TMI Blog2015 (6) TMI 675X X X X Extracts X X X X X X X X Extracts X X X X ..... g to ₹ 29,17,01,515/- in respect of which the proceeding under section 263 has been carried out by the CIT, we, therefore, on this basis itself, set aside the order of the CIT passed under section 263. Interest paid allowed by AO despite not being disclosed in the regular books of accounts - Held that:- Assessing officer has after examining the submissions of the assessee as well as making the enquiry on this issue taken a conscious decision. Thus it is a case where the Assessing Officer has examined the issue by making enquiry on the basis of which the CIT invoked jurisdiction under section 263. It is not a case of lack of enquiry on the part of Assessing Officer the Assessing Officer after making enquiries allowed the claim of the assessee on that issue. It is not necessary that the Assessing Officer should discuss in detail the finding in his order, although the Assessing Officer has given clear-cut finding in this regard. Thus it is a case where due inquiry was conducted by the Assessing Officer as is apparent from assessment order on this issue on which CIT invoked jurisdiction under section 263. Once the order passed under section 143(3) is rectified under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, and sales for the AY 2001-02 to 2007-08 in the statement of income submitted before Hon ble ITSC (Income Tax Settlement Commission). Accordingly he is barred from claiming benefit of such expenditure in the years of payment i.e. AY 2009-10. (c) On perusal of the assessee s original application and letter dated 28.03.2008, it is evident that the issue of unpaid excise duty was not disclosed before the ITSC, hence he was prevented from claiming deduction in respect of payment of such liability in the year of payment i.e. AY 2009-10. (d) Further vide para 9 of the order under section 245D(4), the ITSC has allowed capitalization of additional income offered before the ITSC. Hence the use of additional income for payment of unpaid excise duty and interest levied by the Excise Department on undisclosed sale, is not allowable as per ITSC s order, as obvious and evident from ITSC s order . 3. Subsequently after considering the submission of the assessee CIT took the view that the order passed under section 143(3) dated 24.11.2011 is erroneous and prejudicial to the interest of the revenue and accordingly he set aside the order with the direction that the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said payment has to be allowed on payment basis irrespective of the method of accounting followed by the assessee. Based on the order of the Settlement Commission of Customs and Central Excise an income of ₹ 105,00,00,000/- for the assessment years 2001-02 to 2007-08 was settled by the Settlement Commission of Income Tax vide order passed under section 245D dated 28.03.2008. Thus the sales/income as per the order of the Hon ble Customs and Central Excise Settlement Commission was duly disclosed before the Income Tax Settlement Commission. Reliance was placed in this regard on the decision of the Hon ble ITAT, Mumbai Bench in the case of Euro Rscg Advertising (P.) Ltd. vs.- ACIT reported in 53 SOT 90 in which it was held that the deduction claimed by the assessee in respect of any sum paid by way of tax, duty, cess, or fee, shall be allowed only in computing the income referred to in Section 28 of that previous year in which such sum is actually paid by him, irrespective of the previous year in which the liability to pay was incurred on the payment of such sum as per method of accounting regularly employed by the assessee as per section145. For the claim of deduction of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the deduction of the assessee without examining whether the assessee is entitled for the deduction in respect of excise duty as well as interest thereon. 6. We have heard the rival submissions and carefully considered the same along with the order of tax authorities below. Now the question before us is whether the order passed by the CIT under section 263 is within the four corners of his order as is envisaged on him under the Income Tax Act, 1961. Before deciding the issue whether the order passed by the CIT is valid, it is necessary to discuss the provision of sect ion 263 which empowers the CIT to revise the assessment order under section 263, which reads as under:- 263. (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax. Firstly, the Commissioner may call for and examine the records of any proceedings under the Act and for this purpose he need not to show any reason or record any reason to believe. It is a part of his administrative power to call for the record and examine them relating to any assessee. Secondly he may consider any order passed by the Assessing Officer as erroneous as well as prejudicial to the interest of the Revenue. This consideration having regard to the language of section 263 apparently is a consideration which he exercises by calling for and examining the record available at this stage. There is no question of the assessee to appear and make submission. Thirdly, if after calling for and examining the records the Commissioner considers that the order of the Assessing Officer is erroneous in so far it is prejudicial to the interest of the Revenue, he is bound to give an opportunity to the assessee of being heard and after making or causing to be made such enquiry as he may deem fit, pass such order thereon as the circumstances of the case may justify including an order enhancing or modifying the assessment or cancelling assessment and directing a fresh assessment. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue. Once the record is examined and the CIT on the basis of examination of the record forms an opinion that the order is erroneous and prejudicial to the interest of the Revenue, he is empowered after giving the opportunity to the assessee, to make such enquiry as he may deem necessary. Therefore, the enquiry to be conducted by the CIT is an act once the CIT arrives at a conclusion that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue after examining the record. Thus enquiry precedes the record and the material collected during the course of the enquiry cannot be the part of the record of the proceedings when the CIT forms an opinion that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. 10. From the show-cause notice dated 05.03.2014, it is apparent that the CIT has invoked the jurisdiction under section 263 with regard to the following two issues. Claim of the expenditure towards the payment of excise duty pertaining to the assessment years 2001-02 to 2005-06 on the ground that the same was paid in the impugned assessment year despite the same being not disclosed in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him: Provided that nothing contained in this section shall apply in relation to any sum, which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return . 11. It is not denied by the ld. D.R. before us that the excise duty paid by the assessee is covered by the provisions of section 43B(a). Excise duty is a duty imposed by the Central government under the Central Excise Duty Act. The provisions of section 43B(a), in our opinion, are explicit clear and it allows the deduction in computing the income under the head income from business in the year in which the excise duty is actually paid by the assessee irrespective of the previous year in which the liabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. As a manufacturer, when the society is fond of...., Moreover, the assessee has unit at Haridwar, Delhi, Kolkata. Thus, visit to distributors and coordination among the manufacturing units centred at Delhi and Kolkata. Then the AR clarified that the interest paid on unsecured loan proportionate to the loan advanced without charging any interest to the son of the assessee and M/s. Logotech (I) Pvt. Ltd. have been made from business receipts from......and explained in writing . 