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TMI Blog2020 (3) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... e relevant previous year 2013-14 as well as in the profit and loss account as an exceptional income alongwith the corresponding expenditure of 153,50,000/- which had not been claimed in the settlement petition. Once the assessee had declared additional income of 12.56 crores in earlier assessment year(s) 2010-11 to 2013-14 in due compliance of the Settlement Commission and got the same assessed under normal scheme than MAT assessment, there is hardly any scope left of under-assessment on impugned prior period income going by the PCIT s observations. We wish to re-emphasise here that PCIT has raised the issue of prior period income of 11,04,19,703/- for sec. 115JB computation only relating to the relevant previous year. We thus are of the opinion that once the said prior period income stood assessed under normal provisions in the corresponding earlier assessment year(s) 2010-11 to 2013-14, The Assessing Officer s alleged inaction in not disallowing the very sum(s) as prior period income for the purposes of MAT computation could neither be termed as erroneous nor causing prejudiced to interest of the Revenue going by the foregoing settled legal proposition (supra). The assessee had a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 263 revision mechanism in motion as per PCIT s directions. We accordingly accept the assessee s foregoing arguments challenging correctness of the impugned revision action. The same stands reversed. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned revision proceedings examined the assessee's forgoing submission as well its sec. 43B excise duty claim of ₹321,64,869/- in view of the corresponding documents produced during the course of scrutiny. There is further no issue that he accepted assessee's returned loss of ₹389,72,062/- and proceeded to compute its sec. 115JB book profits coming to final figure of ₹103,77,217/-. 3. Case file suggests that the PCIT thereafter sought to assume sec. 263 revision jurisdiction by terming it as an erroneous one causing prejudice to interest of the Revenue on the following twin issues:- "i) The assessee company has deducted prior period income of ₹ 11,04,19,703/- (as income already offered before Settlement Commission) to arrive at the book profit which is not admissible as per provisions of section 115JB. Therefore, the above mentioned irregularity has resulted in underassessment of income of ₹ 11,04,19,703/- having potential tax effect of ₹ 2,78,89,308/- ii) It is observed that the assessee deducted an amount of ₹ 6,28,68,798/- from income as "Payment of excise Duty in respect of earlier years now allowable" as per details given bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Prior period income of ₹ 11,04,19,703/- which is inadmissible u/s. 115JB of the Act. In this regard, it is submitted that the assessee offered an additional income of ₹ 12,56,69,703/- in the settlement application filed before the Hon'ble Settlement Commission, Kolkata on 18-03-2014 for the assessment years 2010-11 to 2013-14 which were not so included in the original Income Tax Returns filed for the respective years. The assessee duly paid the taxes on the said income offered before the Hon'ble Settlement Commission and also on the additions made by the Hon'ble Settlement Commission in the order passed u/s.245D(4) of the Act dated 21-09-2015. The same is evident from the copy of the settlement order passed u/s.245D(4) of the Act enclosed at page 49-70. Further note that this additional income of ₹ 12,56,69,703/- offered in the settlement application field before the Hon'ble Settlement Commission, Kolkata was incorporated in the regular books of account of the current year and was credited to the statement of the profit and loss a/c under the head "Exceptional Income". Further, an amount of ₹ 1,52,50,000/- was debited to Profit and Lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h normal and MAT provisions of the respective years, being AY 2010-11 to AY 2013- 14 and accordingly the same has already been duly assessed to tax in those years. To substantiate that tax was paid on such income of ₹ 12,56,69,703/- in the respective years, please find enclosed the computation of income forming part of the assessment order for AY 2010-11, refer page 38, wherein the sum of ₹ 31,01,988/-, being gross profit on undisclosed sales and ₹ 1,80,76,698/-, being peak negative capital was added to the enc under both normal provisions and MAT provisions. Further, please note that in this year, AY 2010-11, tax was paid under MAT provisions since the tax liability was more under MAT provisions than normal provisions. As such, there is no iota of doubt that the sum of ₹ 31,01,988/- and ₹ 1,80,76,698/- is tax paid income under MAT provisions. For AY 2011-12, 2012-13 and 2013-14 please find enclosed at page 44, 45 and 46 respectively the computation of income for these years wherein the additional income disclosed by the assessee in the settlement application filed u/s.245D(1) of the Act and the additions made by the Hon'ble Settlement Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 11,04,19,703/- was reduced from the net profits. But the computation of income under normal provisions is not questioned and as such is not a ground for invoking the provisions u/s. 263 of the Act. This alternately implies that your goodslef is satisfied that the assessee has rightly reduced the sum of ₹ 11,04,19,703/- form net profits under normal provisions since the same is not in the nature of income and is in the nature of capital receipt not liable to tax. As such, this is a contradictory stand taken by your goodself." 