TMI Blog2020 (3) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... as an exceptional income alongwith the corresponding expenditure of ₹153,50,000/- which had not been claimed in the settlement petition. Once the assessee had declared additional income of ₹12.56 crores in earlier assessment year(s) 2010-11 to 2013-14 in due compliance of the Settlement Commission and got the same assessed under normal scheme than MAT assessment, there is hardly any scope left of under-assessment on impugned prior period income going by the PCIT s observations. We wish to re-emphasise here that PCIT has raised the issue of prior period income of ₹11,04,19,703/- for sec. 115JB computation only relating to the relevant previous year. We thus are of the opinion that once the said prior period income stood assessed under normal provisions in the corresponding earlier assessment year(s) 2010-11 to 2013-14, The Assessing Officer s alleged inaction in not disallowing the very sum(s) as prior period income for the purposes of MAT computation could neither be termed as erroneous nor causing prejudiced to interest of the Revenue going by the foregoing settled legal proposition (supra). The assessee had admittedly incorporated its additional income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revision mechanism in motion as per PCIT s directions. We accordingly accept the assessee s foregoing arguments challenging correctness of the impugned revision action. The same stands reversed. - Decided in favour of assessee. - ITA No.793/Kol/2019 - - - Dated:- 26-2-2020 - Shri P.M.Jagtap, Vice-President And Shri S.S.Godara, Judicial Member For the Appellant : Shri S.K. Tulsiyan, Advocate, And Mrs Puja Somai, ACA For the Respondent : Shri Radhey Shyam, CIT-DR ORDER PER S.S.GODARA, JUDICIAL MEMBER:- This assessee s appeal for assessment year 2014-15 arises against the Principal Commissioner of Income Tax-1, Kolkata s order dated 20.03.2019, passed in case Memo. No.Pr. CIT-1/Kol/Revision u/s.263/2018-19/12933, involving proceedings u/s 263 of the Income Tax Act, 1961; in short the Act . Heard both the parties. Case file comprising of assessee s audit report, balancesheet, statement of profit and loss account, cash flow statement, notes from financial statements of the relevant previous year, assessment / re-assessment orders dated 02.11.2016 and 17.11.2015 for AY 2014-15 and 2010-11, computation of income for AYs 2011-12 to 2014-15, se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. There is no dispute that the Assessing Officer s assessment forming subject-matter of the impugned revision proceedings examined the assessee s forgoing submission as well its sec. 43B excise duty claim of ₹321,64,869/- in view of the corresponding documents produced during the course of scrutiny. There is further no issue that he accepted assessee s returned loss of ₹389,72,062/- and proceeded to compute its sec. 115JB book profits coming to final figure of ₹103,77,217/-. 3. Case file suggests that the PCIT thereafter sought to assume sec. 263 revision jurisdiction by terming it as an erroneous one causing prejudice to interest of the Revenue on the following twin issues:- i) The assessee company has deducted prior period income of ₹ 11,04,19,703/- ( as income already offered before Settlement Commission ) to arrive at the book profit which is not admissible as per provisions of section 115JB. Therefore, the above mentioned irregularity has resulted in underassessment of income of ₹ 11,04,19,703/- having potential tax effect of ₹ 2,78,89,308/- ii) It is observed that the assessee deducted an amount of ₹ 6,28,68,798/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed being peak negative capital Excise duty collected but not deposited to the credit of the Central Government 2010-11 31,01,988 1,80,76,698 47,26,402 2011-12 6,21,37,228 24,33,132 4,33,32,789 2012-13 3,99,20,658 - - 3,11,05,678 2013-14 - - - - - - Total 10,51,59,874/- 2,05,89,830/- 7,91,64,869 Now the grounds for reopening the case are discussed herein below: Ground 1- Prior period income of ₹ 11,04,19,703/- which is inadmissible u/s. 115JB of the Act . In this regard, it is submitted that the assessee offered an additional income of ₹ 12,56,69,703/- in the settlement application filed before the Hon'ble Settlement Commission, Kolkata on 18-03-2014 for the assessment years 2010-11 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Additional income offered before Hon'ble Hon'ble Supreme Court for AY 2010-1 to AY 2013-14 12,56,69,703/- iii) Expenses incurred but not claimed as deduction offered before Settlement Commissions 1,52,50,000/- iv) Provision for income tax interest etc. in respect of additional income. 