TMI Blog2024 (2) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... lid return of income u/s 139(9) or not is totally against the law laid down by Hon ble Jurisdictional High Court. Accordingly there is no justification in invoking Revision power u/s 263 of the Act. We also find merits in the arguments of once the AO has made inquires and accepted genuineness of the same after detailed verification submitted by the assessee, such view of A.O. being a plausible view, could not be considered erroneous or prejudicial to interest of Revenue as held in case of PCIT V. Shreeji Prints (P.) Ltd. [ 2021 (9) TMI 108 - SUPREME COURT] Respectfully following the above judicial principle, it is clear that the Ld. AO had made adequate inquiries in respect of the claim of deduction u/s. 80JJAA of the Act, while passing assessment order u/s 143(3) of the Act. The Revision of assessment proceedings on this ground is not permissible and accordingly the findings of the Ld. PCIT is hereby set aside. Provision for bad debt u/s. 36(1)(viia) - We observe that the assessees company reverses the provision created u/s 36(1)(viia) in the immediately next year and claims actual bad debt incurred for the year under consideration only. Further, details of bad debt wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 - SUPREME COURT] we find merit in the submissions made of the assessee and set aside the order passed by the PCIT and restore the order passed by the AO. Appeal filed by the Assessee is hereby allowed. - SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER For the Appellant : Shri Vartik Chokshi, A.R. Shri Biren Shah, A.R. For the Respondent : Shri Sanjeev Jain, CIT-D.R. ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Assessee as against the Revision order dated 31.03.2022 passed by the Principal Commissioner of Income Tax, Ahmedabad-1, arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) relating to the Assessment Year (A.Y) 2017-18. 2. The assessee company is engaged in the business of lending of secured and unsecured retail loans, distribution of insurance products, telecalling and collection activities under Business Process Outsourcing. For the Asst. Year 2017-18 the assessee filed its Return of Income on 31.10.2017 declaring total income of Rs. 1096,43,21,300/- and book profit u/s 115JB of Rs. 1058,58 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the year. The assessee company being a Non-Banking Financial Institution ( NBFC ), one of its main function/businesses is to lending money to its customers. While it grants loans, there is always a probability that some of the advances turns bad. In accordance with the provisions laid down by the Reserve Bank of India to NBFC and the NPA Management Policy of the assessee company, the assessee makes provision for Non-Performing Assets on Advances. The assessee further submitted that every year as per accounting norms the assessee makes provision for bad debts which is disallowed (offered to tax) in the return of income. The amount of provision for NPAs as debited in the P L A/c of Rs. 114,77,71,839/- has been disallowed in the return of income for the A.Y. 2017-18. The assessee has been consistently adding back the provision for NPA in its Return of Income, thereby it had claimed only bad debt written off during the year under consideration in its Return of Income. The amount of bad debt written off net of recovery is Rs. 224.81 lacs, the list of which showing with customer name along with their PAN, address, amount written off and subsequently recovered the bad debts wri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned Pr. C.I.T. u/s. 263 of the I.T. Act is bad in law and ab initio void. 2) On the facts and in the circumstances of the case, the learned Pr. C.I.T. erred assessment order dated 19.12.2019 passed by the Assessing Officer 143(3) of the I.T. Act. 3) The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal. 6. Ld. Counsel Shri Vartik Chokshi appearing for the assessee submitted before us a detailed Paper Book and Case laws filed before the Ld. PCIT as well as detailed replies filed before Assessing Officer. As regarding the deduction u/s. 80JJAA, the Ld. Counsel drawn our attention to the detailed reply filed by the assessee before the Assessing Officer on the very same issue which are available at Page Nos. 91 to 93 of the Paper Book as follows: Justification for claim of deduction u/s. 80JJAA (point no. 7) Your goodself has asked the Assessee to show cause as to why the deduction claimed u/s. 8OJJAA should not be disallowed and added. In this regards the assessee submits that the claim has been made according to the provisions of section 80JJA which is duly certi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the financial year, i.e., on 31 March, 2018 and there is an overall increase in total number of employees when compared to the previous year, i.e., financial year 2016-17. However, the following employees are not covered in the definition of additional employees : an employee whose total emoluments are more than INR 25,000 per month; or an employee whose entire contribution under the Employees' Pension Scheme is paid by the Government; or an employee who is employed for a period of less than 240 days/150 days during the year; or an employee who does not participate in the recognised provident fund: the same has been duly verified by the chartered accountant and certified in the form 10DA. e. Employee cost on which the deduction is computed - Any sum