TMI Blog2006 (5) TMI 133X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee during the year 1998 continued to remain with the assessee. According to the CIT, interest amounting to Rs. 13,66,970,850 at the rate of 10.5 per cent of Rs. 13,01,87,70,000 had accrued to the assessee from the oil bonds for the year under appeal but was not subjected to tax. He, therefore, held that the assessment order was erroneous and prejudicial to the interests of the Revenue and required the assessee to explain. 3. The assessee filed a detailed written submission before the CIT. The relevant details about the oil bonds were given. It was particularly emphasized that the mere receipt of the oil bonds does not amount to income, that the assessee did not have the right to appropriate them as its income in the absence of the notification issued by the Government clearly giving the right to the assessee, that the issue is settled in favour of the assessee by the order of the Tribunal for the asst. yr. 1998-99 dt. 7th Aug., 2000 in appeal arising out of proceedings under s. 143(1)(a), that for the asst. yr. 1998-99 the CIT(A) in appeal against the regular assessment made under s. 143(3) had held that principal value of the bonds not having accrued to the assessee the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal on 7th Aug., 2000 for the asst. yr. 1998-99 in the appeal against the order under s. 143(1)(a) and the view expressed by the CIT(A) for the same year in appeal against the regular assessment made under s. 143(3) and when an assessment is made in accordance with the orders of the appellate authorities, it cannot be said to be erroneous; (c) no prejudice has been caused to the Revenue because the assessee can be assessed, in fact it had offered to be assessed, to tax in respect of the interest income to the extent notifications or orders were issued by the Government finally and unconditionally releasing the bonds in favour of the assessee, in the previous years relevant to the asst. yrs. 1999-2000 and 2000-01; (d) the Department did file an appeal to the Tribunal against the order of the CIT(A) for the asst. yr. 1998-99 but consciously omitted to take the ground relating to the taxability of the oil bonds interest; (e) when the CIT issued a show-cause notice proposing to revise the assessment on 20th March, 2002, the CIT(A) had already passed an order for the asst. yr. 1998-99 on 8th March, 2002 by which he had decided the issue of taxability of the interest in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Oil Co-ordination Committee, the bonds and the interest cannot be said to belong to the assessee irretrievably and till the passing of such orders/notification the assessee could be asked to return the bonds or refund the interest,. a position which has been reflected in the balance sheet of the assessee (p. 98 of the paper book which shows Sch. 16 to the balance sheet showing "liability for oil bonds/on account payments from OCC" at Rs. 15,902.50 million as on 31st March, 1999). It was therefore submitted that even on merits, the conclusion of the CIT is wrong and that the interest cannot be said to have accrued to the assessee during the year ended 31st March, 1999. It cannot, therefore, be taxed. 7. On merits, the following authorities were cited in support of the plea that no interest could be said to have accrued to the assessee, despite the assessee having received the oil bonds and also the interest, till appropriate notifications/orders were passed by the OCC: (a) E.D. Sasson Co Ltd. vs. CIT (1954) 26 ITR 27 (SC) (b) Amar Nath Khandelwal vs. CIT (1980) 17 CTR (Del) 243 : (1980) 126 ITR 322 (Del) (c) Order dt. 31st Aug., 2004 of the Delhi "E" Bench of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the merits one way or the other, there was no need to examine the merits of the claim of the assessee at this stage. 10. In his brief reply the learned counsel for the assessee contested the claim of the learned CIT-Departmental Representative that the assessment was considered erroneous and prejudicial to the interests of the Revenue because the assessment order did not disclose any application of mind on the part of the AO. He drew our attention to the letter dt. 5th Dec., 2001 written by the assessee to the AO in the course of the assessment proceedings and pointed out that portions from the same letter, in connection with another issue (regarding currency rate fluctuations on capital and revenue accounts) have been extracted by the AO in para 3 of the assessment order and the assessee's claim therein has been rejected, which shows that the written submissions have been duly and fully considered by the AO and that he had accepted the claim of the assessee about the taxability of the oil bonds interest only after applying his mind to the same. It was submitted that for purposes of s. 263, as contrasted with s. 147, it was not necessary that the assessment order itself should ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er