TMI Blog2015 (1) TMI 646X X X X Extracts X X X X X X X X Extracts X X X X ..... is upheld, then, in law, it will affect the computation of income, ultimately because the receipt will not be taxable, it will not come under the ambit of computation of income. Simultaneously it will be excluded from the deduction u/s 80IA as well as of the total income. The result will remain as it is. It is a revenue neutral case. Therefore, in view of the ratio laid down by the Hon'ble jurisdictional High Court in the case of Gopala Gowda (2013 (5) TMI 46 - KARNATAKA HIGH COURT), the second condition for taking action u/s 263, does not exist. The assessment order is not prejudicial to the interests of the Revenue. In view of the above discussion, we allow the appeal of the assessee and quash the impugned order of the learned CIT passed u/s 263 of the Income Tax Act. - Decided in favour of assessee. - ITA No.258/Bang/2014 - - - Dated:- 28-11-2014 - Shri Rajpal Yadav and Shri Jason P. Boaz, JJ. For the Appellant : Shri Sajjan Kumar Tulsiyan, Advocate For the Respondent : Shri C.H. Sundar Rao, CIT (DR) ORDER Per: Rajpal Yadav: The present appeal is directed at the instance of the assessee against the order of the learned Commissioner dated 27.01.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed for the assessment year 2006-07. Therefore, this is added back to the assessee s income as a result of which the total income is to be taken at ₹ 2,02,30,730/- instead of ₹ 22,66,320/-. 5. After verification of the details, the assessment is concluded accepting the income returned. Tax payable as per normal provisions Total income returned Rs.22,66,320 Total income assessed Rs.2,02,30,730 Tax Thereon 30% Rs.60,69,219 Add: Surcharge @ 10% Rs.6,06,922 Total Rs.66,76,141 Add: Education Cess @ 3% Rs.2,00,284 Net Tax Rs.68,76,425 4. The learned Commissioner after going through the record formed an opinion that the assessment order passed by the learned Assessing Officer is erroneous and prejudicial to the interest of the Revenue. He observed that on verification, it was noticed that there was incorrect allowance of deduction u/s 80IA of the Income Tax Act. The copy of the show caus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent case, even if it is found that the assessment order is erroneous, but if it does not cause any prejudice to the Revenue, then that order cannot be set aside u/s 263 of the Income Tax Act. He relied upon the judgment of the Hon'ble Supreme Court in the case of Malabar Industries Ltd. Vs. CIT, 243 ITR 83(SC) and the decision of the Hon'ble jurisdictional High Court in the case of CIT vs. D.G. Gopala Gowda 354 ITR 501. He further made reference to the following decisions: a) Hon'ble Calcutta High Court in the case of Dawjee Dadabhoy and Co. v. S.P. Jain (1957) 31 ITR 872 b) Hon'ble Gujarat High Court in the case of Add. CIT vs. Mukur Corporation (1978) 111 ITR 312 c) Hon'ble Allahabad High Court in the case of Add.CIT vs. Saraya Distillery, 115 ITR 34 (1978) d) Hon'ble Bombay High Court in the case of CIT vs. Gabriel India Ltd, 203 ITR 108 (Bom.) e) Hon'ble Gujarat High Court in the case of CIT vs. Minalben S. Parikh (Smt.) 215 ITR 812 Guj. (1995) f) Hon'ble Madras High Court in the case of CIT vs. G.R. Thangamaligai, 259 ITR 129 (Mad.) 2003. 6. The learned DR on the other hand contended that the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under s 263 is not permitted to substitute his estimate of income in place of the income estimated by the AO. (vii) The AO exercises quasi-judicial power vested in his and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not fee stratified with the conclusion. (viii) The CIT, before exercising his jurisdiction under s. 263 must have material on record to arrive at a satisfaction. (ix) If the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows 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 discussion in that regard. 8. Before adverting to the facts of the present case, we would like to make a reference to the decision of the Hon'ble jurisdictional High Court in the case of CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous order is prejudicial to the interest of the Revenue, the Commissioner could not have exercised the said power. From the admitted material on record, the amount that is ordered to be refunded to the assessee is not the amount, which is lawfully due to the Revenue at all, it was an amount which is Revenue legitimately should have refunded if only the claim had been in the return enclosing the certificates under Section 203. the said amount should have been refunded to the assessee. Because he was handicapped by such certificates not being forwarded to him, consequently not able to make the claim, such a claim was not made. The moment he got possession of those certificates on 12.02.2001, within two years from the date of the end of the assessment year he has put forth the claim. The said amount was not a lawful amount to the Government. It was an amount which should have been refunded to the assessee. Therefore, the condition precedent for exercising the revisional power under Section 263 of the Act is that the order under revision should not only be erroneous, but such erroneous order should result in prejudice to the interest of the revenue. Mere error would not confer j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Authority even if it is erroneous, is not prejudicial to the interest of the revenue, they have set out computation of capital gains and demonstrated that the order was not prejudicial. Therefore, the order passed by the revisional authority is illegal and rightly it has been set aside. In the light of what we have stated above, the substantial question of law is answered in favour of the assessee and against the revenue . 10. The Hon'ble High Court has held that fulfillment of twin condition is must i.e. assessment order should be erroneous and it should cause a prejudice to the Revenue. If any one condition is lacking, then action u/s 263 would not be justified. In the above case, the assessment order was erroneous because the learned Assessing Officer failed to compute the long term capital gain and short term capital gain separately. But the Tribunal ultimately arrived at a conclusion that even if this exercise is being done, then there will not be any tax liability and therefore, there is no need to set aside the assessment order. The Hon'ble High Court has upheld this finding of the Tribunal. In the light of the above, let us examine the facts of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r rendering any service for carrying on the business. In our opinion, carbon credit is entitlement or accretion of capital and hence income earned on sale of these credits is capital receipt. For this proposition, we place reliance on the judgment of the Supreme Court in the case of CIT vs. Maheshwari Devi Jute Mills Ltd. (57 ITR 36) wherein held that transfer of surplus loom hours to other mill out of those allotted to the assessee under an agreement for control of production was capital receipt and not income. Being so, the consideration received by the assessee is similar to consideration received by transferring of loom hours. The Supreme Court considered this fact and observed that taxability of payment received for sale of loom hours by the assessee is on account of exploitation of capital asset and it is capital receipt and not an income. Similarly, in the present case the assessee transferred the carbon credits like loom hours to some other concerns for certain consideration. Therefore, the receipt of such consideration cannot be considered as business income and it is a capital receipt. Accordingly, we are of the opinion that the consideration received on account of carbon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available. Therefore, the assessee cannot claim the benefit of these orders. However, we do not concur with this proposition of the learned CIT, because the Full Bench of the Hon'ble Punjab Haryana High Court in the case of Aruna Luthra reported in 254 ITR 76 has held that a Court decide a dispute between the parties. The case can involve decision on facts. It can also involve a decision on point of law. Both may have bearing on the ultimate result of the case. When a Court interprets a provision, it decides as to what is the meaning and effect of the words used by the Legislature, it is the declaration regarding the statute. In other words the judgment declares as to what the legislature had said at the time of promulgation of the law, the declaration is .., this was the law, this is the law, this is how the provision shall be construed. Therefore, he cannot plead that the view taken by the Tribunal and upheld by the Hon'ble Andhra Pradesh High Court could be considered as if applicable from the date of the decision. In the decision only the position of the law as to how receipts from sale of carbon credits are to be treated, has been explained. One of the argument rai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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