2020 (5) TMI 645 - AT - Income Tax

Revision u/s 263 - validity of the revision order on the plea that they have been passed against the draft assessment orders - HELD THAT - One gets the impression that the assessee knowingly and deliberately desisted from objecting to the initiation of proceedings against the draft assessment order in course of revision proceedings to take advantage of such mistake in future. From the aforesaid facts, it is very much clear that the assessee has not approached the Tribunal with clean hands on this issue. Therefore, no relief can be granted to the assessee. The decisions relied upon by the assessee would also be of no help as they would not apply to facts of these appeals. The grounds raised by the assessee challenging the validity of the revision order on the plea that they have been passed against the draft assessment orders are devoid of merit, hence, cannot be entertained. In any case of the matter, the mistake in the revision orders with reference to the mentioning of the draft assessment order stands rectified by issuance of corrigendum by Commissioner. For the present, assessee s challenge regarding the validity of the revision orders no longer survives. As regards assessee s contention that Commissioner does not have the power to issue corrigendum, we are unable to accept the same. Accordingly, ground no.1 along with additional grounds no.(IV) and (V) 4 and 5 are dismissed. Validity of exercise of power u/s 263 - Excise Duty exemption received by the assessee, whether revenue or capital - HELD THAT - Facts and materials on record clearly demonstrate that the Assessing Officer has failed to conduct proper enquiry or has made perfunctory enquiry with regard to assessee s claim of excise duty incentive as capital receipt. Whether the excise duty incentive is capital or revenue depends upon various factors, including, the scheme formulated by the Government allowing incentive/subsidy. AO is required to examine the issue factually and only thereafter apply the ratio laid down in the judicial precedents. AO has not even undertaken the exercise required to be undertaken by him in the first step to factually examine the nature of incentive. Allowance of assessee s claim in respect of excise duty incentive while computing the income under the normal provisions without necessary inquiry has certainly made the assessment order erroneous and prejudicial to the interest of Revenue. Conditions of section 263 are fulfilled so as to enable the Commissioner to revise the assessment orders u/s 263 - exercise of power u/s 263 in the facts of the present case is valid. Though, we respectfully agree with the ratio laid down in the decisions cited before us by learned Counsel for the assessee, however, they would not be of any help to the assessee as we have factually found that before allowing assessee s claim in respect of excise duty incentive, the Assessing Officer has not conducted any inquiry. We do not approve the decision of learned Commissioner in directing the Assessing Officer to disallow the excise duty incentive and add it to the income of the assessee. In our considered opinion, the issue whether the excise duty incentive is capital or revenue has to be examined by the Assessing Officer as he has not enquired into or examined it in the course of assessment proceedings. Therefore, he has to examine the issue and take a final decision on it without any fetters being put by the higher appellate authorities. Therefore, the direction of learned Commissioner insofar as it relates to addition of excise duty incentive is set aside/modified. AO is directed to examine the issue in proper perspective and take an independent view after considering all relevant facts and materials on record, submissions made by the assessee, the relevant incentive schemes/notifications, ratio laid down in the decisions to be cited as well as the orders passed by the Appellate Authorities on the issue in assessee s own case in other assessment years. We make it clear, while deciding the issue the AO should not be influenced by any of the observations of learned Commissioner on merits. Needless to mention, the assessee must be provided adequate and proper opportunity of being heard in the matter. Ground no.2 is partly allowed for statistical purposes.

Issues Involved:
1. Validity of the revision orders passed under section 263 of the Income Tax Act.
2. Validity of the corrigendum order dated April 24, 2019.
3. Whether the excise duty exemption received by the assessee should be treated as capital receipt or revenue receipt.

Issue-wise Analysis:

1. Validity of the Revision Orders Passed Under Section 263:
The assessee challenged the revision orders passed under section 263 on the grounds that the Commissioner of Income Tax (CIT) revised the draft assessment orders, which cannot be considered as final assessment orders. The assessee argued that draft assessment orders are not assessment orders in the strict sense and cannot be subjected to section 263 proceedings. The Tribunal found that the CIT referred to the draft assessment orders due to inadvertent clerical/typographical errors, which were later corrected by a corrigendum. The Tribunal held that the corrigendum issued by the CIT was within the period of limitation and did not require a hearing opportunity for the assessee. The Tribunal concluded that the revision orders were valid as the CIT intended to revise the final assessment orders, and the procedural error was rectified by the corrigendum. Thus, the grounds challenging the validity of the revision orders were dismissed.

2. Validity of the Corrigendum Order Dated April 24, 2019:
The assessee contended that the corrigendum issued by the CIT was barred by limitation and violated the principles of natural justice as it was issued without providing an opportunity of being heard. The Tribunal noted that the corrigendum was issued within the permissible period under section 154(7) of the Act, which allows rectification of mistakes apparent on the face of the record within four years. The Tribunal also observed that the rectification did not enhance the assessment or reduce the refund, hence no opportunity of hearing was required. The Tribunal held that the corrigendum was valid and not barred by limitation, and the CIT was within her rights to rectify the mistake. Thus, the grounds challenging the corrigendum were dismissed.

3. Treatment of Excise Duty Exemption:
The core issue was whether the excise duty exemption received by the assessee should be treated as a capital receipt or revenue receipt. The assessee argued that the Assessing Officer (AO) had duly examined the nature of the excise duty exemption and accepted it as a capital receipt. The assessee contended that the AO conducted a detailed inquiry and relied on judicial precedents to support its claim. However, the Tribunal found that the AO failed to properly examine or inquire into the nature of the excise duty exemption. The AO's assessment orders were found to be contradictory as they treated the excise duty exemption differently under normal provisions and while computing book profit under section 115JB. The Tribunal held that the AO's omission to properly examine the issue rendered the assessment orders erroneous and prejudicial to the interests of Revenue. The Tribunal upheld the CIT's exercise of power under section 263 to revise the assessment orders but modified the CIT's direction to directly add the excise duty exemption to the income. The Tribunal directed the AO to independently examine the issue and take a final decision after considering all relevant facts, materials, and judicial precedents. The AO was instructed to provide the assessee with adequate opportunity of being heard.

Conclusion:
The appeals were partly allowed for statistical purposes, with the Tribunal upholding the validity of the revision orders and the corrigendum while directing the AO to re-examine the nature of the excise duty exemption independently. The Tribunal emphasized the need for proper inquiry and application of relevant legal principles in determining the taxability of the excise duty exemption.

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