4. The assessee next highlighted the Assessing Officer's observation in assessment order that he had duly taken up exceptional item of ₹85,15,111/- (supra) inclusive of its income offered for taxation in earlier assessment year to the tune of ₹12,56,69,703/-. It also placed on record the Settlement Commission order(s) alongwith earlier assessment year's final computation of income to this effect. 5. Coming to the latter issue of excise duty of ₹628,68,798/- on payment basis instead of the alleged eligible sum of ₹300,50,738/- the assessee's detailed reply read as follows:- "Ground 2 - Deduction of Excise Duty of ₹ 6,2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee had already claimed a sum of ₹ 4,70,00,000/- paid in earlier years covered in the settlement period and the balance sum of ₹ 6,28,68,798/- was claimed in the current year, being payments made in the relevant assessment year. Out of ₹ 6,28,68,798/-, the sum of ₹ 3,21,64,869/- was claimed u/s. 43B, being payment of excise duty of earlier years covered in the settlement period but paid in the current year. The said payment was not claimed in the earlier years for reasons already discussed in Ground 1. This issue was duly considered and examined by the learned AO and on being satisfied, the same was allowed as deduction u/s 43B. To support this claim of the assessee, the relevant extract of the assessment order for the current year is produced below: "The details of claim of deduction u/s.43B in respect of excise duty amounting to ₹ 3,21,64,849/- was also examined with documents produced in the course of hearing." Further with regard to the balance amount of ₹ 3,07,03,929/- (₹ 6,28,68,798 minus 3,21,64,869), it is submitted that the same was determined as short payment of excise duty in the current year and therefore the company file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the settlement order. Further, please note that the sum of ₹ 7,70,50,738/- was the enhanced figure commuted by the Settlement Commission exclusive of AY 2010-11. The break up of ₹ 7,91,64,869/- and ₹ 7,70,50,738/- is as under:- A.Y Excise duty collected but not deposit to the credit of the Central Government as per the original SOF Enhanced excise duty determination by the hon'ble settlement commission 2010-11 47,26,402 Not admitted, assessed u/s. sec. 148 of the Act. 2011-12 4,33,32,789 4,53,20,664 2012-13 3,11,05,678 3,17,30,074 2013-14 -- Total 7,91,64,869/- 7,70,50,738/- As such, in view of the above facts, it cannot be said that the assessment order passed u/s. 143(3) of the Act is erroneous. As such, since one of the basic conditions mentioned in section 263 of the Act is not met, initiation of revision proceedings u/s 263 is not as per law. In Commissioner of Income-tax vs. Gabriel India Ltd (1993) 208 ITR 0108 (Bom) it was held that: 'The power of suo motu revision under sub-[section and can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In other words, the AO is directed to recompute the book profit after ascertaining as per the aforesaid observations. (ii) Deduction of excise duty of ₹ 6,28,68,798/- on payment basis instead of available excise duty of ₹ 3,00,50,738/-. As per assessee, the excise duty availability for the Settlement period is ₹ 10,98,68,798/- out of which ₹ 4,70,00,000/- stood claimed u/s. 43B in earlier years. Of the remaining ₹ 6,28,68,798/-, it is assessee's case that an amount of ₹ 3,21,64,869/- pertaining to earlier years covered in the settlement period was claimed and paid during the current year. The balance was stated to short payment of excise duty in the current year. Assessee goes on to say that out of ₹ 6,28,68,798/-, a sum of ₹ 5,82,58,034/- was paid in the current year and ₹ 46,10,764/- was paid before filing its income tax return. In other words, assessee contends that it has rightly claimed the deduction of excise duty during the year. It was also contended that the AO had examined the claim of deduction of ₹ 3,07 ,03,929/- paid during the year. However, the fact of the matter is that the Hon'ble Settlemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st be held to be prejudicial to the interests of the revenue and what is prejudicial to the interest of the revenue must be held to be erroneous the converse may not always be true. 8. Hon 'ble Supreme Court in the case of Malabar Industrial Co. Pvt. Ltd vs. CIT reported in (2000) 243 ITR 83, 87 -88 (SC) affirming the Hon'ble Kerala High Court decision (198 ITR 611) has held that the phrase "Prejudicial to the Interests of the Revenue" is of wide import and is not confined to only loss of taxes. If the A.O. has accepted the claim of the assessee without any enquiries then such assessment order passed by the A.O. was held to be erroneous. 