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TMI Blog2020 (3) TMI 782X X X X Extracts X X X X X X X X Extracts X X X X ..... it is prejudicial to the revenue - recourse cannot be had to Section 263 of the Act as held by Hon'ble Supreme Court in Malabar Industrial Co. Ltd. V/s CIT [243 ITR 83 10/02/2000] & noted by Hon'ble Delhi High Court in CIT V/s Vikas Polymers [194 Taxman 57 16/08/2010]. The Hon'ble Supreme Court in Malabar Industrial Co. Ltd. V/s CIT (supra) has held that the phrase 'prejudicial to the interests 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 an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue, unless the view taken by the Income-tax Officer is unsustainable in law. The said principal has been reiterated by Hon'ble Court in its subsequent judgement titled as CIT V/s Max India Ltd. (295 ITR 282). Similar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The exercise of the power is limited to cases where the Commissioner on examining the records comes to the conclusion that the earlier finding of the Income-tax Officer was erroneous and prejudicial to the interest of the revenue and that fresh determination of the case is warranted. There must be material to justify the Commissioner's finding that the order of the assessment was erroneous insofar as it was prejudicial to the interest of the revenue. 1.4 The Hon'ble Delhi Court, in the cited decision, further observed that there is a fine though subtle distinction between "lack of inquiry" and "inadequate inquiry". It is only in cases of "lack of inquiry" that the Commissioner is empowered to exercise his revisional powers by calling for and examining the records of any proceedings under the Act and passing orders thereon. In Gabriel India Ltd. (supra), it was expressly observed: - "The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es under the Act has to be exercised within the areas specifically delineated by the Act and the exercise of power under one provision cannot trench upon the powers available under another provision of the Act. In this regard, it must be specifically noticed that against an order of assessment, so far as the revenue is concerned, the power conferred under the Act is to reopen the concluded assessment under section 147 and/or to revise the assessment order under section 263. The scope of the power/jurisdiction under the different provisions of the Act would naturally be different. The power and jurisdiction of the revenue to deal with a concluded assessment, therefore, must be understood in the context of the provisions of the relevant sections. While doing so, it must also be borne in mind that the legislature had not vested in the revenue any specific power to question an order of assessment by means of an appeal. Regarding applicability of Section 263, what has to be seen is that a satisfaction that an order passed by the Authority under the Act is erroneous and prejudicial to the interest of the revenue is the basic pre-condition for exercise of jurisdiction under section 263. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on surmises and conjectures without appreciating the facts and judicial precedents in the matter. Hence, such order is bad in law and ought to be quashed. 1.2. The learned CIT has erred in holding that the assessment order dated 30 December 2016 passed by the Assessing Officer is erroneous in so far as the same is prejudicial to the interests of revenue. 1.3. The learned CIT failed to appreciate that the conditions specified under Explanation 2 to section 263 are not satisfied in the appellant's case. Accordingly, the appellant prays that the impugned order passed by the learned CIT is ultra vires, invalid and ought to be struck down. 1.4. The learned CIT has erred in holding that the Assessing Officer failed to conduct adequate enquiries during the course of assessment proceedings in spite of the fact the Assessing Officer had recorded the deduction claimed by the appellant in the assessment order and has specifically disallowed the professional fees paid in connection with arbitration awards. 1.5. The learned CIT failed to appreciate that there is due application of mind by the learned AO during assessment proceedings and setting aside of the impugned order is erro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the judicial precedents relied upon by the appellant under the Income-tax Act, 1961 to contend that arbitration awards and interest thereon should be taxable only once the matter has reached finality. 2.7. The learned CIT erred in relying on judicial precedents rendered under the Income-tax Act, 1961 which are distinguishable on facts as compared to facts in the appellant's case. 2.8. The learned CIT ought to have appreciated the appellant's submission that there is no permanent exclusion of the interest on arbitration awards from being taxed in the hands of appellant. The appellant offers the said income to tax in the year in which the arbitration awards reaches finality. As evident, the assessee has contested the validity of order passed u/s 263 besides contesting the proposed addition on merits in respect of interest on arbitration awards granted in favor of the assessee. 2.2 The regular assessment for year under consideration was framed by Ld. AO on 30/12/2016 wherein the income, under normal provisions, was determined at Rs. 37.44 Crores after sole disallowance of professional fees for arbitration award for Rs. 4.57 Crores. However, Book Profits of Rs. 103.62 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led by the clients before the High Courts and journal entries passed in the books of accounts were also furnished. It was submitted that since Ld. AO had called for the requisite details of arbitration awards and even made disallowance for professional fees debited in the Profit & Loss Account in relation to arbitration awards, he had applied his mind to the issue and concluded that interest on arbitration awards was not to be taxed during the year under consideration. 