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Usha Martin Telematics Ltd. Versus C.I.T., Kolkata-IV, Kolkata

2016 (6) TMI 45 - ITAT KOLKATA

Revision u/s 263 - non entitlement to adjust foreign exchange gain while computing the total income - Held that:- CIT having reached the conclusion that the assessee is not entitled to adjust foreign exchange gain while computing the total income and did not mention anything in his order that the order of AO suffered any error and it is prejudicial to the interest of revenue, except mentioning the case requires reconsideration. In our opinion, the facts contained in n the case of COMMISSIONER OF .....

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bove a direction was given to AO to work out the taxable income as per law. In our view it is against the established principles of law. Therefore, applying the ratio of aforesaid decision, we hold that the order dt:12-08-2014 passed by the CIT-IV is bad under law which is liable to be set aside. - Decided in favour of assessee. - ITA No. 2222/Kol/2014 - Dated:- 26-4-2016 - Shri P. M. Jagtap, A.M. & Shri S.S.Viswanethra Ravi, J.M. For The Appellant : Shri Nageshwar Rao, Advocate For The Resp .....

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ating the revisionary proceedings and passing an order under Section 263 of the Income-tax Act, 1961 ('Act'). In this regard, the Appellant respectfully craves leave to prefer an appeal under Section 253 of the Act against the order passed by the learned CIT under Section 263 of Act, on the following grounds: Ground No 1 - Proceedings initiated under Section 263 of the Act are bad in law The learned CIT has erred in initiating the revisionary proceedings under Section 263 of the Act and .....

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e Act for the subject year and revisionary proceedings have been initiated merely on account of change of opinion; and c) Without giving any finding or reasons that the assessment order is erroneous and prejudicial to the interest of the revenue for treating the notional foreign exchange gain as being revenue in nature and accordingly taxable in the hands of the Appellant. Ground no. 2 - Taxability of notional foreign exchange gain as being on revenue account Without prejudice to the above, the .....

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f the Act being bad in law should be deleted. The Appellant craves leave to add, to alter, to amend or to delete any or all of the above grounds of appeal, at or prior to hearing of the appeal, so as to enable the Honourable Income-Tax Appellate Tribunal to decide the appeal according to law. 3. The brief facts of the case are that the assessee is a company and engaged in financial services. The assessee filed its return of income declaring ₹ 2,30,873/- as total income. Under scrutiny, the .....

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on Investments (Mauritius) Ltd. 5. CIT-IV found that the assessee deducted the foreign exchange gain from the net profit under the normal provisions of the Act and the same was not reduced from net profit while computing the income under book profit under section 115JB of the Act. CIT-IV was of the view that the fluctuation in foreign exchange is revenue gain and the assessee is not entitled to adjust the same in computing the total income under the normal provisions of the Act. Accordingly, CIT .....

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did not give his opinion on the order passed by the AO was erroneous in so far it is prejudicial to the interests of the Revenue. The ld. Counsel for the assessee relied on case laws in support of his contentions. The ld. DR relied on the order of the CIT. A reading of the order of CIT-IV suggests that he opined the fluctuation in foreign exchange resulting into gain is a revenue item and no adjustment is available on such gain in computing the total income under normal provisions of the Act. T .....

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ct. The finding of the CIT-IV refers that the assessment requires reconsideration with a direction to AO to examine the case de novo. The CIT-IV failed to point out as to what error was committed by the AO in accepting the foreign exchange gain deductible from the net profit while computing total income under the normal provisions of the Act. 8. A perusal of the order of CIT goes to establish that in response to the notice under section 263 of the Act, the AR representing the assessee appeared a .....

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by the Ld. Counsel for assessee in the case of COMMISSIONER OF INCOME TAX vs. GABRIAL INDIA LTD of Hon ble HIGH COURT OF BOMBAY reported in 203 ITR 1089 (Bom) where a reference made by the Tribunal as to "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in setting aside the order passed by the CIT under s. 263 of the Act ?" The facts involved therein that the assessment of 1973-74, where the assessee-company had claimed deduction of a sum of ₹ .....

