TMI Blog2021 (9) TMI 988X X X X Extracts X X X X X X X X Extracts X X X X ..... o verify whether assessee has filed amalgamated financial statement alongwith revised return from the effective date of amalgamation. The facts placed on record vouches for the stand of the assessee. Such non- speaking omnibus direction points to fishing expedition and would evoke an apparent unease in the minds of the tax payers. The PCIT on verification of the case records could have verified these facts very easily without any effort and could have come to some meaningful observations. PCIT could have gathered the apparent facts without any exertion to our mind. Inexplicably, the PCIT has rather asked the AO to revisit the facts already placed on record and for the purpose unknown to us. The facts available on record clearly points out to proper verification on aspects of deduction claimed and do not warrant any indulgence. Such act of the PCIT to dislodge a quasi judicial order under s. 263 of the Act cannot be countenanced. The revisional action on the first issue therefore is quashed. Correctness of depreciation on gross value of assets without deduction of subsidy receipt on capital assets obtained from the Government - The highlights of the industrial policy awardin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee against the order of the Principal Commissioner of Income Tax, Raipur-1 ( PCIT in short), dated 27.03.2021 passed under s.263 of the Income Tax Act, 1961 (the Act) whereby the assessment order passed by the Assessing Officer (AO) dated 06.12.2018 under s. 143(3) r.w.s. 147 of the Act concerning AY 2011-12 was sought to be set aside for reframing assessment in terms of supervisory directions. 2. As per the grounds of appeal, the assessee has sought to challenge the jurisdiction assumed by the PCIT under s.263 of the Act and as a corollary, sought to impugn the revisional order passed by the PCIT under s.263 of the Act. 3. Briefly stated, the assessee company is engaged in the business of manufacturing of iron and steel rerolled products and generation of power. The assessee filed its original return of income on 28.09.2011 declaring total income at Rs. Nil after inter alia claiming deduction under s.80IA(4) of the Act. Meanwhile, the amalgamation petition of the assessee company with transferor company Shri Bajrang Mettalics Power Ltd. was pending for approval of the Hon ble Chhattisgarh High Court under s.391 to 394 of the Company Act, 1956, for which, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee s own case for A.Y. 2010-11. Consequently, the reasons initially formed for reopening the completed assessment were not applied adverse to the assessee and no additions were made in the re-assessment proceedings on both the counts. 4. Thereafter, the PCIT in exercise of its revisionary powers, issued show cause notice dated 01.03.2021 under s.263 of the Act requiring the assessee to show cause as to why the impugned assessment so framed under s.143(3) r.w.s. 147 of the Act dated 06.12.2018 should not be modified/set aside on the ground that such order is erroneous in so far as it is prejudicial to the interest of the Revenue. The show cause notice issued in this regard is extracted hereunder for ready reference: Subject: Notice for Hearing in respect of Revision proceedings u/s 263 of the THE INCOME TAX ACT, 1961 Assessment Year 2011 - 12 . In this regard, a hearing in the matter is fixed on 08/ 03/ 2021 at 11: 00 AM. You are requested to attend in person or through an authorized representative to submit your representation, if any alongwith supporting documents/ information in support of the issues involved (as mentioned below). If you wish that the Revis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f i led the original return of income on 26. 09. 2011. During re- assessment the assessee company had furnished books of account audited by the Chartered Accountant alongwith 3CA report signed and verified by the Chartered Accountant alongwith Form 10CCB which was signed and verified by the Chartered Accountant on 24. 01. 2012 after date of filing of return of income. The Chartered Accountant had certified deduction u/ s 80IA for ₹ 352395627/- in form 10CCB but no separate/ revised books of accounts and report in form 10 CCB was furnished for calculation of profit and deduction u/ s 80IA for ₹ 295887877/- as claimed in revised return of income and allowed during re- assessment (as per books of account, computation of income and report in form 10CCB available on record.) This aspect was remained to be examine by the AO during re- assessment proceeding. In view of section 80 IA(7) r. w. s. 44AB - the books of account audited by the Chartered Accountant alongwith 3CA report and report in form 10 CCB was required to be signed and verified on or before the due date specified u/ s 139(1) of IT act i.e. 30. 09. 2011. The assessee company had failed to comply the conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t sale tax liability (as per 13(e) of 3CD report certified by the Chartered Accountant) during the previous year relevant to AY 2011. 