9911796707
TMI Blog2012 (11) TMI 461X X X X Extracts X X X X X X X X Extracts X X X X ..... th October, 2011 allowed the appeal of the assessee in part, a copy of the order of the Ld. CIT(A) dated 12-10-2011 is placed at pages 35 to 47 of the paper book. The Ld. CIT issued a show cause notice u/s 263 of the Act dated 09-03-2012, copy placed at page 19 of the paper book. We consider it prudent to state the contents of the said notice which are as under: "Please refer to the assessment order passed under section 143(3) r.w.s. 153A of the Income-tax Act, 1961 dated 31/12/2009, assessing the income at Rs. 14,37,20,890/-. On going through the details of the documents furnished during the course of assessment proceedings, it is noticed that the film "Darna Zaroori Hai" was released on 28.04.2006 as per details furnished by you during the course of assessment proceedings and also as per information available on internet. The cost of production of this film was Rs. 6,99,73,052/-. The entire cost of the production of the film has been claimed as expenses while computing the taxable income. Your reference is invited to the provisions of Rule 9A of income-tax rules. In accordance with the rules, if the film is released in the last quarter of the previous year, then the expenses c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee and after discussing the provisions of sec. 263 of the Act has stated that the AO had not properly looked into the facts of the case. Part of the blame also lies on the assessee, which has misled the AO to various issues. In the profit & loss account the assessee has shown profit of Rs. 13,67,69,626/- whereas while computing the taxable income, the assessee had taken the profit at Rs. 2,67,69,626/-. Thus, the assessee has taken the profit less by an amount of Rs. 11 crores while computing its taxable income. The Ld. CIT has stated that as per the details of income, income from operations is Rs. 37,43,28,823/- and this income includes income of Rs. 11,25,00,000/- from the film "Darna Zaroori Hai". Since the assessee had shown income from this film there is no question of disallowing the expenses under the provisions of Rule 9A. However, the assessee for the first time vide letter dated 5-12-2009 claimed before the AO that it has wrongly shown excess income of Rs. 11 crores under the head "income from operations in view of the film "Darna Zaroori Hai" and submitted that that amount was share application money received. The AO did not believe this submission of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; If it is found that assessee has sold its share in film, the assessing officer will examine whether all revenue accrued to it from film especially amount to be received from M/s Sahara is taxable as revenue receipts in current year or not? * He will examine as to whether any part of the cost of production of film is allowable in current year as film was released on commercial basis in next year? He has stated that the AO will examine these issues and will pass a fresh assessment order after giving sufficient opportunity of being heard, if he is deciding the issue against the assessee. Hence the appeal by the assessee. 5. During the course of hearing Ld. A.R. submitted that the AO while making the assessment order asked the assessee vide notice u/s 142(1) dated 18-12-2009 to furnish details of cost of production allowable as per I.T. Rules, 9A of Rs. 27.19 crores. That the assessee vide letter dated 29-12-2009 furnished the details of claim of cost of production and the AO after examining the facts and applicability of provisions of law and proper application of mind accepted the deduction to the extent of Rs. 24,84,27,124/- and disallowed the claim to the exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that the Ld. CIT while passing the impugned order u/s 263 of the Act has also gone beyond the reasons stated in the show cause notice in respect of the claim of Rs. 25 lakhs and also gave direction to the AO to examine whether revenue accrued to the assessee from the film especially the amount received from M/s Sahara is taxable as revenue receipt in the year under consideration or not. He submitted that the Ld. CIT without stating the said issue in the show cause notice, cannot give such direction to the AO as it is beyond the reasons given in the show cause notice issued u/s 263 and to substantiate his submissions relied on the decision of the ITAT, Kolkata Bench in the case of Viper Estates & Investments (P.) Ltd. v. CIT, dated 29-12-2011 in I.T.A. No. 890/Kol/2010, the decision of ITAT Mumbai bench in the case of Geometric Software Solutions Co. Ltd. v. Asstt. CIT [2009] 32 SOT 428 (Mum.). The Ld. A.R. submitted that the impugned order of Ld. CIT is not valid and thus the same should be quashed. 6. On the other hand, Ld. DR justified the action of the ld. CIT to invoke jurisdiction of sec. 263 of the Act. She submitted that ld. CIT(A) had not considered applicability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... From a reading of Section 263(1), it is clear that power of suo motu revision can be exercised by the Commissioner only if on examination of any proceedings under the I.T. Act, he considers that any order passed by the A.O. was "erroneous" in so far as it is prejudicial to the interests of the revenue. It is not an arbitrary or un-chattered power. It can be exercised only on fulfilment of the requirements laid down in Section 263(1). The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of revenue must be based on materials on record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him, will be illegal and without jurisdiction. This opinion was expressed by the Hon'ble Bombay High Court in the ease of CIT v. Gabriel India Ltd. [1993] 203 ITR 108. 