TMI Blog2021 (9) TMI 444X X X X Extracts X X X X X X X X Extracts X X X X ..... 2/Mum/2019 - - - Dated:- 3-9-2021 - Hon ble Justice P.P.Bhatt, President And Shri Shamim Yahya, Accountant Member For the Assessee : Shri Nimesh Vora-AR For the Revenue : Ms. R.M.Madhavi-CIT(DR) ORDER PER SHAMIM YAHYA, A. M.: These are appeals by the assessee against the order of learned Commissioner of Income Tax (Appeals), Mumbai ( ld.CIT(A) for short) for the concerned assessment years. ITA No.5421/Mum/2019:- 2. Grounds of appeal read as under:- 1. The learned Commissioner of Income-tax - (Appeals - 1) {hereinafter referred to as CIT(A) erred in confirming the order passed by the Assessing Officer (AO) under section 154 of the Act by holding that there is a mistake apparent from record in computing book profit u/s 115JB of the Income tax Act, 1961 {'Act'). The Appellant submits that the order under section 154 of the Act is bad in law and not in accordance with the provisions of the Act as there is no mistake apparent from records. The Appellant therefore submits that the order passed by the CIT (A) confirming the order under section 154 of the Act shall be vacated 2. The learned CIT (A) erred in conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any of the Grounds of Appeal herein and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing. 3. The assessee has also raised following additional grounds:- On the facts and in circumstances of the case and in law, the order passed u/s 154 of the Act is liable to be quashed as same is passed beyond the time limit prescribed u/s 154(7) of the Act. 4. Brief facts of the case are that assessee is a public limited company. During the year under appeal, the appellant was engaged in Business of Oil Exploration, Manufacturing and trading of Petrochemicals, Polyester, Fibre intermediate, Textiles, Generation and Distribution of Power and Operation of Jetties and related Infrastructure and investments. The assessee filed its return of income on 30.09.2009 declaring total income of ₹ 2551,67,29,0787- under normal provision and ₹ 10648,47,54,158/- under section 115JB of the Income Tax Act, 1961 (Act). The assessee electronically filed a revised return on 23.03.2011 declaring total income of ₹ 2905,36,58,6047- under normal provisions and ₹ 10634,55,98,256/- under section 115JB of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided on merits. 10. It has been submitted that the order under section 154 passed on 30-11-2018 is barred by limitation as per section 154(7) of the Act. For ready reference, section 154(7) is reproduced below: (7) Save as otherwise provided in section 155 or sub-section (4) of section 186, no amendment under this section shall be made after the expiry of four years from the end of the financial year in which the order sought to be amended was passed It is submitted that the order under section 154 shall be passed within 4 years from the end of financial year in which order sought to be amended was passed. 11. The Ld. Counsel of assessee in a below chart summarised various orders passed by the AO for the relevant assessment year Sr No Order u/s Date of order Particulars time limit as per section 154(7) 1 143(3) 26-12-2011 Regular assessment order u/s 143(3) 31-03-2016 2 143(3) rws 147 11-05-2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was claimed in the Return of Income. Assessee had filed appeal on computation of Long-Term Capital Gain (LTCG) and not on nongrant of set off of brought forward LTCL. On remand by ITAT to rework LTCG. The AO reworked the LTCG in the order giving effect to ITAT order and did not allow set off of LTCL. On Assessee's rectification application to allow set off of LTCL, AO held that same emanates from original assessment order and not from any intervening order and hence it is barred by limitation. - The High Court confirmed the action of the AO holding that issue of set off of LTCL was not subject matter of intervening orders and thus the assessee sought amendment in the original order and hence limitation as prescribed uin section 154(7) shall be counted from date of original assessment order. While holding so, the HC also considered SC decision in case of Hind Wire Industries Ltd 212 ITR 639 and held that said decision is already considered by the SC in later case of CIT v Alagendran Finance Ltd 293 ITR 1 and accordingly upheld the action of the AO holding that in the garb of remand order in relation to some other aspect, the assessee could not have taken advantage of exte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As submitted in earlier paras, the additions