2022 (11) TMI 774 - AT - Income Tax

Revision u/s 263 by CIT - Period of limitation - whether the receipt of compensation for shortfall in guaranteed performance from Suzlon Energy Ltd is liable to tax in the facts and circumstances of the instant case? - HELD THAT - It is pertinent to know that A.Y.2009-10 is a completed assessment as on the date of assumption of jurisdiction u/s.153C in the hands of the assessee. Admittedly, only incriminating material which was handed over is a petty cash book marked as Annexure A-8 pertains only to A.Y.2011-12 and not relatable to A.Y.2009-10. Hence, AO was fully justified in not looking into this issue while framing the search assessment on 29/03/2016. Hence, no error could be attributed in his order. Hence, the pre-requisite twin conditions of Section 263 cannot be cumulatively satisfied in the instant case and consequently invocation of revision jurisdiction u/s.263 of the ACT on the same is unsustainable in the eyes of law. We also find that the issue on receipt of compensation for shortfall in guaranteed performance from Suzlon Energy Ltd was claimed as capital receipt by the assessee in revised return filed on 31/03/2011 itself. AO had framed the original assessment u/s. 143(3) of the Act on 30/12/2011 by considering the said revised return. If at all there is any error, the error could only be in the said assessment order dated 30/12/2011. Hence, the time limit for reckoning revision jurisdiction u/s 263 has to be from that date on 30/12/2011 in terms of Section 263(2) of the Act and not from the search assessment framed on 29/03/2016. Hence, we hold that the revision order passed u/s.263 by the PCIT for A.Y.2009-10 is barred by limitation and accordingly, quashed. Appeal of the assessee is allowed.

Issues Involved:
1. Justification of invoking revision jurisdiction under Section 263 of the Income Tax Act.
2. Taxability of compensation for shortfall in guaranteed performance from Suzlon Energy Ltd.
3. Validity of the revised return filed by the assessee.
4. Limitation period for invoking Section 263.
5. Whether the assessment order was erroneous and prejudicial to the interest of the Revenue.

Detailed Analysis:

1. Justification of Invoking Revision Jurisdiction under Section 263:
The principal issue was whether the Principal Commissioner of Income Tax (PCIT) was justified in invoking revision jurisdiction under Section 263 of the Income Tax Act. The PCIT argued that the assessment order dated 29/03/2016 was erroneous and prejudicial to the interest of the Revenue because the Assessing Officer (AO) allowed the deduction of Rs. 22,22,18,000/- received as compensation for shortfall in guaranteed performance from Suzlon Energy Ltd without proper inquiry or verification. The PCIT invoked Explanation 2 to Section 263, which allows revision if the order is passed without making inquiries or verification that should have been made.

2. Taxability of Compensation for Shortfall in Guaranteed Performance:
The assessee received compensation from Suzlon Energy Ltd and treated it as a capital receipt in the revised return. The PCIT contended that the AO erred in accepting this treatment without considering that the same receipt was treated as revenue in the previous assessment year (A.Y. 2008-09). The Tribunal noted that even if the compensation is considered a revenue receipt, it would qualify for deduction under Section 80IA of the Act, making it revenue-neutral. The Tribunal also referenced the Jaipur Tribunal's decision in the case of Rajasthan State Mines & Minerals Ltd, which allowed such compensation as a revenue receipt eligible for deduction under Section 80IA.

3. Validity of the Revised Return Filed by the Assessee:
The Department argued that the revised return filed by the assessee was invalid under Section 139(5) of the Act, as it was not filed due to any omission or wrong statement in the original return but based on advice from counsel. The Tribunal dismissed this argument, noting that the AO had taken cognizance of the revised return during the assessment proceedings.

4. Limitation Period for Invoking Section 263:
The assessee argued that the revision jurisdiction under Section 263 was barred by limitation, as the error, if any, occurred in the original assessment order dated 30/12/2011, and not in the search assessment order dated 29/03/2016. The Tribunal agreed, citing the Supreme Court's decision in CIT vs. Alagendran Finance Ltd, which held that the limitation period for invoking Section 263 should be reckoned from the date of the original assessment order.

5. Whether the Assessment Order was Erroneous and Prejudicial to the Interest of the Revenue:
The Tribunal found that the AO's order was not erroneous or prejudicial to the interest of the Revenue. The compensation received from Suzlon Energy Ltd was directly linked to the business of generating power, qualifying it for deduction under Section 80IA. Since the assessment was revenue-neutral, there was no prejudice to the Revenue. The Tribunal also noted that the search assessment for A.Y. 2009-10 was based on a petty cash book that pertained to A.Y. 2011-12, and thus, the AO was justified in not considering it for A.Y. 2009-10.

Conclusion:
The Tribunal quashed the revision order passed by the PCIT under Section 263 of the Income Tax Act for A.Y. 2009-10, holding it to be barred by limitation and unsustainable in law. The appeal of the assessee was allowed.

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