial to the interests of the reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self to applying the provisions of Section 263 of the Act qua the instant assessment year alone. Admittedly, each assessment year is different and by invoking the jurisdiction under Section 263 of the Act, the Commissioner is empowered to revise the assessment order of the relevant assessment year alone. It is not open for the Commissioner to invoke his jurisdiction prescribed in Section 263 of the Act for one assessment year and thereby embark on correcting the order of assessment passed by the Assessing Officer for a different assessment year. Ostensibly, in the instant case, if the Commissioner found that the order of assessment for assessment year 2009-10 was erroneous and prejudicial to the interests of the revenue, he ought to have invoked the provisions of Section 263 of the Act for assessment year 2009-10. Quite clearly, the Commissioner did not do so and instead, he has attempted to revise the assessment for assessment year 2009-10 while invoking his power of revision under Section 263 of the Act qua the assessment year 2010-11. Quite clearly, the action of the Assessing Officer of allowing depreciation on foreign exchange fluctuation loss in this year is consequent to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above background, in our view, the Commissioner erred in holding the view that in the assessment proceedings culminating in assessment order dated 28.03.2013 (supra) for the instant assessment year, the Assessing Officer should have relooked at his own finding in the earlier year while allowing depreciation on the opening WDV price of foreign exchange fluctuation loss which was accepted in the assessment for assessment year 2009-10 as eligible for depreciation. Quite clearly, the Assessing Officer, in the instant year, allowed the claim as a consequence of the assessment for the preceding assessment year of 2009-10. It is also not the case of the Commissioner that at the time of invoking of Section 263 of the Act by him, the assessment order for assessment year 2009-10 had been altered by any higher authority. In this view of the matter, in our view, the order of the Assessing Officer dated 28.03.2013 (supra) qua the aforesaid aspect, cannot be said to be erroneous and prejudicial to the interests of the revenue within the meaning of Section 263 of the Act. So far as the merit of the claim of depreciation is concerned, we are not inclined to give any opinion in as much as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as have not been considered and decided in such appeal. It is pointed out that in the instant case, the Assessing Officer has considered the aspect of treatment of excise duty and sales tax incentives in the assessment order, which has been challenged by the assessee in appeal before the CIT(A). The said appeal was pending at the time when the Commissioner invoked revisionary jurisdiction under Section 263 of the Act and, therefore, in our view, clause (c) of Explanation 1 to Section 263(1) of the Act could be exercised only in case of lack of inquiry by the Assessing Officer, but not for the level or quality of inquiry. According to the learned Representative, the instant case cannot fall under the category of no inquiry since undisputably, the matter was considered by the Assessing Officer in the assessment proceedings whereby he disagreed with the treatment given by the assessee to the excise duty and sales tax incentives. For the proposition that jurisdiction under Section 263 of the Act can be exercised only in case of lack of inquiry and not in case of inadequate inquiry, reliance was placed on the following decisions :- a) CIT vs. Shreepati Holdings Finance (P.) Ltd. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the revenue. The Commissioner by invoking his revisionary jurisdiction under Section 263 of the Act also wants to treat the excise duty exemption and sales tax incentives as revenue receipts. As such there is no difference in the treatment of excise duty exemption and sales tax incentives given by the Assessing Officer and as required by the Commissioner. The only difference is that the reasoning given by the Assessing Officer and the reasoning of the Commissioner is on different footing. However, this difference does not lead to any tax impact in as much as the tax computed by the Assessing Officer and as suggested by the Commissioner will be the same. Thus, it can safely be inferred that the action of the Commissioner is tax neutral and as such, the order of the Assessing Officer cannot be said to be prejudicial to the interests of the revenue. 