made in the impugned order under section 154 are not discussed in any of the orders passed till date and in such a case, it is submitted that where the point which is not examined on fact or in law cannot be dealt as mistake apparent on the record. For this proposition, we rely on the following decisions: CIT v Hero Cycles (P) Ltd 94 Taxman 271 (SC) (pg 5-11 of LPB I) Punjab Fibres Ltd V ITO 110 Taxman 35 (Del Trib) (pg 22 of LPB I) Proposition 2 15. It is trite law that only mistake apparent from records can be rectified under section 154 of the Act and any debatable issue can not be matter of rectification under section 154. Also, where more than one view is possible on an issue, same cannot be subject matter of rectification. In other words, rectification u/s 154 of the Act can be made only when there is patent mistake which is apparent from record and on which two views are not possible and it should not be something which can be established by a long-drawn process of reasoning. 16. In the appeal before your honour, interest on income tax refund has not been credited to Profit Loss A/c following the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of assessment proceedings the AO had called for justification of the claim u/s 37 of the Act in respect of the pre-operative expenses (pg 164-171 of FPB). Hence, the AO was aware of the fact that the pro-operative income though offered for tax under normal provisions has not been offered to tax u/s 115JB of the Act. Thus, assessment u/s 143(3} was completed by the AO without making any adjustment to the book profit on account of the difference in accounting of the aforesaid 2 type of income. The Appellant therefore respectfully submit that the non-addition of above two income to book profit cannot be termed as a 'mistake apparent from record' and same cannot be added to book profit u/s 115JB of the Act by passing a rectification order u/s 154 of the Act. 18. It is also submitted that book profit shall be computed as per the Profit and Loss Account is prepared in accordance with part - II and Part -III of schedule VI to the Companies Act and same shall be adjusted as per Explanation 1 to Section 115JB. It shall not be disturbed otherwise. In the case of the appellant, the Profit and Loss account is prepared in accordance with Schedule VI to the Companies Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oposition, we rely on the following judgements: ITO v Volkart Bros 82 ITR 50 (SC) (pg 1-4 of the LPB I) In this case, the SC has held that a mistake apparent from record must be an obvious and patent mistake and not something which can be established by a long-drawn process of reasoning on points on which there may be conceivably two opinions. CIT v Hero Cycles (P) Ltd 94 Taxman 271 (SC) (pg 5-11 of LPB I) In this case, the SC has held that rectification is not possible if the question is debatable. CIT v Reliance Industries Ltd 228 Taxman 184 (Bom) (Appellant's own case for AY 2002-03) (pg 12-16 of LPB I) In this case, the Bombay HC has held that exercise of powers under section 154 is limited to rectify mistakes which are apparent from record and not to carry out exercise of rectification of debatable issues. DCIT v India Jute Industries Ltd 156 ITD 912 (Kol Trib) (pg 17-21 of LPB I) 21. Our submissions in aforesaid paras on validity of order passed under section 154 are summarized as under: - The order is barred by limitation as per section 154 (7) of the Act - The order is invalid and void ab initio as additions ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ultimate collection with reasonable certainty is lacking at the time of raising any claim, e.g., for escalation of price, export incentives, interest etc., revenue recognition is postponed to the extent of uncertainty involved. In such cases, it may be appropriate to recognise revenue only when it is reasonably certain that the ultimate collection will be made. Where there is no uncertainty as to ultimate collection, revenue is recognised at the time of sale or rendering of service even though payments are made by installments. 9.3 When the uncertainty relating to collectability arises subsequent to the time of sale or the rendering of the service, it is more appropriate to make a separate provision to reflect the uncertainty rather than to adjust the amount of revenue originally recorded. 9.4 An essential criterion for the recognition of revenue is that the consideration receivable for the sale of goods, the rendering of services or from the use by others of enterprise resources is reasonably determinate. When such consideration is not determinate within reasonable limits, the recognition of revenue is postponed. 