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TMI Blog2017 (8) TMI 1122X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee. Accordingly, the order passed by the AO is not prejudicial to the interest of the revenue. The assessment order passed by the AO u/s 143(3) r.w.s. 254 of the Income-tax Act, 1961 is neither erroneous nor prejudicial to the interest of the revenue. - revision order set aside - Decided in favour of assessee. - ITA No. 3271 to 3276/Mum/2017 - - - Dated:- 7-7-2017 - Shri D.T. Garasia (Judicial Member) And Shri G Manjunatha (Accountant Member) Appellant by : Shri Dr P Daniel / Shri S.M. Makhija Respondent by : Shri Santanu Saikia ORDER Per Bench These are six appeals filed by the assesse directed against the separate but identical orders of Principal Commissioner of Inocme-tax-3, Thane u/s 263 of the Income-tax Act, 1961 for the assessment years 2003-04 to 2008-09. Since common facts are involved and the issues are identical, for the sake of convenience, these appeals were heard together and are disposed of by this common order. 2. The brief facts of the case are that the assessee is a partnership firm engaged in the business of builders and developers and government contractors. The assessee has filed its return of income for the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake any claim either in the original returns of income filed u/s 139(1) or in the revised returns filed u/s 153A of the Act. 4. The assessee preferred appeals against the orders of the CIT(A) before ITAT. The ITAT, B-Bench, Mumbai, vide its consolidated order dated 13-03- 2013 for the assessment years 2003-04 to 2008-09 restored the matter to the file of the AO and directed the AO to verify the claim of the assessee in the light of provisions of section 80IB(10) by observing that the housing project developed by the assessee by name Madhav Srushti , Phase-I may be entitled for deduction u/s 80IB(10) in view of the decision of the jurisdictional High Court in the case of Brahma Associates (supra). 5. Thereafter, in pursuance to the order passed by the ITAT, the AO issued a letter to the assessee calling upon it to furnish various details in respect of deduction claimed u/s 80IB(10) especially with reference to the observations of the ITAT with regard to the eligibility of the assessee for such claim. In response to the AOs notices, the assessee furnished details in respect of the project Madhav Srushti , Phase-I including copy of agreement for acquisition of land, copies of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he revenue and accordingly issued a notice to the assessee. 7. In response to the show cause notice, the assessee submitted that the assessment orders passed by the AO u/s 143(3) r.w.s. 254 neither are erroneous nor prejudicial to the interest of the revenue as the AO has allowed the claim of deduction u/s 80IB(10) as per the specific directions given by the ITAT. The assessee further submitted that once the AO has passed the assessment order as per the directions of the ITAT, the order of ITAT is merged in the assessment orders and, therefore, it is beyond the scope of the jurisdiction of Principal CIT u/s 263 of the Act. The assessee further submitted that the department has filed further appeals against the order of the ITAT before the Hon ble Bombay High Court and has taken a specific ground in regard to section 80A(5). The Hon ble Bombay High Court has not entertained the appeals of the department in respect of the provisions of section 80A(5). Therefore, it is incorrect to say that the AO has ignored the provisions of section 80A(5) before allowing the claim of the assessee u/s 80IB(10) of the Act. In support of his arguments, he relied upon the decision of Hon ble Bombay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed in accordance with the directions of the ITAT and as such, it was beyond the purview of section 263 of the Income-tax Act, 1961. The Ld.AR further submitted that the orders passed by the AO had merged in the order of ITAT giving specific directions to the AO to verify the claim of the assessee in the light of provisions of section 80IB(10) and thus, the AO was bound to follow the said directions. The AR further submitted that the Ld.Principal CIT was erred in simultaneously filing review petitions before Hon ble High Court as well as invoking the provisions of section 263 in respect of the same point being agitated which makes it clear that the order passed by the Tribunal was in the knowledge of the Principal Commissioner, therefore, the invocation of jurisdiction u/s 263 by the Principal Commissioner is not sustainable in the eyes of law. The Ld.AR referring to the decisions of the Hon ble jurisdictional High Court in the case of CIT vs K. Sera Sera Productions Ltd (supra) and also Ranka Jewellers vs Addl.CIT (supra) submitted that once the issues which are subject matter of appeals before the higher authorities and which has been adjudicated by higher authorities, then t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Principal CIT, the AO misconstrued the order of ITAT to understand that ITAT has given any specific finding as to the allowability of deduction claimed u/s 80IB(10). But, the ITAT has only set aside the issue to the file of the AO for further verification with reference to the provisions of section 80IB(10) of the Act, therefore, he opined that the orders passed by the AO are erroneous insofar as they are prejudicial to the interest of the revenue. 