27. Furthermore, we also find enough potency in the plea of the assessee that the instant, at best, can be case of inadequate inquiry, and not that of lack of inquiry. The Hon'ble Bombay High Court in the case of Shreepati Holdings and Finance (P.) Ltd. (supra), in this context, observes as under :- 7. Moreover the CIT in e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he applicability of Rule 9A and, therefore, clause (c) of Explanation to sec. 263(1) is not applicable. We, on consideration and perusal of the order of ld. CIT(A) read with the remand report before the AO submitted to the ld. CIT(A), do not find merit in her contention. The AO specifically stated in the remand report to make working of deduction allowable u/r 9A of I. T. Rules. Further, we also observe from para-10 of the assessment order that the AO called for the details from the assessee by issuing notice u/s 142(1) dated 18-12-2009 to furnish details of cost of productionallowable as per Rule 9A of ₹ 27.19 crores. As mentioned hereinabove, the AO after considering the reply filed by the assessee vide letter dated 29-12-2009 as mentioned by the AO in para-10 of the assessment order, considered the claim of the assessee to the extent of ₹ 24,84,37,124/- and disallowed the balance amount of ₹ 2,34,91,380/-. Therefore, it is not factually correct that the AO at the time of making the assessment did not consider the applicability of Rule 9A vis-a-vis claim of the assessee on cost of production of film. 16. The Bombay High Court has also held in the case of CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the contentions of the department that it was difficult to accept the submission of the department that the issue of depreciation being optional or the issue whether the assessee was at all entitled to deduction u/s.80HHC or not, was not a subject matter of appeal filed by the assessee before the ld. CIT(A). It was held that a matter might have many aspects and the above mentioned two factors might be the aspect of the matter, but not the entire matter itself. The matter , in the instant case, was deduction u/s.80HHC. Therefore, the assessment order so far as related to deduction u/s.80HHC has merged with the order of the ld. CIT(A) and, therefore, exercise of power by the Commissioner u/s 263 was even not available under explanation (c) to sec. 263(1) and held that order u/s 263 passed by the ld. CIT was not a valid order in the eyes of law. 19. Similar issue also came before the Hon'ble Gujarat High Court in the case of CIT vs. Nirma Chemicals Works P. Ltd. (supra), wherein also it was held that the assessee claimed relief u/s 80I of the Act. AO worked out such claim after making necessary enquiries and partly reduced the claim made by the assessee. The assessee carried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s per the order dated 31st December, 2009 (para 9.2). The first appellate authority, in dealing with this ground, in its order dated 12th October, 2011, concluded that after that consideration of the submissions of the Assessee, in the backdrop of the facts of this case, it is evident that the addition made by the Assessing Officer cannot be sustained. In para 1.6 of the order passed by the first appellate authority on 12th October, 2011, this conclusion is reached. 9. Then, ground No. 2 in that Appeal was whether in the facts and circumstances and in law the Assessing Officer erred in disallowing the alleged cost of production claimed amounting to ₹ 2,34,91,380/-as per para 10 of the impugned order. In other words, if the amount of ₹ 11,25,00,000/- is not taken to be the income of the Assessee from film Darna Zaroori Hai , then, by applying Rule 9A, the cost of production of this film deserves to be deducted and in full as claimed by the Assessee. From para 2.1 onwards in the appellate order, this aspect has been dealt with. When this aspect was considered by the first appellate authority, not only did he have before him the record pertaining to the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to revise, as conferred by section 263, is sought to be exercised so as to deal with the same matters which have been considered and decided in the Appeal. We do not find any merit in Mr. Mohanty's submission because detailed references have been made in the foregoing paragraphs to the case of the Assessee before the Assessing Officer, his initial order, the order of the first appellate authority, the direction issued by the first appellate authority and which was given effect to by the Assessing Officer. All these would denote that something which was very much part and parcel of the appellate authority's order and dealt with extensively therein is now sought to be revised and revisited. Firstly, if the income of the Assessee from the film is ₹ 11,25,00,000/-, then, whether the explanation of the Assessee that it is not so deserves to be considered or not by the Assessing Officer is grievance No. 1/ground No. 1 before the first appellate authority. Secondly, if that is taken to be the income of the Assessee and without admitting it to be so the cost of production of the film needs to be deducted by applying Rule 9A of the Income Tax Rules. Thus, that is ground No. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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