12. Further, it was observed from the balance sheet that the assessee company had shown as capital subsidy for ₹ 7,97,84,262/- as on 31.03.2011 (refer schedule- 2 reserve and surplus). The assesse had received total capital subsidy for ₹ 4,31,55,400/- during the previous year which was credited to the balance sheet, the depreciation was required to be calculated after considering capital subsidy which was not done. In view of explanation 10 of section 43 the assessee had claimed and allowed excess depreciation for ₹ 3,45,24,230/- (being 80 % on plant and machinery for ₹ 4,31,55,400/-) was not in order and required to be added back in the assesses income which was not done. Since the above facts and enquiry was not done by the Assessing officer during the course of re- assessment proceedings, the order passed u/ s 143 (3) r. w. s. 147 of the I.T Act dated 06.12.2018 for A. Y 2011- 12 is prejudicial to the interest of revenue. 4. Hence, there is no application of mind on the part of the AO to correctly tax t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T in its revisional order. On consideration thereof, the PCIT passed an order under s.263 of the Act whereby the impugned re-assessment order was set aside to make a fresh assessment after making suitable enquiries as directed in the order. 7. The relevant directions of the revisional order in respect of each issue are reproduced hereunder: I have gone through the above submission and annexures submitted by the assessee. The contention of the assessee that they have filed the revised return along with the amalgamated financial statement and revised Form 10CCB (after amalgamation) is in view of the order of amalgamation passed by Hon ble High Court of Chhattisgarh needs further verification. However, the AO is directed to verify the above facts mentioned by the assessee. Also, the AO is also directed to verify whether assessee has filed Amalgamated Financial Statement along with revised return from the effective date of amalgamation i.e. from 1.04.2008 to 31.03.2011. The AO is further advised to verify the status of claim of deduction u/ s 80IA in preceding previous years. With respect to issue No. 2, the industrial policy for subsidy framed by the State of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of reasons recorded in this regard. The eligible deduction under s. 80IA of the Act stood at ₹ 35,23,95, 627/- but was however restricted to the available profit. All the facts concerning claim of deduction under s. 80IA(4) of the Act was verified by the AO in the original return based on revised return as per amalgamated accounts and thereafter in the re- assessment proceedings yet again as claimed and demonstrated by the assessee with reference to notices issued and replies filed thereon. It is noticed from the reasons recorded for reopening the assessment dated 27. 04. 2018 that reopening was carried out to ascertain the claim of deduction under s.80IA(4) of the Act alone. Apparently, all the facts were examined by the AO and the claim of deduction under s.80IA(4) of the Act was accepted and allowed for which the case was reopened. Noticeably, original as well as re- assessment were carried out on the very issue of eligibility of Section 80IA(4) of the Act in the case of the assessee. The revisional jurisdiction under s. 263 of the Act was invoked yet again on the same set of ground for which the case was reopened under s. 147 of the Act. Such action of the PCIT was held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the case records could have verified these facts very easily without any effort and could have come to some meaningful observations. The action of the PCIT is grossly contrary to the observations made by the Hon ble Delhi High Court in the case of ITO vs. DG Housing Projects Ltd. (2012) 343 ITR 329 (Delhi) wherein a case of inadequate enquiry and lack of enquiry has been clearly distinguished and a burden albeit on some lower pedestal has been placed upon PCIT to conduct some minimal enquiry himself to prevent misuse of revisional jurisdiction. In the instant case, the PCIT could have gathered the apparent facts without any exertion to our mind. Inexplicably, the PCIT has rather asked the AO to revisit the facts already placed on record and for the purpose unknown to us. The facts available on record clearly points out to proper verification on aspects of deduction claimed and do not warrant any indulgence. Such act of the PCIT to dislodge a quasi judicial order under s. 263 of the Act cannot be countenanced. The revisional action on the first issue therefore is quashed. 11.3 Adverting to the second issue, a controversy has been raised by the PCIT on correctness of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o revisit the impugned issue of depreciation on capital subsidy. Secondly, the issue raised in second round was in relation to Section 80IA(4) of the Act for which no additions were made and therefore no other additions/ disallowances were permissible in law as echoed by several judicial precedents including CIT V. Jet Airways , [2011] 331 ITR 236 (Bom); Ranbaxy Laboratories Limited versus CIT, (2011) 336 ITR 136 (Delhi). 11.5 We also find the case of the assessee on merits to be prima facie plausible. All the relevant facts were placed before the PCIT, which clearly justifies the stand of the assessee that subsidy granted not being attributable to meet any portion of actual cost, such subsidy cannot be reduced from the cost of assets. The claim of assessee is plausible and is in accord with judicial precedents. Consequently, non- adjustment in the depreciation cannot termed as erroneous. We thus see total absence of merit in the assumption of jurisdiction under s. 263 of the Act. 12. The event of initiation of penalty under s.271B of the Act, if any, relates back to original assessment dated 14. 03. 2014 when the return was filed post amalgamation. Thus, the show cause n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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