13. From this we noted that it is apparent that the Assessing officer has after examining the submissions of the assessee as well as making the enquiry on this issue taken a conscious decision. Thus it is a case where the Assessing Officer has examined the issue by making enquiry on the basis of which the CIT invoked jurisdiction under section 263. It is not a case of lack of enquiry on the part of Assessing Officer the Assessing Officer after making enquiries allowed the claim of the assessee on that issue. It is not necessary that the Assessing Officer should discuss in detail the finding in his order, although the Assessing Officer has given clear-cut finding in this regard. 14. If the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either of the sides. 16. We noted that Hon ble Delhi High Court in the case of CIT vs.- Leisure wear Exports Ltd., 341 ITR 166 (Del.) has clearly held as under:- The power of revision is not meant to be exercised for the purpose of direction the AO to hold another investigation without describing as to how the order of the AO is erroneous. From this it also follows that where the assessment order has been passed by the AO after taking into account the assessee s submissions and documents furnished by him and no material whatsoever has been brought on record by the CIT which showed that there was any discrepancy or falsity in evidences furnished by the assessee, the order of the AO cannot be set aside for making deep inquiry only on the presumption and assumption that something new may come out. For making a valid order under section 263 it is essential that the CIT has to record an express finding to the effect that order passed by the AO is erroneous which has cause loss to the Revenue. Furthermore, where acting in accordance with law the AO frames certain assessment order, same cannot be branded as erroneous simply because according to the CIT, the order should be writt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interest of the revenue has to be read in conjunction with an erroneous order passed by the assessing officer. Every loss of revenue as a consequence of the order of the assessing officer cannot be treated as prejudicial to the interests of the revenue. for example, if the assessing officer has adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the assessing officer has taken one view with which the commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue, unless the view taken by the assessing officer is unsustainable in law. Where a sum not earned by a person is assessed as income in his hands on his so offering the order passed by the assessing officer accepting the same without application of mind as such will be erroneous and prejudicial to the interest of Revenue. 20. In the case of CIT vs. R.K. Construction Co., Hon ble Gujarat High cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there was no illegality committed by the assessee in entrusting the work to sub-contractors nor there was any illegality in making all due payments to them. The Tribunal has also given specific finding to the effect that there was no evidence on record that these contractors were related to the assessee or were associates or sister concerns of the assessee. The Tribunal has also given finding that the Revenue has not discharged the onus that the payments to sub-contractors were not genuine. Thus the Tribunal has come to the conclusion that no disallowances can be made merely on the basis of suspicion, howsoever strong may it be, and the suspicion cannot take the place of actuality. AO has taken a particular view on the basis of evidence produced before him. On the basis of the said material and materials which were collected by the CIT in revisional proceedings, the CIT has taken a different view. However, in the revisional proceedings under s. 263, it is not open for the CIT to take such a different view. No substantial questions of law arise out of the order of the Tribunal and hence, the appeal filed by the Revenue deserves to be dismissed. CIT vs. Arvind Jewellers (2002) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oneous and prejudicial to the interest of the Revenue. Since the material was there on record and the said material was considered by the ITO and a particular view was taken, the mere fact that different view can be taken, should not be the basis for an action under s.263 and it cannot be held to be justified. Having regard to the facts and circumstances of the case, the Tribunal was justified in setting aside the order passed by the CIT under s. 263. Malabar Industrial Co. Ltd. vs. CIT (2000) 159 CTR (SC) 1: (2000) 243 ITR 83 (SC) followed. 24. In the case of Income-tax Officer v. DG Housing Projects Ltd. 343 ITR 329 (Del), Delhi High Court has held as under:- A finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under section 263 of the Incometax Act, 1961. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. In such matters, to remand the matter to the Assessing Officer would imply the Commissioner has not examined and decided whether or not the order is erroneous but has directed the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous. Where the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion such a conclusion cannot be found to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. The assessee was a manufacturer of car parts. Its return for the assessment year 2001-02 was taken up for scrutiny and assessment was completed. In revisional proceedings, the solitary objection of the Commissioner was that the expenditure on tools and dies aggregating to ₹ 10,56,69,367 was allowed as revenue expenditure without a detailed investigation. After considering all the materials furnished by the assessee the Commissioner took the view that the accounting practice followed by the assessee to debit the entire cost of tools and dies in the year of installation was not correct and he remitted the case to the Assessing Officer for re-examination. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken an alternative argument that both the issues on the basis of which the jurisdiction under section 263 have been considered and decided by the CIT(Appeals). This is a fact that the original assessment passed under section 143(3) has been rectified by the Assessing Officer vide order dated 24.05.2013 and in the order passed under section 154, the Assessing officer disallowed the excise duty payment of ₹ 29,17,01,515/- as well as the interest amounting to ₹ 12,93,62,086/-. The assessee went in appeal before the CIT(Appeals). CIT(Appeals) duly considered the submissions of the assessee whether the deduction is available to the assessee in respect of the excise duty paid as well as the interest paid. CIT not only annulled the rectification order but has also allowed the relief to the assessee on merit and took the view that the assessee is entitled for deduction in respect of both the payments. We noted that clause (c) of proviso to section 263 mandates that the CIT does not have jurisdiction to revise the assessment on the issue which has been considered and decided by the CIT(Appeals). It is apparently clear that both the issues have duly been considered and decided by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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