TMI Blog2016 (2) TMI 1082X X X X Extracts X X X X X X X X Extracts X X X X ..... owards ‘Contribution to SGF’ is not in the nature of ‘provision’ as alleged in the impugned order passed u/s 263 of the Act. Hence the order passed by the Learned AO is neither erroneous nor prejudicial to the interest of the revenue. Hence the revisionary jurisdiction u/s 263 of the Act is not warranted in such a case. - Decided in favour of assessee. - ITA No. 268/Kol/2015 - - - Dated:- 24-2-2016 - Shri M. Balaganesh, Accountant Member, and Shri S.S. Vishwanethra Ravi, Judicial Member For The Appellant : Shri D.S. Damle, FCA, ld.AR For The Respondent : Shri S.Srivastava, CIT, ld.DR ORDER SHRI M.BALAGANESH, AM This appeal of the assessee arises out of the order of the Learned CIT, Kolkata- 2, Kolkata passed u/s 263 of the Act on 27.2.2015 treating the order passed by the Learned AO, u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ), as erroneous and prejudicial to the interest of the revenue. 2. The only issue to be decided in this appeal is as to whether the Learned CIT is justified, in treating the order passed by the Learned AO as erroneous and prejudicial to the interest of the revenue in respect of contribution t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olding the assessment to be erroneous being entirely different from the reasons for which show cause notice was issued, the order of revision passed u/s 263 be cancelled. 6) For that on the facts and in the circumstances of the case, the order of the CIT passed u/s 263 be cancelled and the order of the Assessing Officer passed u/s 143(3) be restored. 7) For that the appellant craves leave to submit additional grounds and/or amend or alter the grounds already taken either at the time of hearing of the appeal or before. 4. We have heard the rival submissions and perused the materials available on record including the paper book filed by the assessee. The Learned DR argued that there was absolutely no discussion made by the Learned AO in the assessment order as could be evident from the reading of the same. Hence it resulted in underassessment warranting invocation of revisionary jurisdiction u/s 263 of the Act by the Learned CIT. He further argued that no prejudice is caused to the asssessee by setting aside the order of assessment as erroneous and prejudicial to interest of revenue and further argued that non-examination of this issue by the Learned AO made the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blic and investors. The purpose of SGF was to guarantee settlement of all transactions of members of the exchange conducted through and inter-se the stock exchange. In the event when any of the member fails to honour his obligation / commitment, that the assessee intervenes and utilizes the SGF to fulfil the commitment of the defaulting member and completes the settlement without disturbing the normal settlement process. The directive dated 9.6.1997 contained detailed guidelines for setting up, maintaining and administering the SGF. The said guidelines made clear that the SGF shall be formed from contributions by the members and shall be utilized only for settling bad deliveries or failures of members on the floor of the stock exchange. It further provided that the fund shall be administered by an independent committee comprising of members and outsiders. In terms of the aforesaid directives, the assessee forwarded a proposal on 29.10.1997 to the SEBI for setting up a separate and independent Settlement Guarantee Fund. It was then agreed that the assessee would transfer at least ₹ 5 crores from its net income each year to the Fund until its corpus reached ₹ 100 crores. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hortfall and deficiencies arising out of the clearing and settlement of the deals as provided in the bye laws and regulations. (e) To satisfy any loss or liability of the clearing house arising out of clearing and settlement of deals as provided in the bye laws and regulations. (f) To any other purpose of the SGF as may be specified by the Defaulters Committee from time to time. 4.3. The above rules make it evidently clear that the SGF maintained by the assessee can only be applied and utilized for the purposes as specified in the bye laws. It cannot be utilsied or appropriated by the assessee itself for its own purposes or at its own free will nor the assessee is entitled or permitted to appropriate any part of the corpus of income of SGF for its own use or purpose treating it to be its own property. In fact the rules contained in Paragraph 8 goes on to categorically caveat that Save as otherwise expressly provided in the Bye-laws and Regulations, the Settlement Guarantee fund shall not be utilized for any other purpose. It further caveats