TMI Blog2023 (8) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be said that the assessment was completed after verifying assessee s books of accounts for the subsequent year. It is pertinent to note that the question as to the year in which deduction is allowable may be material when the rate of tax chargeable on the assessee in two different years is different. Assessee is a company, and therefore tax is leviable at a uniform rate. It is trite law that in order to invoke section 263, the assessment order must be erroneous and also prejudicial to revenue, and if one of the limbs is absent, i.e., if the order of the AO is erroneous but is not prejudicial to Revenue or if it is not erroneous but is prejudicial to Revenue, recourse cannot be had to section 263 of the Act. Since the MTM loss was duly reversed in the subsequent year and has been offered to tax, therefore, there is no prejudice to the Revenue. Therefore, the impugned revisionary proceedings invoked under section 263 of the Act cannot be upheld and thus, are set aside. Decided in favour of assessee. - SHRI G.S. PANNU, PRESIDENT AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER For the Assessee by : Shri Hiten Chande For the Revenue by : Shri Biswanath Das ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er without making adequate enquiry and not discussing the subject issue in the assessment order, without appreciating the fact that lack of discussion in the order as long as the query is raised during assessment proceedings and answered to the satisfaction of the Learned AO, the same cannot be regarded as lack of adequate enquiry. 5. On the facts and in circumstances of the case and in law, the learned PCIT has erred in concluding the assessment order passed by the learned AO as erroneous and prejudicial to the interest of revenue and not giving any finding to this effect, without appreciating the fact that the subject MTM loss of INR 9.29 crores claimed during the subject year has been reversed in the subsequent year i.e. AY 2016-17 and duly offered to tax in the rectum of income for AY 2016-17. Without prejudice to grounds 1 to 5 above: 6. On the facts and in circumstances of the case and in law, the learned PCIT has erred in referring to the decision of Apex court in case of PCIT vs Woodward Governor India (P.) Ltd. (312 ITR 254) and Instruction No. 03/2010 issued by Central Board of Direct Taxes, by grossly ignoring the fact that the apex court in its judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 143(3) of the Act is of capital nature and therefore should not be allowed as it directly relates to capital expenses. The learned PCIT further alleged that the assessee itself claims MTM loss but does not offer any MTM gains. Accordingly, the learned PCIT alleged that since the aforesaid aspects have not been enquired into by the AO the assessment order is erroneous and prejudicial to the interest of the Revenue. 6. In response thereto, the assessee submitted that the AO after due examination of facts, details, and information submitted by the assessee, during the assessment proceedings, allowed the MTM loss claimed by the assessee. Further, the assessee submitted that the financial statements of the assessee documented the treatment given to MTM loss and the same is in accordance with the guidelines on accounting for derivatives issued by the Institute of Chartered Accountants of India, which prescribes that the company provides a loss in respect of all outstanding derivative contracts in the balance sheet on MTM basis and any gains arising on such MTM are not recognised as income. The assessee also submitted that subject loss on MTM basis has been duly reversed in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the existing GSM network, etc. In terms of the accounting policy, the assessee has recognised the MTM loss of Rs. 9.29 crore on the basis of the bank advice and claimed the same as revenue in nature. During the assessment proceedings, vide notice dated 24/07/2017 issued under section 142(1) of the Act, forming part of the paper book from pages 91-92, the AO, inter-alia, raised the following specific query regarding the MTM loss claimed by the assessee:- 10. As per note 24 in point B you have debited mark to market loss on cross currency interest rate swap at Rs. 9.25 crores. Explain its allowability. 9. As is evident from the submission dated 13/12/2017 on page 93 of the paper book, the assessee replied to the query raised by the AO and substantiated its claim of MTM loss on cross-currency interest rate swap. The AO vide order dated 26/12/2017 passed under section 143(3) of the Act made certain additions, however, did not make any addition on this aspect. Vide impugned order, the learned PCIT held that the AO has not discussed the issue of allowability of MTM loss in the assessment order, nor it has recorded the reasons for accepting assessee s submission. The learned PCI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -2(a) to section 263 of the Act, as invoked by the learned PCIT, is not applicable to the facts of the present case. 11. As regards the finding of the learned PCIT that the AO has not verified whether MTM losses are speculative in nature under section 43(5)(d) of the Act, we find that this allegation does not form part of the notice issued under section 263 of the Act by the learned PCIT and therefore the opportunity was not granted to the assessee to rebut the same. Thus, it is contrary to the provisions of section 263 of the Act, which specifically requires the grant of opportunity of being heard to the assessee. We find that the Hon ble Supreme Court in CIT v/s Amitabh Bachchan, [2016] 384 ITR 200 (SC) observed as under:- 10...... What is contemplated by Section 263, is an opportunity of hearing to be afforded to the assessee. Failure to give such an opportunity would render the revisional order legally fragile not on the ground of lack of jurisdiction but on the ground of violation of principles of natural justice. 12. Further, as per the assessee, the MTM loss of Rs. 9.29 crores was duly reversed in the subsequent assessment year, i.e. assessment year 2016-17, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned order is non-est and null and void in law. 14. During the hearing, the learned Authorised Representative ( learned AR ), after the submissions by both sides on the grounds raised in the appeal, made his submission on the aforesaid additional ground of appeal. The learned AR submitted that the impugned order is issued manually without mentioning the Document Identification Number ( DIN ) and therefore has been passed without complying with Circular No. 19 of 2019. For this reason, the impugned order is non-est in law, and null and void. The learned AR placed reliance upon the decision of the coordinate bench of the Tribunal in Teleperformance Global Services Private Limited v/s ACIT, in ITA No. 2814 2815/Mum/2022. 15. Since, in the present case, the revisionary proceedings have been found to be without jurisdiction and thus the impugned order passed by the learned PCIT under section 263 of the Act has already been set aside, we are expressing no findings on the additional ground raised by the assessee and the same is left open. 16. In the result, the appeal by the assessee is allowed. Order pronounced in the open Court on 13/07/2023 - - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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