TMI Blog2021 (11) TMI 922X X X X Extracts X X X X X X X X Extracts X X X X ..... rading liability and the assessee has obtained in cash or in any other manner any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof. We find that Ld. Pr.CIT has grossly erred in applying the provisions of section 41(1) in the present case which in no situation is applicable in the facts of the present case. We find that during the course of the assessment proceeding, the Ld. AO specifically asked Vide questionnaire issued on 17.04.2017, to explain large any other deduction claimed in sch. BP creating a loss without any income in Profit Loss Account and explain mismatch between income/receipt credited to Profit Loss Account considered under other heads of income and income from heads of income other than business/profession, which was replied. AO conducted proper enquiry to verify the withdrawal of provision of ICD and allowed the claim on being satisfied with the details and explanation. Thus, the decision of ld. AO cannot be held to be erroneous. We find that the ld. AO has applied his mind while conducting the assessment proceedings. Under these circumstances, where a detailed enqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and without prejudice to the other grounds raised herein 2. The registry has informed that the present appeal is delayed by 37 days. Ld. Counsel for the assessee submitted that the delay in filing the appeal is due to country-wide lockdowns imposed by the government in wake of Covid-19 outbreak. Taking cognizance of the same the government had introduced the taxation and other laws (Relaxation and Amendment of Certain Provisions) Act 2020 in order to relax/extend the statutory timelines for various compliance under various laws including the Income Tax Act 1961. Prayer was made to condone the delay. Ld. DR opposed the request. We however under the given facts and circumstances of the case, are satisfied with the reason giving rise to delay in filing the instant appeal. We condone the delay and admit the appeal for adjudication on merits. 3. Brief facts of the case as culled out from the records are that the assessee company is engaged in the Financial Assistance for industrial development and infrastructure. It declared total loss at ₹ 1,55,62,351/- in the return filed on 30.09.2015. The case was selected for limited scrutiny through CASS and the notices u/s 143(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and a decision will be taken on the basis of material available in this office. 5. Now the assessee is in appeal before the Tribunal challenging the jurisdiction of Ld. PCIT assumed u/s 263 of the Act. 6. Ld. Counsel for the assessee apart from placing reliance on written submissions placed on record and relevant extract reproduced in the subsequent paras and also submitted that provision of section 41(1) cannot be the basis for initiating proceeding u/s 263 of the Act and the Ld. Pr. CIT was not justified in alleging that the order passed by the Assessing Officer was erroneous and prejudicial to the interest of the revenue because the Ld. AO has examined the details and applied his mind and after making due verification framed the assessment. Ld. counsel for the assessee referred to the following arguments mentioned in the written submissions: This submission is being made as the impugned order passed u/s 263 is neither erroneous nor prejudicial to the interest of the Revenue. The issue stated by Ld. Pr.CIT in the show cause notice issued u/s 263 on 13.01.2020 has already been dealt and considered by Ld. AO while passing the assessment order u/s 143(3) on 18.12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 014 of ledger inter corporate deposits is ₹ 156,89,42,845. Out of this, during the impugned year an amount of ₹ 14,75,00,000 was recovered from Som Distilleries Limited. This recovered amount has been reduced from net profit while computing the income under the head profits and gains from business and profession for the impugned year. There is no benefit claimed by the assessee in terms of section 41(1) in respect of the impugned amount. There is no tax advantage derived by the assessee in respect of the impugned amount which is a balance sheet transaction.Extract of the relevant ledger account reproduced as under 6. Ld. Pr.CIT erred in not considering all the submissions and documentary evidences placed on record in proper perspective. Ld. Pr.CIT thereby erred in concluding that the order passed by Ld. AO u/s 143(3) is erroneous and prejudicial to the interest of revenue by resorting to the provisions of section 41(1). 7. Ld. Pr.CIT in the show cause notice issued on 13.01.2020 stated [PB 01] In view of section 41(1) of the provision of the Act the recovered amount of ₹ 14,75,00,000/- which was classified as loss as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces placed on record. No specific enquiry or investigation has been made by Ld. Pr.CIT to establish and show the error or mistake made by the assessing officer making the order unsustainable in law. Reliance is placed on the decision of Hon ble Delhi High Court in the case of D G Housing Projects Ltd [2012] 20 taxmann.com 587. [PB 148] B. Enquiry conducted by Ld. AO no lack of enquiry and C. Application of the mind by Ld. AO 1. Assessee is a Government company in which 100% shareholding is of the Government of Madhya Pradesh. It is engaged in the business of financial assistance for Industrial Development and Infrastructure activity in the state of Madhya Pradesh. 2. The complete control and management is by the Board of Directors on the directives of Government of Madhya Pradesh. Currently, no fresh lending has been done instead assessee is under the process of recovery of loans, interest and investments which have been granted earlier. 