2021 (11) TMI 872 - AT - Income Tax

Revision u/s 263 by CIT - As per CIT AO has not examined the issue of set off of brought forward losses against book profit computed u/s.115JB which rendered assessment order erroneous insofar as it is prejudicial to the interests of revenue - HELD THAT - PCIT did not dispute fact that brought forward business loss or unabsorbed depreciation as per books is at Rs. 120.46 crores. Further brought forward book loss has been increased to Rs. 153.16 crores after giving effect order to CIT(A) order dated 27-10-2014 because of deletion of addition made by the AO towards brought forward loss of Amalgamated Company M/s Visakha Cement Industries Limited. Therefore if recomputed book profit of Rs. 88.75 crores is taken in to account then the assessee can completely set off its book profit of Rs. 88.75 crores out of unabsorbed depreciation of assessment year 2006-07 of Rs. 153.16 crores and thus there is no excess allowance of unabsorbed depreciation while computing book profit u/s. 115JB for the impugned assessment year as alleged by the ld. PCIT. Therefore we are of the considered view that assessment order passed by the Assessing Officer on this issue is neither erroneous nor prejudicial to the interests of revenue. Expenditure incurred for premium on redemption of debentures - The assessee has paid Rs. 59.01 crores on redemption of OCDs and same was debited into profit loss account but in the profit loss account the assessee has also credited equal amount of Rs. 59.01 crores by withdrawing from share premium account. This amount of Rs. 59.01 crores from share premium account is actually reduced from OCDs redemption expenditure of Rs. 59.01 crores debited into profit loss account and thus there is no expenses debited into profit loss account . From the above it is clear that the assessee has not claimed any deduction for expenditure incurred on redemption of FCCB/Debentures. Therefore once no deduction was claimed for any expenditure by debiting into profit loss account the question whether it is capital or revenue in nature does not arise. Whether total amount incurred for premium paid on redemption of debentures is deductible or not? - In this case the issue of expenditure incurred on premium paid for redemption of debentures was thoroughly examined by the Assessing Officer not once but twice and after application of necessary facts to the relevant law has allowed claim of the assessee. Further the issue of expenditure incurred for premium paid on redemption of debentures / FCCB is a subject matter of appeal before learned CIT(A) and the CIT(A) vide his order dated 27.10.2014 has held that assessee is eligible for reducing the amount of 59.01 crores from the net profit shown in profit loss account. Therefore we are of the considered view that once the issue which was subject matter of proceedings u/s.263 was subject matter of appeal before learned CIT(A) then there is no power to the Pr.CIT to take up said issue in revision proceedings as per clause (c) to Explanation (1) to section 263 of the Income Tax Act 1961 - we are of the considered view that assessment order passed by the Assessing Officer on this issue is neither erroneous nor prejudicial to the interests of revenue and hence assumption of jurisdiction by the Principal CIT u/s.263 of the Act fails. Investments in shares of M/s. Janani Infrastructure Ltd. - Admittedly for the first time this issue has been taken up by the Principal CIT in the proceedings u/s.263 of the Act on the basis of information received by the Assessing Officer from another Assessing Officer after the Assessing Officer has passed assessment order u/s.143(3) r.w.s.263 of the Act dated 30.03.2013. This issue was not a subject matter of discussion either in the original assessment proceedings u/s.143(3) or revision proceedings u/s.263 of the Act in first round of 263 proceedings. Therefore when a issue which is not subject matter of any other proceedings the period of limitation shall run from original assessment order passed u/s.143(3) of the Act for the purpose of invoking jurisdiction u/s.263 of the Act. If you consider original assessment order u/s.143(3) dated 22.12.2009 the Principal CIT can revise the assessment order within two years from the end of financial year in which the order sought to be revised was passed. In this case if you take original assessment order dated 22.12.2009 the Principal CIT can issue show-cause notice on or before 31.03.2012. Since the Principal CIT has issued show-cause notice on 09.02.2015 which is clearly beyond the period of two years provided under the Act. Therefore we are of the considered view that assumption of jurisdiction by the Principal CIT on this issue for revision of assessment order u/s.263 of the Act is bad in law and liable to be quashed. Assessment order passed by the Assessing Officer u/s.143(3) r.w.s 263 is neither erroneous nor prejudicial to the interests of revenue - Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act.
2. Setoff of unabsorbed loss under Section 115JB.
3. Premium on redemption of debentures.
4. Verification of investments in M/s Janani Infrastructure Pvt Ltd.

Issue-wise Detailed Analysis:

1. Jurisdiction under Section 263 of the Income Tax Act:
The Principal CIT assumed jurisdiction under Section 263, alleging the assessment order was erroneous and prejudicial to the interests of revenue. The assessee argued that the twin conditions for invoking Section 263 were not satisfied, as the assessment order was neither erroneous nor prejudicial to the revenue. The Tribunal observed that the Assessing Officer (AO) had already examined the issues in question during the original assessment and the subsequent reassessment proceedings. The Tribunal concluded that the Principal CIT's assumption of jurisdiction was not justified as the AO's order was neither erroneous nor prejudicial to the interests of revenue.

2. Setoff of Unabsorbed Loss under Section 115JB:
The Principal CIT contended that the AO allowed an incorrect setoff of unabsorbed loss against book profit, exceeding the permissible amount. The Tribunal noted that the AO had considered the issue of setoff of losses in both the original and reassessment proceedings. The Tribunal found that the AO had allowed the setoff of brought forward losses correctly, as per the records and subsequent appellate orders. Therefore, the Tribunal held that the assessment order was not erroneous or prejudicial to the interests of revenue on this issue.

3. Premium on Redemption of Debentures:
The Principal CIT argued that the AO failed to examine whether the premium on redemption of debentures was capital or revenue in nature. The Tribunal observed that the AO had examined the issue in detail during the original assessment and reassessment proceedings. The Tribunal also noted that the assessee had not claimed any deduction for the premium, as it was adjusted against the share premium account. The Tribunal concluded that the AO's order was not erroneous or prejudicial to the interests of revenue on this issue.

4. Verification of Investments in M/s Janani Infrastructure Pvt Ltd:
The Principal CIT raised concerns about the AO's failure to verify investments in M/s Janani Infrastructure Pvt Ltd. The Tribunal noted that this issue was not part of the original assessment or the first revision proceedings. The Tribunal held that the Principal CIT's assumption of jurisdiction on this issue was barred by limitation, as it was raised beyond the permissible period. The Tribunal quashed the Principal CIT's directions on this issue.

Conclusion:
The Tribunal concluded that the assessment order passed by the AO under Section 143(3) read with Section 263 was neither erroneous nor prejudicial to the interests of revenue. Consequently, the Tribunal quashed the Principal CIT's order under Section 263 and allowed the assessee's appeal.