6,92,66,368/- v) VAT paid in part in respect of Additional sales resulting in additional income 30,00,000/- vi) Total excise duty including interest thereon as per order of Hon'ble SC of Excise (net of excise duty collected ₹ 7,91,64,869/- as stated hereinabove) 3,07,03,929/- 12,56,69,703/- 13,41,84,814/- As such, the sum of ₹ 12,56,69,703/- and ₹ 1,52,50,000/- were routed through the profit and loss a/c under the head Exceptional Income . However, in the computation of income for the subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to the above, the assessee further submits that since the net income of ₹ 11,04,19,703/- is a tax paid income relating to earlier years and was incorporated in the books in the current year, the same forms part of the capital in this year and therefore the sum of ₹ 11,04,19,703/- becomes a capital receipt. The said capital receipt was routed through the Profit and Loss Account in accordance with Part 1 and Part II of Schedule VI to the Companies Act, 2013. However, in the present case, the said receipt is not in the nature of income at all. The sum of ₹ 11,04,19,703/- was incorporated in the books for the current year only to regularize the income of earlier years on which tax has already been paid. If the same is not allowed to be reduced from the Book Profits then the real working results of the current year would be distorted. In this regard, your kind attention is now invited to the show cause notice issued u/s.263 of the Act wherein your goodself has questioned the computation of income under MAT provisions and opined that deduction of prior period income is not admissible by virtue of the Explanation enshrined in section 115JB of the Act. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms and Central Excise Settlement Commission, Kolkata on 19-11-2013 for the period December 2009 to July 2011 for Unit-2 admitting liability on account of non-payment of Central Excise duties of ₹ 8,18,22,881/- and interest liability of ₹ 71,64,290/-, refer page 104 . For Unit 1 the application was filed on 02-07-2014 for the period April 2010 to July 2011 admitting the liability on account of non-payment of Central Excise duties of ₹ 1,62,70,862/- and interest of ₹ 46,10,764/-, refer page 90 . As such, the company paid an amount of ₹ 10,98,68,798/- towards settlement applications filed before Hon'ble Customs and Central Excise Settlement Commission in respect of two units The same is evident from the copy of the orders passed by the Hon'ble Customs and Central Excise Settlement Commissions us/s.32E of the Central Excise Act, 1944 for Unit I and Unit II enclosed at page 87-99 and 100-108 respectively. Out of ₹ 10,98,68,798/-, the sum of ₹ 4,70,00,000/- had already been claimed by the company in earlier years and therefore the balance amount of ₹ 6,28,68,798/- has been claimed in the current year. The date-wise payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pancy was found in this regard. The same is evident from the copy of the submissions filed before the learned AO. Hence, this case is clearly not a case of lack of enquiry on the part of the AO and as already discussed in the preceding paras, it is only in cases of lack of inquiry that proceedings u/s 263 of the Act would be open . Here reliance is placed on the judgment of the Delhi High Court in the case of Commissioner of Income tax vs. Ashish Rajpal (2010) 320 ITR 0674 (Del) wherein it was held that, The fact that a query was raised during the course of scrutiny which was satisfactorily answered by the assessee but did not get reflected in the assessment order, would not by itself lead to a conclusion that there was no enquiry with respect to transactions carried out by the assessee giving the CIT jurisdiction to invoke s. 263, more so when the Tribunal had found that there had been an enquiry which had not been conducted with undue haste . Further, please note that that your goodself has mentioned in the notice that total non-remittance of excise duty for the settlement period was ₹ 7,70,50,738/-.In this regard, please note that excise duty co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Prior period income of ₹ 11,04,19,703/- which is not admissible u/s. 115JB of the Income Tax Act, 1961. It is seen that the assessee had deducted net credit amount of ₹ 4,1l,53,335/- i.e. ₹ 11,04,19,703/-less ₹ 6,92,66,368/- to arrive at book profit. The figure of ₹ 11,04,19,703/- has been arrived at by the assessee by deducting an expenditure of Rs.l,52,50,000/- from the total additional income of ₹ 12,56,69,703/- offered by the assessee for AY 2010-11, AY 2011-12 AY 2012-13 before the Hon'ble Settlement Commission. Hence, at the first instant, the prior period income should be taken as per declared ₹ 12,56,69,703/-. So, there is no reason to give the benefit of the expenditure incurred but was not claimed as deduction offered before the Settlement Commission of Rs.l,52,50,000/- at this late juncture. Secondly the sum of ₹ 85,15,111/- is shown by assessee as a debited exceptional item in the P L A/c. which represented net of debit item of short item sanctioned interest subsidy of Rs.l59.65 lakhs written off and credit item of ₹ 75.50 lakhs additional income which is again net of expenses, taxes and duties a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee states that the application for AY 2010-11 relating to the unpaid duty of ₹ 47,26,402/- was not considered by the Settlement Commission (C E) as no proceeding was pending on that date. Copy of the order of Settlement Commission (C E). was not provided by assessee as already stated. In fact both issues raised in this show cause notice will have a bearing on each other. The assessee has questioned the present proceedings. It need not be emphasised that the assessing officer should have ascertained the facts before mechanically accepting the contentions of the assessee for the role of AO is not only as an adjudicator but also an investigator. Last but not the least, the function of a tax authority is to levy and collect tax in accordance with law on facts of each case. Hence an order which causes lawful loss of tax revenue is not only erroneous but also prejudicial to the interest of revenue, as would be evident from the discussions on pre- pages. 