alia, the following terms: (i) that the bonds were issued on "provisional basis"; (ii) that the bonds were issued towards the "estimated" claims; (iii) that the claims are subject to audit by the C AG of India; (iv) that the issue of the bonds "does not per se signify acceptance of any claim; (v) ONGC (assessee) will be "liable to refund" any overpayment. In accordance with the above, the assessee received oil bonds worth Rs. 3,122 crores and in its accounts the amount of bonds worth Rs. 1,820.13 crores recognized as income (price of crude) was reduced and the balance of Rs. 1,301.87 crores, not recognized as income, was shown. The CIT, in his show-cause notice, has observed that interest at the rate of 10.5 per cent on this amount of Rs. 1,301.87 crores, ought to have been taxed as the income of the assessee. The assessee has pointed out in its reply to the notice that out of the amount of Rs. 1,301.87 crores the GOI has taken back bonds worth Rs. 850.63 crores on the ground that the assessee was not entitled to the same and that out of the balance of Rs. 451.24 crores, the assessee has offered far taxation a sum of Rs. 447.40 crores far the asst. yr. 2000-01 since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t view of the mailer and nothing being brought before us to show that the order of the Tribunal or its observations regarding the merits of the assessability of the oil bonds have been reversed, we must hold that the view taken by the AO was undoubtedly in conformity with those observations attracting the decision of the Calcutta High Court in the case of Russell Properties (P) Ltd. vs. A. Chowdhury, Addl. CIT (1977) 109 ITR 229 (Cal) and the judgment of the Orissa High Court in CIT vs. Orissa State Finance Corporation (1993) 114 CTR (Ori) 1 : (1993) 203 ITR 747 (Ori) relied upon by the assessee. In these cases it has been held that if the order of the AO is in accordance with the view taken by the Tribunal in the assessee's case for another year, it cannot be said to be erroneous and prejudicial to the interests of the Revenue, notwithstanding that a reference is pending before the High Court against the Tribunal's order. That apart, no appeal had been filed on the point of assessability of the oil bonds against the decision of the CIT(A) for the asst. yr. 1998-99, though an appeal was filed on other points before the Tribunal on 26th June, 2002. This also shows that the Departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd to the issue sought to be revised. This is the basis of the judgment of the Punjab Haryana High Court in Hari Iron Trading Co. cited by the learned counsel for the assessee. The High Court held that the expression "record" has been defined in cl. (b) of the Explanation to s. 263 so as to include all records relating to any proceedings available at the time of examination by the CIT and that it is not only the assessment order but the entire record which has to be examined before arriving at a conclusion as to whether the AO had examined any issue or not. It was observed that the assessee has no control over the way the assessment order is drafted, but if it has produced enough material before the AO, merely because the AO has not discussed in detail the reasons for accepting the claim of the assessee it cannot be said that the matter was not examined by him thoroughly. The practice generally prevailing, of issues which are accepted by the AO not finding mention in the assessment order was noticed by the High Court. This judgment is direct authority under s. 263. If we apply the same to the facts of the case on hand, it is found that some query was raised by the AO on 19th Nov. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02, the order of the Tribunal for the asst. yr. 1998-99 had been passed (7th Aug., 2000) and was available on the record. The acceptance of the claim was, therefore, in conformity with the order of the Tribunal. We may add that the definition of the word "record" in s. 263 is not confined to the proceedings for the year under revision. It includes "all records relating to any proceeding under this Act available at the time of examination by the CIT" and thus it was incumbent on the CIT to also examine, before proceeding to pass the final order under s. 263, whether the AO's decision not to tax the interest on oil bonds was in conformity with the order of the Tribunal. In this view of the matter, we consider it unnecessary to discuss the question whether it is open in this case to the Tribunal to substitute its own grounds for those taken by the CIT. 14. The view taken by the AO was certainly one plausible view, and having regard to the orders of the CIT(A) and the Tribunal for the asst. yr. 1998-99 buttressed by the rule of consistency, was perhaps the better view. The question of accrual of income is no doubt a complex one and the question as to when the particular income can be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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