2022 (4) TMI 739 - AT - Income Tax

Validity of Revision u/s 263 - period of limitation or time barred order - Re-assessment was completed by making addition on account of prior period expense - book profit under section 115JB towards grants, subsidies and consumer contributions were not being properly calculated by the AO in the original assessment proceedings - CIT set aside the reassessment order, and directed the AO to frame assessment afresh after proper enquiries/ verification - HELD THAT - No doubt the excess claim of depreciation on grants, subsidies and consumer contributions were subject matter of proceedings only in the original assessment passed under section 143(3) which is dated 30.12.2010. In the reassessment proceedings the issue is related to prior period expenses claimed by the assessee which was in the re-assessment order dated 30.12.2015. Therefore the present impugned order dated 22.03.2018 passed under section 263 is clearly time barred as per section 263(2). Further, jurisdictional High Court in the case of CIT Vs. Gujarat Forging P.Ltd 2008 (7) TMI 1029 - GUJARAT HIGH COURT following Supreme Court judgment in the case of Alagendran Finance Ltd. 2007 (7) TMI 304 - SUPREME COURT held that revision proceedings initiated under section 263 is beyond period of limitation and quashed the same. In view of the above binding judgment, we have no hesitation in holding that Revision proceedings initiated under section 263 by the Pr.CIT is beyond period of limitation, since the issue of computation of book profit under section 115JB towards grants, subsidies, consumer contributions are not subject matter of re-assessment proceedings and but arising from original assessment proceedings vide order dated 3.12.2010 which is clearly is time barred. Thus, the additional ground raised by the assessee are allowed. Thus order passed by the AO neither an erroneous nor prejudicial to the interest of Revenue and therefore the initiation of 263-proceeings itself is unwarranted - Decided in favour of assessee.

Issues Involved:
1. Whether the assessment order dated 30-12-2015 passed under section 147 read with section 143(3) of the Income Tax Act, 1961 is erroneous and prejudicial to the interest of revenue.
2. Whether the additions of ?7,09,12,384/- made to the total income under normal provisions on account of Capital Grants, Subsidies, and Consumers' Contribution should also be made to the Book Profits computed under section 115JB of the Income Tax Act.
3. Whether the order passed by the Pr. Commissioner of Income Tax under section 263 is time-barred.

Detailed Analysis:

1. Erroneous and Prejudicial Assessment Order:
The primary issue raised by the assessee was that the Pr. Commissioner of Income Tax (Pr. CIT) erred in holding that the assessment order dated 30-12-2015 was erroneous and prejudicial to the interest of revenue. The Pr. CIT invoked section 263 of the Income Tax Act, 1961, arguing that the reassessment order did not include additions to the Book Profits under section 115JB for Capital Grants, Subsidies, and Consumers' Contribution, which had been made under normal provisions in other years. The assessee contended that such additions were not required and had been deleted by appellate authorities in other assessment years.

2. Additions to Book Profits under Section 115JB:
The Pr. CIT directed the Assessing Officer (AO) to include the additions of ?7,09,12,384/- to the Book Profits under section 115JB, arguing that the assessee had not prepared its statement of profit and loss in accordance with section 115JB(2) and relevant accounting principles. The assessee argued that such additions were made for the first time in the assessment year 2013-14 and had been quashed by the Hon'ble Gujarat High Court for other years. The assessee also pointed out that appellate authorities had deleted similar additions for assessment years 2013-14 and 2014-15.

3. Time-Barred Order under Section 263:
The assessee raised an additional ground of appeal, arguing that the order passed by the Pr. CIT under section 263 was time-barred and void ab initio. The assessee filed its return for the assessment year 2008-09 on 30.9.2008, and the original assessment under section 143(3) was completed on 30.12.2010. The reassessment was completed on 30.12.2015, and the Pr. CIT issued the show cause notice under section 263 on 13.3.2018. The assessee argued that the issue of government grants, subsidies, and contributions was not part of the reassessment proceedings but was dealt with in the original assessment order dated 30.12.2010. Therefore, the revision order was time-barred as per section 263(2) of the Act.

Judgment Analysis:
The Tribunal considered the arguments and concluded that the revision order passed by the Pr. CIT was time-barred. The Tribunal referred to the Supreme Court judgment in the case of CIT Vs. Alagendran Finance Ltd., which held that the period of limitation for revisional jurisdiction begins from the date of the original assessment order and not from the reassessment order if the issues were not part of the reassessment proceedings. The Tribunal also referred to the jurisdictional High Court judgment in CIT Vs. Gujarat Forging P. Ltd., which quashed revision proceedings initiated beyond the period of limitation.

Furthermore, the Tribunal noted that the proposed additions to the Book Profits under section 115JB had been deleted by appellate authorities for assessment years 2013-14 and 2014-15 in similar cases. Therefore, the reassessment order was neither erroneous nor prejudicial to the interest of revenue, making the initiation of section 263 proceedings unwarranted.

Conclusion:
The Tribunal allowed the appeal of the assessee, quashing the revision order passed by the Pr. CIT under section 263 as time-barred and unwarranted. The Tribunal emphasized that the reassessment order was not erroneous or prejudicial to the interest of revenue, and the proposed additions under section 115JB were not justified.

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