3. Assessment u/s 143(3) for the impugned year was completed on 18.12.2017. Vide questionnaire issued on 17.04.2017, assessee was required to [PB 128] a. Explain large any other deduction claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest of revenue are not satisfied. 9. Being erroneous always refers to being an error of law / jurisdiction i.e. an incorrect application of law. An order passed by an Assessing Officer can be treated as erroneous if the view taken by the assessing officer is unsustainable in law. Thus, when a plausible view sustainable in law has been taken by assessing officer the order so passed cannot be treated as erroneous. In the instant case, Ld. AO has made the enquiries during the assessment proceedings on the issues raised by Ld. Pr.CIT in the proceedings u/s 263. Ld. AO has allowed the claim on being satisfied with the explanation given by the assessee. Thus, plausible view taken by the Ld. AO cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in this regard. 10. Without prejudice to the above and strictly in alternate, the assessee has unabsorbed brought forward loss of ₹ 127,77,68,266 which is available for set off. The tax liability on the addition, if any, made shall be set off against the above referred loss. Thus, there is no loss to the Revenue. 11. Reliance is placed on the following judicial p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ICD) and provision of interest on ICD totalling to ₹ 15,04,64,954/-. We further observe that from the profit and loss account these amounts were credited and since they did not form part of income from business or profession the same were excluded for computation of income under the head income from business or profession. 9. We also observe that in the course of revisionary proceedings assessee had explained that the provision for bad and doubtful debts on ICD and interest thereon was made in the earlier years i.e. A.Y. 2002-03 to 2004-05 while computing the total income of these year. The amount of provision for bad and doubtful debts on ICD and interest was added back to the net profit in the Profit and loss account and is evident from the documentary evidences placed on record in the paper book which is summarized in the table below: Sr. No. Particulars Amount (Rs.) Amount (Rs.) 1 Net profit as per audited financial statements (85,69,05,758) 2 Add: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment and directing a fresh assessment. Explanation 1.-For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner authorised by the Board in this behalf under section 120; (b) record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal Commissioner or Commissioner; (c) where any order referred to in this sub-section and pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ason. It is a part of his administrative control to call for the records and examine them. The second feature would come when he will judge an order passed by an Assessing Officer on culmination of any proceedings or during the pendency of those proceedings. On an analysis of the record and of the order passed by the Assessing Officer, he formed an opinion that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. By this stage the learned Commissioner was not required the assistance of the assessee. Thereafter the third stage would come. The learned Commissioner would issue a showcause notice pointing out the reasons for the formation of his belief that action under section 263 is required on a particular order of the Assessing Officer. At this stage the opportunity to the assessee would be given. The learned Commissioner has to conduct an inquiry as he may deem fit. After hearing the assessee, he will pass the order. This is the fourth compartment of this section. The learned Commissioner may annul the order of the Assessing Officer. He may enhance the assessed income by modifying the order. 13. It is well settled law that for invoking th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pronouncements including the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) and has propounded the following broader principle to judge the action of the Commissioner of Income-tax taken under section 263. (i) The Commissioner of Income-tax must record satisfaction that the order of the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. Both the conditions must be fulfilled. (ii) Section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the Assessing Officer has adopted one of the courses permissible under law or where two views are possible and the Assessing Officer has taken one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is worth noting that provisions of section 41(1) are attracted only when any allowance or deduction has been claimed in respect of loss, expenditure or trading liability and the assessee has obtained in cash or in any other manner any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof. We find that Ld. Pr.CIT has grossly erred in applying the provisions of section 41(1) in the present case which in no situation is applicable in the facts of the present case. 17. We further find that the Ld. Pr.CIT has directed AO to decide the issue i.e. amount recovered out of the loss assets, on merits and as per law but no specific finding on merits has been given by Ld. Pr.CIT on examination of written submissions and all the documentary evidences placed on record. No specific enquiry or investigation has been made by Ld. Pr.CIT to establish and show the error or mistake made by the assessing officer making the order unsustainable in law. This action of Ld. Pr. CIT can stand only if it is found that the assessment order is erroneous so far as prejudicial to the interest of revenue and no enquiry has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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