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allowed the same on the presumption that it was revenue expenditure and Commissioner opined that the expenditure was in the nature of capital expenditure with out giving any specific finding regarding the order of AO is to how it was erroneous in so far as the prejudicial to the revenue. The Hon ble High Court supra held as follows. 15. We may now examine the facts of the present case in the light of the powers of the Commissioner set out above. The ITO in this case had made enquiries in regard .....

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en after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the ITO to re-examine the matter. That, in our opinion, is not permissible. Further, inquiry and/or fresh determination can be directed by the Commissioner only after coming to a conclusion that the earlier finding of the ITO was erroneous and pr .....

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ssment order and only stated that the case requires reconsideration. In our opinion, the facts contained in the aforesaid decision are similar and relying on the same we hold that the order of the CIT-IV is bad under law and consequently it is set aside. 11. Further on similar facts the Hon ble HIGH COURT OF ALLAHABAD in the case of COMMISSIONER OF INCOME TAX vs. GOYAL PRIVATE FAMILY SPECIFIC TRUST reported in 171 ITR 0698 where the Hon ble High Court rendered opinion Whether, on the facts and i .....

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T set aside the assessment orders for both the years directing the ITO to make the assessments de novo. On appeal, the Tribunal set aside the order of the CIT. The Hon ble High Court observed as under: 6. There is no finding by the CIT that the ITO reached an erroneous conclusion and that, on the facts and circumstances of the case, the conclusion would have been different. The orders of the ITO may be brief and cryptic, but that by itself is not sufficient reason to brand the assessment orders .....

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out any error, no error can be inferred from the orders of the ITO for the simple reason that they are bereft of details. If the order is not erroneous, then it cannot be prejudicial to the interest of the Revenue. There is nothing to show in the order of the CIT that the ITO would have reached a different conclusion had he passed a detailed order. So, the conclusion of the CIT that the orders of the ITO are erroneous and prejudicial to the interest of the Revenue are based merely on suspicion .....

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are similar and applicable to the case on hand and relying on the same we hold that the order of the CIT is bad under law and consequently it is set aside. 13. The Hon ble HIGH COURT OF PUNJAB & HARYANA in the case of COMMISSIONER OF INCOME TAX vs. R.K. METAL WORKS reported in 112 ITR 0445 a question has been referred "Whether, on the facts and in the circumstances of the case, the Tribunal was right in setting aside the order passed by the CIT under s. 263 of the Act". The CIT no .....

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e interests of the Revenue and directed the ITO to reframe the assessment. The Tribunal observed that the CIT had not given any reasons to justify his satisfaction that the order passed by the ITO was prejudicial to the interests of the Revenue. While dealing with the issue the The Hon ble HIGH COURT opined as herein below: 2. A perusal of the order of the CIT clearly shows that the criticism of the Tribunal is well-founded. There is no indication in the order of the CIT as to the basis on which .....

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pted by him. It was necessary for the CIT to state in what manner he considered that the order of the ITO was erroneous and prejudicial to the interests of the Revenue and what the basis was for such a conclusion. After indicating his reasons for such a conclusion, it would certainly have been open to him to remand the matter to the ITO for such other investigation or enquiry as might be necessary. But that was not the course which the CIT pursued. The Tribunal was, therefore, justified in setti .....

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In the present case also, in response to the notice U/S 263 of the Act, the assessee raised his contentions by way of a written submissions, having acknowledging the same on file, with out answering contentious issues therein came to a conclusion that the order of AO is erroneous and prejudicial to the interests of the Revenue. The facts in the aforesaid case also are similar to the facts case on hand and the law laid down by the Hon ble High Court is clearly applicable to the case on hand. 15. .....

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nal, Chandigarh Bench, came to the conclusion that no firm conclusions were arrived at by the CIT in decisional jurisdiction and the order of the CIT was set aside. On these facts, the Tribunal has referred the question for the opinion of the Hon ble High Court at the instance of the Revenue that "Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in vacating the order of the CIT (A), Ludhiana, passed under s. 263 of the IT Act, 1961? The Hon ble High C .....

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