9. The expression "erroneous", "erroneous assessment" and "erroneous judgment" have been defined in Black Law Dictionary, 6th Edition, Page 542. According to definition, "erroneous" means ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine the records of any proceedings under the Act and to empower him to make or cause to be made such an enquiry as he deems necessary in order to find out if any order passed by the AO is erroneous in so far as it is prejudicial to the interests of the revenue, but subject to the limitation that he must have some material (s) which would enable him to form a prima facie connection with the order passed by the officer is erroneous in so far as it is prejudicial to the interests of the revenue. He is required to exercise revisional powers within the bounds of the law with due respect to the principle of audi alteram paterm. The ld. CIT also cannot invoke his revisionary jurisdiction u/s 263 to correct each and every type of mistake or an error committed by the AO and it is only with an order which is erroneous, that sec. 263 can be invoked. Further, if the AO has made an enquiry during the course of assessment proceedings on the relevant issues and assessee has given its explanation and the AO allowed the claim on being satisfied with the explanation of the assessee, the decision of the AO cannot be held to be erroneous simply because in his order he does not make an elaborate discus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No Name of the Film Date of release 1 Sarlar 30-06-2005 2 James 16-09-2005 3 Darna Jaruri Hai 22-02-2006 In support of the claim relating to date of release assessee has filed copies of Certificate issued by the CBFC (Central Board of Film Certification). The cost claim consists of opening stock and expenditure incurred during the year. The opening stock and expenses incurred for various films are as under: Sr. No Name of the Film Opening Stock Expenses incurred during the year Total cost 1 Sarkar 5,58,03,296 5,83,92,426 11,41,95,722 2 James 4,42,41,537 2,07,45,215 6,49,86,752 3 Darna Jaruri Hai 3,54,87,929 3,44,85,122 6,99,73,051 Cost of the above total cost of each film assessee has created @ 10% reserve towards IPR and has debited the balance in the profit and loss account. However for IT purposes he has claimed the entire cost as per Rule 9A of IT Rules. Thus though assessee had added back in the computation of total income an amount of Rs. 24,84,37,124/- i.e. amount debited to profit and loss account after amortizing 10% towards Intellectual Prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowable as per Rule 9A of Rs. 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 Rs. 24,84,37,124/- and disallowed the balance amount of Rs. 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 Saraf Bandhu (P.) Ltd. (supra), that once the original order goes in appeal and the appeal is decided, the original order ceases to exist since it merged in the appellate order and hence the original order cannot be revised under the revisional jurisdiction of the Commissioner u/s 263 of the Act. It is relevant to state that the ld. CIT(A) passed the order on 12-10-2011 that is much before the notice u/s 263 dated 9-3-2012 was issued by the ld. CIT. 17. At the time of hearing Ld. DR also made a submission that if the issue has not been considered in entirety of applicability of Rule 9A, ld. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th 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 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 the matter in appeal before the CIT(A) who allowed the appeal on this count directing the AO to grant relief u/s 80I of the Act as claimed by the assessee without any disallowance. Subsequently, CIT u/s 263 of the Act disallowed the claim u/s 80I on the ground that the asset used by the assessee in the new industrial undertaking had formed part of old plant & machinery and the new industrial undertaking of the assessee was formed by reconstructing or restructuring or splitting up of the old business. In appeal before the Tribunal, the Tribunal rejected the contention of the assessee that the revisional order had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in current year or not. Since these issues are outside the show cause notice issued by the ld. CIT u/s 263 of the Act, the said direction of the ld. CIT to the AO could not form the basis of revision of the assessment order. To substantiate his submission the ld. A.R. replaced reliance on the decision of ITAT Kolkata Bench in I.T.A. No. 890/K/10 dated 29-12-2011 in respect of Viper Associates & Investments (P.) Ltd. (supra), and the decision of the ITAT Mumbai Bench in the case of Geometric Software Solutions Co. Ltd. (supra). We agree with the above contention of the assessee that ld. CIT in his revisional proceedings cannot travel beyond reasons given by him for revision in show cause notice issued u/s 263 of the Act. Similar view has also been taken by the Hon'ble Delhi High Court in the case of CIT v. Contimeters Electricals (P.) Ltd. [2009] 317 ITR 249, wherein it was held that Tribunal was right in holding that Commissioner did not even call for any explanation of the assessee and the issue of fulfillment of the condition u/s 80IA had not been part of the show cause notice, therefore, it could not form the basis of revision of the assessment order u/s 263 of the Act. 23. B ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
