9911796707
TMI Blog2020 (3) TMI 782X X X X Extracts X X X X X X X X Extracts X X X X ..... edings. The argument advanced is that the said documents were not called for by Ld. AO and the same were not considered by Ld.AO while framing the assessment. It is difficult to accept the fact that the said documents were not appreciated / considered by Ld. AO since a specific disallowance has been made, being conscious of the fact that certain arbitration income was not offered to taxation by the assessee. The assessment orders for earlier years were specifically called for vide notice u/s 142(1) and the same were also furnished by the assessee. Upon perusal of the same, Ld.AO specifically took note of the fact that similar disallowance was made in earlier years and therefore, he chose to make similar disallowance during the year under consideration. The computation of income filed by the assessee clearly demonstrated that arbitration awards received during the year were offered to tax whereas interest on arbitration award was reduced while computing the taxable income. The revenue recognition policy being followed by the assessee to recognize the interest income was fully disclosed in Notes to the account. In the light of all these facts, it could safely be concluded that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny order passed by the Assessing Officer [AO]. For the said purpose, the appropriate authority may call for and examine the record of any proceedings under the Act and may proceed to revise the same provided two conditions are satisfied-(i) the order of the assessing officer sought to be revised is erroneous; and (ii) it is prejudicial to the interest of the revenue. If one of the condition is absent i.e. if the order of the Incometax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but it is prejudicial to the revenue - recourse cannot be had to Section 263 of the Act as held by Hon ble Supreme Court in Malabar Industrial Co. Ltd. V/s CIT [243 ITR 83 10/02/2000] noted by Hon ble Delhi High Court in CIT V/s Vikas Polymers [194 Taxman 57 16/08/2010]. The Hon ble Supreme Court in Malabar Industrial Co. Ltd. V/s CIT (supra) has held that the phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue. For example, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved in Dawjee Dadabhoy and Co. vs. S.P. Jain, (1957) 311 ITR 872 (Calcutta), can only mean that the orders of assessment challenged are such as are not in accordance with law, in consequence whereof the lawful revenue due to the State has not been realized or cannot be realized. Thus, the Commissioner's exercise of revisional jurisdiction under the provisions of Section 263 cannot be based on whims or caprice. It is trite law that it is a quasi-judicial power hedged in with limitation and not an unbridled and unchartered arbitrary power. The exercise of the power is limited to cases where the Commissioner on examining the records comes to the conclusion that the earlier finding of the Income-tax Officer was erroneous and prejudicial to the interest of the revenue and that fresh determination of the case is warranted. There must be material to justify the Commissioner's finding that the order of the assessment was erroneous insofar as it was prejudicial to the interest of the revenue. 1.4 The Hon ble Delhi Court, in the cited decision, further observed that there is a fine though subtle distinction between lack of inquiry and inadequate inquiry . It is only in case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. 1.5 The Hon ble Supreme Court in CIT V/s Amitabh Bachchan (69 Taxmann.com 170 11/05/2016) held that the power of appeal and revision is contained in Chapter XX of the Act which includes section 263 that confers suo-motu power of revision in the Commissioner. The different shades of power conferred on different authorities under the Act has to be exercised within the areas specifically delineated by the Act and the exercise of power under one provision cannot trench upon the powers available under another provision of the Act. In this regard, it must be specifically noticed that against an order of assessment, so far as the revenue is concerned, the power conferred under the Act is to reopen the concluded assessment under section 147 and/or to revise the assessment order under section 263. The scope of the power/jurisdiction under the different provisions of the Act would naturally be different. The power and jurisdiction of the revenue to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns etc. issued by the Board u/s 119; or (iv) the order was not in accordance with binding judicial precedent. 2.1 Keeping in mind aforesaid principle, we find that the assessee before us, is under appeal challenging the validity of revisional jurisdiction as exercised by Ld. Pr. Commissioner of Income Tax-9, Mumbai for Assessment Year 2014-15 vide order dated 29/03/2019. The grounds raised by the assessee read as under: - 1. Re: Validity of order under section 263: 1.1. The learned CIT has erred in passing an order under section 263 of the Income-tax Act, 1961 based on surmises and conjectures without appreciating the facts and judicial precedents in the matter. Hence, such order is bad in law and ought to be quashed. 1.2. The learned CIT has erred in holding that the assessment order dated 30 December 2016 passed by the Assessing Officer is erroneous in so far as the same is prejudicial to the interests of revenue. 1.3. The learned CIT failed to appreciate that the conditions specified under Explanation 2 to section 263 are not satisfied in the appellant's case. Accordingly, the appellant prays that the impugned order passed by the learned CIT is ultra vires, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nforceability of award under new statute to conclude that enforceability and finality of award are synonymous. 2.5. The learned CIT erred in relying on the decision of the Supreme Court in the case of BCCI Vs. Kochi Cricket Pvt. Ltd Ors which has been rendered under the Arbitration and conciliation Act, 1996 and Arbitration and conciliation (Amendment) Act, 2015 which deals with the issue of enforceability of the arbitration award. Thus, the same cannot be followed for proposing taxation of income of ₹ 36,22,59,000 in the current assessment year. 2.6. The learned CIT erred in disregarding the judicial precedents relied upon by the appellant under the Income-tax Act, 1961 to contend that arbitration awards and interest thereon should be taxable only once the matter has reached finality. 