12. The Principal CIT has power to revise the assessment order u/s 263 of the Act, but to invoke the provisions of section 263, the twin conditions must be satisfied, i.e. i) the order of the AO should be erroneous; and (ii) it must be prejudicial to the interest of the revenue. Unless both these conditions are satisfied, the Principal CIT cannot assume jurisdiction to revise the assessment order. It is not necessary that every order which is erroneous may be prejudicial to the interest of the revenue or vice versa. In some cases, the order passed by the AO may be erroneous but it may not be prejudicial to the interest of the revenue or vice versa. Unless the order passed by the AO is erroneous and also prejudicial to the interest o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the ITAT with reference to the eligibility of deduction u/s 80IB(10) of the Act. The AO, after satisfying with the other conditions prescribed u/s 80IB(10) has allowed the claim of deduction. Therefore, the Principal CIT cannot say that the AO has not considered the provisions of section 80A(5) before allowing the deduction claimed u/s 80IB(10) of the Act. We further observe that the Hon ble Bombay High Court in the case of CIT vs K Sera Sera Productions Ltd (supra) has observed that the CIT has no power to revise the assessment order on the issues which were considered and decided in appeal by the CIT(A). A similar view has been expressed by the Hon ble Bombay High Court in the case of Ranka Jewellers (supra) wherein it has been categorically held that subject matter which has been decided in appeal cannot be subject matter of revision u/s 263 of the Act. The Hon ble Gujarat High Court in the case of Garden Silk Mills vs CIT 221 ITR 861 (Guj) observed that the CIT cannot set aside the assessment order passed by the AO giving effect to the directions of the Tribunals. In this case, on the issue of deduction u/s 80IB10), the ITAT has already given a direction to the AO to consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at when original returns of income filed u/s 139(1) or revised return filed u/s 153A, the assessee was not eligible to claim deduction u/s 80IB(10) because the commercial area in the housing project is more than the prescribed limit provided u/s 80IB(10) of the Act. But while the appeals were pending before the CIT(A), the Hon ble High Court has rendered judgement wherein it has been held that so far as deduction u/s 80IB(10) in respect of housing project which has been approved by the appropriate authority before 01-04-2005, the limit of 5% of the built up area or 2000 sq.ft. whichever is less is not applicable and the assessee is entitled for deduction u/s 80IB of the Act. Relying upon the judgement of the jurisdictional High Court, the assessee filed an additional ground of appeal making the claim before the Ld.CIT(A). Though the Ld.CIT(A) did not allow the claim of the assessee, the ITAT has admitted the additional ground filed by the assessee and directed the AO to examine the other conditions prescribed u/s 80IB(10). The AO, after satisfying with the other conditions, has allowed the claim of the assessee towards deduction u/s 80IB(10) of the Act. Therefore, we are of the vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) and itself), had the necessary power to consider the claim for deduction, if, the assessee company was otherwise entitled to in law, given the fact that the relevant material was already available on record. 11. Mr. Ravikumar, in support of the appeal, contended to the contrary and in this behalf, placed great emphasis on the judgment of the Supreme Court in GOETZE's case. A perusal of the said judgment would show that the issue which arose for consideration before the Supreme Court, was, as to whether a claim for deduction could be made by way of a letter before the Assessing Officer, if, it did not form part of the original return. The Supreme Court ruled and, while doing so, to our minds, carefully noted that, though the Assessing Officer did not have the power to entertain the claim for deduction made after the return was filed , otherwise than by filing a revised return , it did not exclude the power of the Tribunal to consider the claim in exercise of its appellate power under Section 254 of the Act. This aspect of the matter is quite clearly brought to light in the operative paragraph of the judgment, i.e., paragraph 4. 11.1. . For the sake of convenience, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been included in the total income. 1 2 . 2 . The Supreme Court , after examining the matter threadbare, made the following observations: Under Section 254 of the Income-tax Act, the Appellate Tribunal may after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment before the tax ig authorities is to assess. correctly the tax liability of an assessee in accordance with law. If for example, as a result of a judicial decision given while the appeal is pending before the Tribunal it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under section 254. only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ours) 12.3. In the said judgment, the Supreme Court also noticed its own judgment in the case of Jute Corporation of India Ltd. V. CIT (1991) 181 ITR 688. This view has been adopted by two Division Benches of this Court in the matter of Ramco Cements Ltd. vs. DOT (2015) 55 taxmann.com 79 (Madras) and, in the judgment rendered in: T.C. (A) No.878 of 2014 dated 18.11.2014, titled CIT vs. Malind Laboratories P. Ltd. As a matter of fact, the Delhi High Court has also, in two separate judgments, come to the same conclusion. These judgments are rendered in: CIT vs. Sam Global Securities Ltd., (2013) 38 taxmann.com 129 (Delhi) and CIT vs. Jai Parabolic Springs Ltd., (2008) 306 ITR 42 (Delhi). 