9. In this regard it is mentioned that mere non enquiry would also render a particular order passed by lower authority as erroneous and prejudicial to the interests of Revenue. This position has been clearly confirmed by Hon'ble Supreme Court in the case of Rampyari Devl Saraogi v. CIT [1968] 67 ITR 84 & Smt. Tara Devl Aggarwal v. CIT [1973] 88 JTR 323 (SC). The reasoning for this proposition has been explained by Hon'ble Delhi High Court in the case of Gee Vee Enterprise v. Addl. CIT [1975] 99 ITR 375 in the following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid decisions of Hon'ble Supreme Court and Hon'ble High Court, and in accordance with the amendment made in Section-263 of the Act with effect from 01.06.2015, I hold that the impugned assessment order dated 23.12.2016 passed by the A.O. is erroneous in so far as it is prejudicial to the interests of the revenue. I further hold, after giving the assessee an opportunity of being heard, that the impugned assessment order dated 23.12.2016 is liable to set-aside. Therefore, I set aside the said assessment order directing the A.O. to frame the assessment afresh after considering the aforesaid observations, Hon'ble Supreme Court and Hon'ble High Court decisions and as per law. 12. In the result, the assessment order u/s 143(3) dated 23.12.2016 for A.Y. 2014-15 is setaside to the file of the Assessing Officer with a direction to pass a fresh assessment order after considering the aforesaid observations, as per law and after giving an opportunity of being heard to the assessee." It is in this backdrop of fact that the assessee's instant appeal seeks to reverse the PCIT's assumption of revision jurisdiction vested u/s 263 of the Act. 7. We have given our thoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Learned counsel at this stage submitted that since the assessee's accounts for the said earlier assessment year(s) stood submitted before the Registrar of Company's, "ROC" no rectification was permissible therein and therefore, it included both the above stated additional income as well as expenditure in the relevant previous year's books only. Our attention is invited to note-29 in assessee's audit report explaining all the foregoing facts of settlement petition followed by declaration of the relevant asset therein stated to have been accounted for in the impugned assessment year only. 10. Mr. Tulsiyan's next plea is that the assessee's additional income stood duly assessed in assessment year(s) 2011-11 to 2013-14 as per the corresponding computation at page-38 revealing profits on undisclosed sales with peak negative capital of ₹180,76,698/- (included in normal as well as MAT computation) respectively. It is further highlighted that the assessee's normal computation exceeded the latter MAT computation, both the former sums stood assessed. The factual position is stated to be no different for the remaining three assessment year's 2011-12 to 2013-14 as well as per the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.07.2019 (Kol) etc., 12. Learned CIT-DR submitted that the assessee ought not to have any grievance at this premature stage since the PCIT has merely directed the Assessing Officer to recompute its book profits as per the foregoing detailed observations. This technical plea carries no substance. We make it clear that the assessee had very well placed all of its additional income declaration details before the Settlement Commission followed by the corresponding order(s) finality culminating assessment thereof in assessment years) 2010-11 to 2013-14 in normal scheme. We thus conclude that even if the PCIT's directions are taken as for the purpose of mere re-computation, the same go against the settled legal proposition that the sec. 263 revision jurisdiction is not attracted in absence of the corresponding assessment being both erroneous as well as causing prejudice to interest of the Revenue. This tribunal's yet another co-ordinate bench's decision in Narayan Tatu Rane vs. Income Tax Officer (2016) 70 Taxmann 227 (Mumbai) also holds that insertion of Explanation-2 in sec. 263 vide the Finance Act, 2015 w.e.f 01.06.2015 does not ifso facto mean that every regular assessment could b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nced excise duty determined by settlement commission for assessment year(s) 2010-11 to 2012-13 read figure(s) of ₹ 47,26,402/-, ₹433,32,789/- & ₹311,05,678/- with corresponding figure of ₹453,20,664/- and ₹317,30,074/-; aggregating to head-wise figure ₹791,64,869/- and ₹770,50,738/-; respectively. He also took us to Assessing Officer's order in page- 2 para-3(ii) (supra) making it clear to have examined the impugned excise duty claim u/s 43B amounting to ₹321,64,869/-. We therefore conclude in these clinching factual aspects as well that the Assessing Officer's action in not disallowing / adding the impugned excise duty claim could neither be termed as erroneous nor prejudicial to the interest of the Revenue so as to set sec. 263 revision mechanism in motion as per PCIT's directions. We accordingly accept the assessee's foregoing arguments challenging correctness of the impugned revision action. The same stands reversed.
The assessee's regular assessment framed in the instant case dated 02.11.2016 is restored as a necessary corollary.
15. This assessee's appeal is allowed.
Order pronounced in open court on 26/02/2020 X X X X Extracts X X X X X X X X Extracts X X X X
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