paid or payable to an employee on account of employment, whether termed as salary or any other name, excluding any contribution paid/payable by the employer to any pension fund or provident fund or any other fund for the benefit of the employee; and any lump-sum payment paid/payable to the employee at the time of termination of his service or superannuation or voluntary reti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d AO and after keeping in mind the provision contained in section 80JJAA of Income Tax Act and no addition has been made by Assessing officer. However the Ld. PCIT set aside the assessment order passed by the Ld. AO with the following direction: Collect the revised audit report in form 3CD as the auditor of the company has not certified the deduction u/s 80JJAA of the Act in col.33 of Form 3CD report and verify whether the revised return filed by the assessee company on 29.03.2019 is valid return as per provisions of section 139(9) of the Act or not? The AO is also directed to take cognizance of CBDT s Circular bearing No. 14(XL- 35) dated 11.04.1995. 6.2. The above direction is without any base, as the claim of the assessee is based on Form 10DA duly certified by Chartered Accountant, which is as per the requirement of section 80JJAA(2)(c) of the Act. The only requirement in section 80JJAA to file Form 10DA duly certified by Chartered Accountant to claim deduction u/s 80JJAA. Even as per the Rule 19AB of the I.T. Rules, the only requirement is to get Form 10DA duly certified by Chartered Accountant for claiming deduction, which has been complied by the assessee. Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellate authority or the Tribunal when facts necessary to examine such ground, contention or claim are already on record. In such a case the situation would be akin to allowing a pure question of law to be raised at any stage of the proceedings. This is precisely what has happened in the present case. The Appellate Commissioner and the Tribunal did not need to nor did they travel beyond the materials already on record, in order to examine the claims of the assessees for deductions under sections 80-IB and 80HHC of the Act. 41. In the decisions that we have noted above, the Courts have considered such questions when a legal contention or a claim was based on material already on record but raised at an appellate stage. On such premise we wholeheartedly agree that the appellate authority and the Tribunal would have the power to entertain any such new ground, legal contention or claim. However, it is only the Bombay High Court in the case of CIT v. Pruthvi Brokers Shareholders (P.) Ltd. (supra), which has travelled a little beyond this preposition and come to the conclusion that even if facts necessary to examine such a claim are not placed before the assessing officer and, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able in law before embarking upon exercise of revisionary powers. The revisional powers cannot be exercised for directing a fuller inquiry to merely find out if the earlier view taken is erroneous particularly when a view was already taken after inquiry. If such course of action as interpreted by the Revisional Commissioner in the light of the Explanation 2 is permitted, Revisional Commissioner can possibly find fault with each and every assessment order without himself making any inquiry or verification and without establishing that assessment order is not sustainable in law. This would inevitably mean that every order of the lower authority would thus become susceptible to section 263 of the Act and, in turn, will cause serious unintended hardship to the tax payer concerned for no fault on his part. Apparently, this is not intended by the Explanation. Howsoever wide the scope of Explanation 2(a) may be, its limits are implicit in it. It is only in a very gross case of inadequacy in inquiry or where inquiry is per se mandated on the basis of record available before the AO and such inquiry was not conducted, the revisional power so conferred can be exercised to invalidate the actio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akes provision for bad debts which is disallowed (offered to tax) in the return of income. The amount of provision for NPAs as debited in the Profit and Loss A/c of Rs. 114,77,71,839/- has been disallowed in its return of income for the AY 2017-18 i.e. the year under consideration. The assessee has been consistently adding back the provision for NPA in its return of income. Thereby it has claimed only bad debt written off during the year under consideration deduction in its return of income. The copy of Computation of Income of AY 2017-18 is attached herewith for your goodself's ready reference vide Annexure 4. Also, an extract from the Audited Accounts of the assessee company as on 31.03.2017 for amounts written off as Bad is reproduced before your goodself for your kind perusal as under: Provisions and write offs Particulars March 31, 2017 Provisions recognised for non-performing assets (Refer Note 44A) Write offs (net of recovery * 75.28 crore (previous year 51.74 crore)) Provision for dimunition of investment Contingent prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T v. Gujarat Industrial Investment Co. Ltd. Section 37(1), read with section 36(1)(vii), of the Income-tax Act, 1961 Business expenditure - Allowability of (Reversal of income) - Assessee financial institution was following mercantile system of accounting - Whenever it charged penal