TMI Blog2011 (4) TMI 1353X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the Assessing Officer has failed to make necessary disallowance in terms of clause (f) of explanation (1) to section 115JB of the Act in respect of dividend income claimed exempt u/s 10 of the I T Act, which resulted in under assessment of book profit u/s 115JB of the I T Act. Therefore, the CIT was of the opinion that the order passed by the Assessing Officer u/s 143(3)/147 on 29.11.2006 was erroneous in so far as it is prejudicial to the interest of the revenue. Accordingly, proceedings u/s 263 were initiated by the CIT. 2.1 In response to the notice issued u/s 263, it was submitted that while completing the assessment u/s 143(3)/147 on 29.11.2006, the Assessing Officer had made two additions viz ₹ 6.87 crores in respect of arrears of depreciation and ₹ 1.35 crores in respect of revaluation reserve for the purpose of computing book profit u/s 115JB of the Act. Both these additions were subsequently knocked down by the CIT(A). It was submitted that in view of the CIT(A) s order and the Supreme Court s decision in the case of CIT vs Apollo Tyres Ltd reported in 255 ITR 273, there was no case for disallowance in terms of clause (f) of explanation (1) to section 115 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment order dated Nov 29, 2006 passed u/s 143(3) r.w.s147 of the Act without appreciating the fact that the CIT(A)/VI has deleted all the additions/deletions/adjustments made by the A?O in t he said order and thus, the order of the Cit(A) got merged with assessment order passed by the Assessing Officer u/s 143(3) r.w.s 147. The appellant prays that order passed u/s 263 of the Act to be struck down as null and void-ab-initio. 3. On the facts and circumstances of the case and in law, the CIT erred in directing the Assessing Officer to compute book profit u/s 115JB of the Act after making necessary adjustment to the book profit in terms of clause (f) of explanation (1) to sec.115JB of the act. The appellant prays that it b held that on the facts and circumstances, invoking section 263 for directing such disallowance is not in accordance with law and that no addition to the book profit u/s 115JB in terms of clause (f) of explanation (1) to sec. 115JB of the act is called for The assessee has also taken additional ground which reads as under: The order dated 30.3.2009 passed by the CIT u/s 263 of the I T Act is beyond the limitation period as the issue on which rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid two adjustments made by the AO in his order passed u/s 143(3) r.w.s 147 8 25.3.2009 Notice u/s 263 issued by CIT stating that book profit computed by the AO u/s 155jB in his order passed on 29.11.2006 is erroneous and prejudicial to the interest of revenue as no disallowance of expenditure in respect of exempt income is made by the AO under clause (f) to explanation 9 30.3.2009 Order passed by CIT holding that order passed by the Assessing Officer on 29.11.2006 is erroneous and prejudicial to the interest of revenue as no disallowance of expenditure in respect of exempt income is made by the AO under clause (f) to explanation 10 31.3.2009 Expiry of limited u/s 263(2) if limited reckoned from Sl No.5 i.e. the assessment order. 11 19..2009 Finance Act no.II got the assent from the President 4.2 Arguing the additional ground first the ld counsel for the assessee referring to the decision of the Hon ble Supreme Court in the case of Alagendra Finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation made by the Assessing Officer determining the book profit u/s 115JB. Referring to the said computation, he submitted that the Assessing Officer has made addition on account of amount referred to clause (f) of Explanation (1) to sub.sec (2) of section 115JB. 4.9 Referring to the copy of the order of the CIT(A) against the order passed by the Assessing Officer, he drew the attention of the Bench to para 17.6 at page 23 of the order and submitted that the issue relating to disallowance of interest u/s 36(1)(ii) was decided by the CIT(A) wherein he has given part relief to the assessee. 4.10 Referring to page 91 of the paper book, the ld counsel for the assessee drew the attention of the Bench to the notice dated 9.6.2005 issued u/s 148. Referring to the reasons for reopening of the assessment at page 92, he submitted that the reasons for reopening of the assessment u/s 147 of the Act was on account of computation of book profit u/s 115JB due to reduction of arrears of depreciation amounting to ₹ 6,86,82,986/- and revaluation reserves of ₹ 1,35,09,886/-. 4.11 Referring to the order passed u/s 143(3)/147, a copy of which is placed at pages 93 to 100 of the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue, unless the view taken by the AO is unsustainable in law. He accordingly submitted that the order of the CIT passed u/s 263 should be quashed. 5.4 The ld DR, on the other hand, submitted that jurisdictional issue was never before the CIT. While supporting the order of the CIT, the ld DR submitted that the CIT has not at all passed the order based on presumption and surmises and in fact he has quantified the amount of disallowance u/s 14A attributable to such exempted dividend income. He submitted that the decision of the jurisdictional High Court in the case of Godrej Boyce Mfg P Ltd vs ACIT reported in 328 ITR 81 is binding on the assessee as well as the revenue and the decision of the Third Member in the case of Wimco Seedlings Ltd (supra) is not applicable. 6 The ld counsel for the assessee, in his rejoinder submitted that the assessee can always raise a legal issue at any point of time in the shape of additional grounds in view of the decision of the Hon ble Supreme Court in the case of NTPC reported in 229 ITR 383. He also relied on the decision of the Hon ble Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer under clause (f) of explanation (1) to sec. 15JB. Accordingly in the order passed u/s 263 on 30.3.2009, the CIT held that the order passed by the Assessing Officer on 29.11.2006 is erroneous in so far as it is prejudicial to the interest of revenue as no disallowance of expenditure in respect of exempt income is made by the Assessing Officer under clause (f) of explanting (1) to sec. 115JB of the Act. In our opinion, the issue stands covered in favour of the assessee by the decision of the Hon ble Supreme Court in the case of Alegendran Finance Ltd (supra) and the decision of the jurisdictional High Court in the case of Ashok Buildcon Ltd (supra). 7.2 We find. In the case Alagendran Finance Ltd (supra) the assessment for the AYs 1994-95, 1995-96 and 1996-97 were completed in 1997 and 1998. In the orders of assessment, the assessee s claim relating to lease equalisation fund was accepted. Thereafter, orders of reassessment were initiated in respect of three other items but not the item relating to lease equalisation fund and reassessment were made. Thereafter, the Commissioner by an order dated 29.3.2004, initiated revision proceedings only in relation to the item lease ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 263 would commence from the date of the order of assessment and not from the date on which the order reopening the reassessment had been passed. In respect of issues which did not form the subject matter of the reassessment proceedings u/s 143(3) r.w.s 147 limitation would commence with reference to the original order of assessment. 7.4 Since in the instant case, the original order was passed on 22.3.2004 u/s 143(3) of the I T Act and since the reassessment notice was issued for the purpose of adding the arrears of depreciation debited to P L account and the revaluation reserves credited to P L account to be reduced while computing book profit and since the order of the CIT relates to non disallowance of expenditure in respect of exempt income under clause (f) to Explanation(1) of sec 115JB; therefore, in view of the decisions cited above, the period of limitation provided for in 263(2) would commence from the date of original assessment which, in the instant case is 22.3.2004. Since the order of the CIT u/s 263 is dated 30.3.2009, therefore, the same is barred by limitation. Since the assessee succeeds on the additional ground the other grounds being academic in nature are not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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