2.7. The learned CIT erred in relying on judicial precedents rendered under the Income-tax Act, 1961 which are distinguishable on facts as compared to facts in the appellant's case. 2.8. The learned CIT ought to have appreciated the appellant's submission that there is no permanent exclusion of the interest on arbitration awards from being taxed in the hands of appellant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able expenditure which made the assessment order erroneous and prejudicial to the interest of the revenue within the meaning of Sec. 263. The assessee assailed the proposed revisional jurisdiction vide submissions dated 25/03/2019, a copy of which has been placed on record. The attention was drawn to the fact that during the course of assessment proceedings, Ld. AO had specifically show-caused the assessee as to why interest on arbitration awards of ₹ 36.22 Crores was reduced in the computations, against which detailed submissions were furnished by the assessee to Ld. AO. The copies of awards received during the year, stay petition filed by the clients before the High Courts and journal entries passed in the books of accounts were also furnished. It was submitted that since Ld. AO had called for the requisite details of arbitration awards and even made disallowance for professional fees debited in the Profit Loss Account in relation to arbitration awards, he had applied his mind to the issue and concluded that interest on arbitration awards was not to be taxed during the year under consideration. 2.4 On merits also, it was submitted that the assessee, following mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me and therefore, no real income accrued to the assessee on grant of arbitration award in favor of the assessee. The income would be offered to tax only when the matter reaches finality. 2.6 It was further submitted that the assessee offered the arbitration awards to tax in the year of actual receipt once the matter reached finality which was evident from the fact that the assessee offered to tax Arbitration Award of ₹ 18.82 Crores received during the year. Thus, there would only be timing difference in offering the said income to tax depending on when matter reaches finality. 2.7 The assessee also raised a plea of Rule of consistency by submitting that similar submissions were made before Ld. DRP for AY 2009-10 wherein Ld. DRP, after considering the same, did not issue any directions for enhancement of the proposed income of the assessee. Therefore, following the Rule of Consistency in terms of decision of Hon ble Apex Court in Radhasoami Satsang V/s CIT (193 ITR 321) , no addition was to be made on account of interest on arbitration awards. 2.8 In the above background, the assessee, relying upon various judicial pronouncements, assailed the exercise of revisional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P(C) Nos. 1074 of 2019 and ors. 27/11/2019] which was in the context of The Arbitration and Conciliation Act, 1996. The assessee filed written submissions against the same also, which has duly been considered. 5.1 We have carefully considered the factual matrix as well as arguments advances by both the representatives. Our adjudication to the issue, in the light of settled legal position as enumerated in opening paragraphs, would be as given in succeeding paragraphs. 5.2 From the perusal of documents on record, we find that during regular proceedings, notice u/s 142(1) was issued to the assessee on 31/05/2016 wherein the assessee was directed to file the copy of return of income, financial statements and copy of assessment orders for last 3 years. The notice was duly complied with by the assessee vide submissions dated 08/06/2016 wherein the assessee, inter-alia, filed its annual report, statement of total income and assessment orders for AYs 2011-12 2012- 13. In the computation of income, the assessee has offered to tax money received on arbitration award for ₹ 18.82 Crores and at the same time, claimed deduction of interest on arbitration award for ₹ 36.22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been framed u/s 143(3) on 30/12/2016 wherein, Ld. AO has chosen to make disallowance of ₹ 4.57 Crores, being professional fees for arbitration since corresponding arbitration award income was not offered for taxation. It was noted that similar disallowance was made in earlier years and the same was deleted by Ld. first appellate authority and consequently, the department was in appeal before Tribunal on the stated issue. However, to keep the issue alive, the said disallowance was made for the year under consideration. 5.5 First of all, we deal with the arguments advanced by Ld.CIT-DR that the submissions made by the assessee during the course of regular proceedings with respect to taxability of interest on arbitration awards were not called for by Ld. AO in notice u/s 142(1) and the submissions were purely suo-moto voluntary submissions which would clearly demonstrate that Ld. AO did not apply his mind to this aspect while framing the assessment. We find that assessee has duly certified the paper-book containing the said submission that the aforesaid submissions vide letter No. PG/26138 as well as supporting documents were duly submitted to Ld.AO during the course of regul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the revenue is earlier years and similar deduction claimed in earlier years was not disturbed. The Notes to the accounts would, prima-facie, establish that the assessee was following consistent method of accounting for recognition of interest income and there was no change in accounting policy in this regard. This is in consonance with plea of Rule of consistency as raised by Ld. Sr. Counsel, who has submitted that there was no change in the accounting methodology being followed by the assessee for recognizing the interest income on arbitration awards. This is further evidenced by the submissions made by the assessee during the course of assessment proceedings with respect to taxability of interest income on arbitration awards during assessment proceedings for AYs 2009-10 to 2013-14 wherein similar pleas has been raised. The perusal of these submissions would reveal that the assessee has offered interest income on arbitration awards to tax only in the year of actual receipt thereof. Therefore, the principle of rule of consistency favor the assessee, on the issue raised by Ld. Pr.CIT. 5.8 Therefore, in the given facts and circumstances, we find that the subject matter of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