interest from customers, same was reflected as income - On settlement with parties, interest was either waived or reduced - Whether amount waived or reduced was either allowable as revenue expenses under section 37(1) or as bad debt - Held, yes [Paras 8 11] [In favour of assessee] 2013] 29 taxmann.com 140/[2013] 212 Taxman 293 (Gujarat) (Gujarat) DCIT v. Hindustan MI Swaco Ltd. Section 254, read with section 36(1)(vii), of the Income-tax Act, 1961 Appellate Tribunal - Powers of - Power to recall - Assessee had written off an advance of Rs. 65lakhs as bad debts on ground that despite filing a suit sum was not recoverable Issue had reached up to Tribunal - Tribunal by an ex-parte order held against assessee - Subsequently, however, assessee applied for recall of such an order Tribunal thereupon proceeded to decide appeal afresh - In such exercise Tribunal overruled objection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amount of actual provision for bad debt disallowed (in Rs. ) 2017-18 original computation of income copy attached wide Annexure-8 with acknowledgement 57,81,71,229 0 1,14,77,71,839 2017-18 revised computation of income copy attached wide Annexure-4 with acknowledgement 57,79,00,453 0 1,14,77,71,839 2018-19 original computation of income copy attached wide Annexure-9 with acknowledgement 85,01,51,889 57,81,71,229 1,35,41,72,567 (752685120 + 601487447) 2018-19 revised computation of income copy attached wide Annexure-10 with acknowledgement 85,12,58,444 57,81,71,229 1,35,41,72,567 (752685120 + 601487447) From the above table it is evident that the assessee has during the year under consideration disallowed more than in A. Y. 2018-19 than the amount claimed u/s. 36(viia) in A. Y. 2017-18 vide its revised return. 9.3. The Ld. Counsel furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e u/s 36(1)(vii) and 36(1)(viia), directly set aside the assessment order passed by the Ld. AO, which is beyond the scope of powers conferred u/s 263 of the Act. 10.1. Thus the very same issue what was considered by the Ld. A.O. in the assessment proceedings is revised by the Ld. PCIT on the ground that the Ld. A.O. has verified the claim properly. In our considered view, the Ld. PCIT partially looking into the assessment record initiated the Revision proceedings which is factually not correct. The Ld. PCIT failed to consider the reply to the notice issued u/s. 143(2) dated 21.11.2019 filed by the assessee already reproduced in Paragraph 6 of this order. Thus both the ingredients i.e order must be erroneous in nature; and the error must be such that it is prejudicial to the interest of Revenue are present in a given case, it is not legally permissible for a Commissioner to initiate suo motu proceeding under section 263 of the Act, the same has been upheld by Hon'ble Supreme Court in case of Malabar Industrial Co. Ltd.-Vs-CIT 243 ITR 83. However, an assessment cannot be revised if there is no jurisdictional error in the order or if it has been passed after due application of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclusion reached by ITO on ground that on material already brought on record, better assessment could have been framed than that framed by ITO and invoked section 263 Whether since material was there on record and said material was considered by ITO and a particular view was taken, mere fact that different view could be taken, should not have been basis for an action under section 263 Held, yes - Whether Commissioner was unjustified in arriving at a conclusion that order passed by ITO was erroneous and prejudicial to interest of revenue - Held, yes (c) Spectra Shares Scrips (P.) Ltd. V/s Commissioner of Income- tax III, Hyderabad [2013] 36 taxmann.com 348 (Andhra Pradesh) Section 263 of the Income-tax Act, 1961 Revision Of order prejudicial to interest of revenue [Scope of] Assessment year 2006-07 Whether Assessing Officer in assessment order is not required to give detailed reasons and once it is clear that there was application of mind by an enquiry, Commissioner, merely because he entertains a different opinion in matter, cannot invoke his powers under section 263 Held, yes [Para 59] [In favour of assessee] (d) Decision of Gujarat High Court in case of Aryan arca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority has bestowed consideration and given a decision.... (f) Commissioner of Income-tax-III V/s R.K. Construction Co [2008] 175 Taxman 165 (Gujarat) Section 263 of the Income-tax Act, 1961 - Revision Of orders prejudicial to interest of revenue - Whether where Assessing Officer has taken a particular view on basis of evidence produced before him, it is open for Commissioner, in revisional proceedings under section 263, to take a different view on same material Held, no Whether on facts stated under heading 'Business disallowance - Excessive or unreasonable payments' when Assessing Officer had duly verified all details from books and records, and had made no addition in regular assessment, Commissioner was justified in invoking revisional jurisdiction under section 263 - Held, no] 12. We have perused the findings of the above decision. Respectfully following the above ratio, it transpires that the Ld. PCIT ought to have proved that the order of the Assessing Officer is both erroneous as well as prejudicial to the interests of the revenue. Even lack of adequate inquiries by the Ld. AO should result fulfilment of these critical twin conditions. Since the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