12.4. Furtherrnore, a Division Bench of the Bombay High Court has also taken the same view in the judgment rendered in CIT vs. Pruthvi Brokers Shareholders P. Ltd., (2012) 349 ITR 336 16 (Bom.). The issue, with which, the Bombay High Court was grappling was, that a claim for deduction under Section 43B of the Act had not been made qua the relevant assessment year in the original return but was made via a letter. The Division Bench of the Bombay High Court held even while assuming and, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he scope of Section 31(3)(a) of the Income Tax Act 1922 which is almost identical to Section 251(1)(a). The C01111 held as under : (1TR p. 229) If an appeal lies, Section 31 of the Act describes the powers of the Appellate Assistant Commissioner may, in the case of an order of assessment, confirm, reduce, enhance or annul the assessment; under clause (b) thereof he may set aside the assessment and direct the Income Tax Officer to make a fresh assessment. Under 5ectiuii 31( 3)(a) in disposing of such an appeal the Appellate Assistant Commissioner may, in the case of an order of assessment, confirm, reduce, enhance or annul the assessment; under clause (b) thereof he may set aside the assessment and direct the Income Tax Officer to make fresh assessment. The Appellate Assistant Commissioner has, therefore, plenary powers in disposing an appeal. The scope of his power is co- terminus with that of the Income-tax Officer. He can do what the Income-tax Officer can do and a/so direct him to do what he has failed to do. (emphasis supplied) The above observations are squarely applicable to the interpretation of Section 251(1)(a) of the Act. The declaration of law is c/ear that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral factors justifying raising of such new plea in appeal, and each case has to be considered on its own facts. If the Appellate Assistant Commissioner is satisfied he would be acting within his jurisdiction in considering the question so raised in all its aspects. Of course, while permitting the assessee to raise an additional ground, the Appellate Assistant Commissioner should exercise his discretion in accordance with law and reason. He must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The satisfaction of the Appellate Assistant Commissioner depends upon the facts and circumstances of each case and no rigid principles or any hard and fast rule can be laid down for this purpose. [emphasis supplied] 17. The underlined observations in the above passage do not curtail the ambit of the jurisdiction of the appellate authorities stipulated earlier. They do not restrict the new / additional grounds that may be taken by the assessee before the appellate authorities to those that were not available when the return was filed or even when the assessment order was made. The sentence read as a whole entitles an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y disclosing a lower taxable income, albeit by filing a second revised return. It is in that context that the Division Bench came to the conclusion that the second revised return, which was filed beyond the period of limitation, being nonest in law, would not be considered for the purposes of ascertaining the taxable income. 14. In so far as the judgment of the Supreme Court in the matter of Stepwell is concerned, according to US, it has no applicability to the issue raised in the instant appeal. In that case, the Tribunal appears to have allowed the claim of the assessee for deduction under S 35B of the Act without examining the facts of the case. The assessee evidently, had neither made a claim before the ITO nor the AAC nor had he, furnished particulars of the expenditure incurred by it. It is in this context that the Supreme Court observed that the onus of proving facts and obtaining the benefit of a deduction lay on the assessee. It was further observed that since the assessee failed to prove its claim before the ITO or the AAC, the Tribunal could not have allowed the claim on assumption of facts. 15. As indicated above, the ratio on the said judgment is entirely dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emed it fit to direct its reexamination by the Assessing Officer. 17. The assessee also relied upon the decision of Hon ble Bombay High Court in the case of CIT vs Prithvi Brokers and Shareholders Pvt Ltd (supra). The Hon ble High Court under similar set of facts and circumstances held that even assuming that the AO is not entitled to grant a deduction on the basis of a letter requesting an amendment to the return filed, the appellate authorities are entitled to consider the claim and adjudicate the same. It is not necessary that the deduction be allowed only if the revised return of income would have been filed. The relevant portion of the judgement is extracted below:- Even assuming that the Assessing Officer is not entitled to grant a deduction on the basis of a letter requesting an amendment to the return flied, the appellate authorities are entitled to consider the claim and to adjudicate the same. A long line of authorities establish clearly that an assessee is entitled to raise additional grounds not merely iii terms of legal submissions, but also additional claims to wit claims not made in the return filed by it. It is necessary to refer to some of these decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the deduction in law is admitted and, in any event, clearly established. The conclusion that the error in not claiming the deduction in the return of income was inadvertent cannot be faulted for more than one reason. It is a finding of fact which cannot be termed perverse. There is nothing on record that militates against the finding. (par 20 .21) It was submitted by counsel for the appellant that the Supreme Court had taken a different view in Goetze (India) Limited v. Commissioner of Income-tax. However this Court is unable to agree. The decision was rendered by a Bench of two learned Judges and expressly referred to the judgment of the Bench of three learned Judges in National Thermal Power Company Limited vs. Commissioner of Income-tax. The question before the Court was whether the appellant-assessee could make a claim for deduction, other than by filing a revised return. After the return was filed, the appellant sought to claim a deduction by way of a letter before the Assessing Officer. The claim, therefore, was not before the appellate authorities. The deduction was disallowed by the Assessing Officer on the ground that there was no provision under the Act to ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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