6. Hon'ble Delhi High Court in the case of GEE VEE Enterprise vs. Addl.CIT reported ITR 99 ITR 375. 386 (Del) has held that the CIT may consider the order of the Assessing Officer to be erroneous not only if i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer is very different from that of civil court. The statements made in the pleading proved by the minimum amount of evidence may be adopted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which come before it. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when. circumstances would make such an inquiry prudent that the word erroneous in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an inquiry has not be made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. 10. Further to this it is noticed that there is no appeal right available to the Revenue from the order of assessment pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat about the settled legal proposition that before the learned CIT or the PCIT seeks to exercise his revision jurisdiction vested u/s. 263 of the Act, the assessment concerned ought to be both erroneous as well as prejudicial to the interest of the Revenue. ; simultaneously. And that each and every case causing loss to the Revenue need not come under the purview of revision jurisdiction in case the assessing authority concerned adopts one of the two possible views. Both the learned representatives are ad idem during the course of hearing that whether or not the various judicial precedents quoted in the PCIT s revision direction apply in each and every case, has to be examined as per the relevant factual backdrop involved in a lis . We therefore deem it appropriate to revert back to the detailed facts involved herein once again. 8. Coming to the former issue of the alleged under assessment of the prior period income s assessment of ₹11,04,19,703/- for the purpose of sec.115JB computation as per the PCIT s above extracted directions, case file suggests that the clinching factual position herein is that the assessee had declared additional income of ₹12,56,69,73/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed under normal scheme than MAT assessment, there is hardly any scope left of under-assessment on impugned prior period income going by the PCIT s observations. We wish to re-emphasise here that PCIT has raised the issue of prior period income of ₹11,04,19,703/- for sec. 115JB computation only relating to the relevant previous year. We thus are of the opinion that once the said prior period income stood assessed under normal provisions in the corresponding earlier assessment year(s) 2010-11 to 2013-14, The Assessing Officer s alleged inaction in not disallowing the very sum(s) as prior period income for the purposes of MAT computation could neither be termed as erroneous nor causing prejudiced to interest of the Revenue going by the foregoing settled legal proposition (supra). 11. Next comes yet another significant aspect for this former issue. The assessee had admittedly incorporated its additional income of ₹12,56,69,703/- in its books of account of the relevant previous year in the nature of its capital. The same therefore acquired the character of a capital receipt routed in profit and loss account as per part- I and part-II of the schedule-VI of the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different qua the latter issue of deduction of excise duty amounting to ₹628,68,798/- on payment basis instead of the available excise duty of ₹30,05,078/-as well. It is not in dispute that the assessee had actually paid the impugned excise duty of ₹628,68,798/- as per the corresponding challens (pages 109 to 125 of the paper book). We find that apart from all other technical aspects, sec. 43B makes it clear such a deduction of excise duty under sub-sec.1 thereof is allowable only on actual payment irrespective of previous year in which the liability to pay the same as arose to the assessee as per the method of accounting regularly employed. The Revenue s stand questioning liability of assessee s excise duty; whether for factual re-verification or on legality, deserves to be rejected on this sole ground. 14. Learned counsel drew our attention to assessee s settlement application dated 19.11.2013 for its unit-II admitting unpaid central excise liability of ₹818,22,881/- with interest of ₹71,64,290 (page 104 in paper book) for the period from December, 2009 to July 2011. It had also admitted a similar liability of ₹162,70,862/- with interest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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