9.5 When recognition of revenue is postponed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany has certified the accounts of the Appellant as prepared in compliance of the provisions of part II and III of schedule VI of the Companies Act- 1956 and the same has also been adopted by the Board of Directors and approved by the shareholders in their Annual General Meeting; hence the net profit shown in its accounts shall be taken as book profit u/s 115JB of the Act and no further addition can be made in respect of aforesaid two items. Ground of appeal no. 3(b) 27. Vide Ground of appeal No 3(b), appellant is seeking consequential deduction on account of pre-operative expenses of ₹ 3,308 crs which was not debited to P/L Account and claimed and allowed under normal provisions 28. Without prejudice to our submissions that pre-operative interest income was not credited to P/L Account and was reduced from Capital Work in Progress and hence same shall not be taxed under book profit, if the action of AO is upheld, then on similar analogy, the pre-operative expenses which are not routed through P/L account and are capitalized under capital work in progress, shall be allowed as deduction while computing book profits as same are allowed as deduction under norma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 2012 w.e.f 01.07.2012, the processing of a return u/s 143(1) before the expiry of time period specified in second proviso to sub-section 1, was not necessary, when a notice has been issued to the assessee u/s 143(2). However, since we are concerned with AY 2009-10, the said amendment made by the Finance Act 2012 is not applicable to the facts of our case. 38. Thus, since no intimation u/s 143(1) was issued w.r.t the revised return, hence, the precondition of invoking provisions of section 234D is not fulfilled and accordingly, interest u/s 234D has been erroneously charged by the AO. 39. In light of the above, it is submitted that interest u/s 234D cannot be levied by the AO. 40. Similarly, interest u/s 220(2) is consequential in nature and once the demand is deleted or reduced, the interest u/s 220(2) would accordingly be deleted or reduced. 14. Upon careful consideration, we first refer to the additional ground. Since, the additional ground challenged the very jurisdiction of the 154 of the order passed in this case. We refer to the same in the first place Since it is a legal issue on the touchstone of Hon ble Supreme Court decision in the case of National T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, the assessee succeeds on the additional ground. The rectification order passed u/s. 154 in this case is accordingly time barred and hence, the same is squashed as such. Since, we have already held that the order passed is time barred and hence without jurisdiction, the other issues on merits are only of academic interest and hence, we are not adjudicating upon the same. 16. In the result, appeal by the assessee is partly allowed. ITA No.5422/Mum/2019:- 17. Grounds of appeal read as under:- 1. The learned Commissioner of Income-tax - (Appeals - 1) {hereinafter referred to as CIT(A) erred in confirming the order passed by the Assessing Officer (AO) under section 154 of the Act by holding that there is a mistake apparent from record in computing book profit u/s 115JB of the Income tax Act, 1961 ('Act'). The Appellant submits that the order under section 154 of the Act is bad in law and not in accordance with the provisions of the Act as there is no mistake apparent from records. The Appellant therefore submits that the order passed by the CIT(A) confirming the order under section 154 of the Act shall be vacated 2. The learned CIT (A) er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Refund of AY 2003-04 and 2003-04 and 2004-05 due to order giving effect to CIT(A) order Consequential withdrawal of depreciation where expenses are allowed as revenue in AY 2003-04 by appellate order 3 154 06-03-2017 To withdraw allowance of mark to market loss on account of derivatives pursuant to CTT(A) order of AY 2009-10 4 143(3) 27-12-2017 Assessment reopened to recompute deduction allowed u/s 10B and other issues. r.w.s 147 However, no additions made in the order passed 5 154 30-11-2018 Impugned order making addition of interest on Income Tax refund u/s 115JB 11. From the notice under section 154 issued on 21-05-2018 (pg 125-126 of the FPB) and the order passed on 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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