2.4 On merits also, it was submitted that the assessee, following mercantile system of accounting was maintaining books as prescribed under the Companies Act, 2013. Accordingly, the assessee credited the interest on arbitration awards received during the current year as well as received in earlier years to the Profit & Loss Account but the said interest was not actually received and the awards were challenged by the clients before the High Courts. The matter had not attained finality and there was no actual receipt of funds and the interest was merely a book entry. The details of interest component would reveal that amount of Rs. 32.17 Crores pertained to awards received during the year whereas the balance interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r submissions were made before Ld. DRP for AY 2009-10 wherein Ld. DRP, after considering the same, did not issue any directions for enhancement of the proposed income of the assessee. Therefore, following the Rule of Consistency in terms of decision of Hon'ble Apex Court in Radhasoami Satsang V/s CIT (193 ITR 321), no addition was to be made on account of interest on arbitration awards. 2.8 In the above background, the assessee, relying upon various judicial pronouncements, assailed the exercise of revisional jurisdiction u/s 263 and submitted that the order was neither erroneous nor prejudicial to the interest of the revenue which would require any interference u/s 263. 2.9 However, the said submissions could not find favor with Ld. Pr. CIT, who opined that the interest income would accrue to the assessee in the year in which the award was issued. Once award was granted, it is realizable with reasonable certainty even though the final award may vary after the High Court orders. Therefore, interest income was to be offered in the year in which the award was granted. The plea that a stand was already taken by Ld. AO during regular assessment proceedings was also rejected by observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial statements and copy of assessment orders for last 3 years. The notice was duly complied with by the assessee vide submissions dated 08/06/2016 wherein the assessee, inter-alia, filed its annual report, statement of total income and assessment orders for AYs 2011-12 & 2012- 13. In the computation of income, the assessee has offered to tax money received on arbitration award for Rs. 18.82 Crores and at the same time, claimed deduction of interest on arbitration award for Rs. 36.22 Crores. Thereafter, the assessee has filed another submission vide letter no. PG/26138 which is stated to be as per oral inquiry raised by Ld. AO during the course of hearing. In this submission, the assessee has elaborately dealt with the issue as to why the arbitration award and interest on arbitration awards were reduced from computation of income. The assessee filed project-wise details of deduction so claimed and submitted that interest would not be liable to tax since the same was disputed by the clients and the matter had not reached finality. No right was stated to have accrued to the assessee to receive any amount towards arbitration awards including interest on arbitration award as these awar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion awards were not called for by Ld. AO in notice u/s 142(1) and the submissions were purely suo-moto voluntary submissions which would clearly demonstrate that Ld. AO did not apply his mind to this aspect while framing the assessment. We find that assessee has duly certified the paper-book containing the said submission that the aforesaid submissions vide letter No. PG/26138 as well as supporting documents were duly submitted to Ld.AO during the course of regular hearing. The factum of making said submission during the course of regular assessment proceedings was reiterated by the assessee in para-5 of its submissions dated 25/03/2019 to Ld. Pr.CIT while opposing the revision proceedings u/s 263. Even Ld. CITDR has not disputed the fact that the said documents were not, at all, available before Ld.AO during the course of regular assessment proceedings. The argument advanced is that the said documents were not called for by Ld. AO and the same were not considered by Ld.AO while framing the assessment. 5.6 However, in the background of factual matrix as enumerated by us, it is difficult to accept the fact that the said documents were not appreciated / considered by Ld. AO since a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wards during assessment proceedings for AYs 2009-10 to 2013-14 wherein similar pleas has been raised. The perusal of these submissions would reveal that the assessee has offered interest income on arbitration awards to tax only in the year of actual receipt thereof. Therefore, the principle of rule of consistency favor the assessee, on the issue raised by Ld. Pr.CIT. 5.8 Therefore, in the given facts and circumstances, we find that the subject matter of proposed revision was already deliberated upon by Ld. AO and a possible was taken in the matter. That view could not be said to be contrary to law, perverse or unsustainable in law, in any manner and the same would be a possible view keeping in mind the rule of consistency. This being the case, the assessment order could not be termed as erroneous or prejudicial to the interest of the revenue u/s 263 as held by Ld. Pr. CIT. The action of Ld. AO, in our opinion, was in consonance with the position accepted by the revenue in earlier years and therefore, it could not be said that the order was not in accordance with law. In such a case, the action of Ld. Pr.CIT in invoking jurisdiction u/s 263 could not be sustained in the eyes of la ..... X X X X Extracts X X X X X X X X Extracts X X X X
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