that No income of SGF would be distributed or paid to any member or person as part of profit or as dividend or distributio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... break up of the expenses are as below:- Salary 34,83,812 Staff Welfare 2,12,010 Rent and other Expenses 1,20,000 Electric Charges 20,408 Telephone Charges 18,000 Computer Service Expenses 1,229 Legal and Professional Charges 6,74,656 Website Expenses 40,000 45,70,115 We find from the aforesaid expenses, the same does not represent any provision but were actual expenses incurred by the assessee in connection with managing and operating the SGF. The version of the Learned CIT in the section 263 order that these expenses are in the nature of provision is factually incorrect. Hence we hold that initiation of proceedings u/s 263 of the Act based on incorrect facts is not justified. 4.6. Apropos the balance sum of ₹ 5,76,07,622/- debited to profit and loss account under the head Contribution to SGF , we find that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. 4.7. It was submitted that this Fund has been in existence from 1998 onwards wherein the contributions and transfers to the Fund have been invested in notified securities and the income earned thereon has been consistently credited in the said Fund and such income was always excluded while computing the taxable income of the assessee. It was further submitted that in all the earlier years, the Learned AO had accepted this accounting practice of the assessee and allowed the deduction. In this regard, we hold that the principle of res judicata though not strictly applicable in income tax proceedings, yet the established rule of consistency must also be followed on factual matters permeating through the years. It is a well settled legal position that factual mattes which permeate through more than one assessment year, if the revenue has accepted a particular view or proposition in the past, it is not open for the revenue to take a entirely contrary or different stand in a later year on the same issue, involving identical facts unless and until a cogent case is made out by the Learned AO on the basis of change in facts, position or in law. We place reliance in this regard on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03-2013 should not be revised u/s.263 of the I. T. Act 1961. Please note that no further adjournment will be given unless there IS a valid reason and failure to comply with the requirement of the notice will lead to decision on merit. Sd/- (KAVITA JHA) CIT, Kol-II, Kolkata. We find from the above show cause notice , the Learned CIT had not stated the following:- a) That no enquiries were made by the Learned AO on the impugned issue. b) That how the order passed by the Learned AO is erroneous in as much as it is prejudicial to the interest of revenue. 4.8.1. We hold that the order passed by the Learned CIT u/s 263 of the Act cannot be different from the ground on which the show cause notice was issued u/s 263 of the Act. In this regard, we place reliance on the co-ordinate bench decision of this tribunal in the case of Vesuvius India Limited vs CIT in ITA No. 663/Kol/2010 for Asst year 2002-03 dated 30.3.2012, wherein it was held that :- 9. Having said so, we may also make it clear that in view of the judgement of the Hon ble Delhi High Court in the case of CIT vs Vee Gee Enterprises (99 ITR 375) , an assessment order is rendered erroneous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pport the facts of the instant case. In the case before the Hon ble Calcutta High Court, it was held that where it was established on record that credits shown by the assessee were based on laon from parties who were not possessed of sufficient means and the AO had not made sufficient enquiries regarding the creditworthiness of the parties, then the Commissioner was justified in exercising his power u/s 263 of the Act and directing the AO to make enquiries about the creditworthiness of the parties. In the instant case, there was nothing on record that would enable the Learned CIT on his examination to come to a conclusion that the Learned AO had allowed an illegitimate claim towards Contribution to SGF and the accounting treatment done by the assessee with regard to the same. It is not in dispute that the assessee had duly credited the profit and loss account by the same figure of ₹ 5,76,07,622/- and had only tried to eliminate the said income attributable to the Fund by debiting the same in its profit and loss account and therefore it becomes revenue neutral. Hence it can be safely concluded that the order passed by the Learned AO is also not prejudicial to the interest of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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