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TMI Blog2020 (5) TMI 645X X X X Extracts X X X X X X X X Extracts X X X X ..... resent, assessee s challenge regarding the validity of the revision orders no longer survives. As regards assessee s contention that Commissioner does not have the power to issue corrigendum, we are unable to accept the same. Accordingly, ground no.1 along with additional grounds no.(IV) and (V) 4 and 5 are dismissed. Validity of exercise of power u/s 263 - Excise Duty exemption received by the assessee, whether revenue or capital - HELD THAT:- Facts and materials on record clearly demonstrate that the Assessing Officer has failed to conduct proper enquiry or has made perfunctory enquiry with regard to assessee s claim of excise duty incentive as capital receipt. Whether the excise duty incentive is capital or revenue depends upon various factors, including, the scheme formulated by the Government allowing incentive/subsidy. AO is required to examine the issue factually and only thereafter apply the ratio laid down in the judicial precedents. AO has not even undertaken the exercise required to be undertaken by him in the first step to factually examine the nature of incentive. Allowance of assessee s claim in respect of excise duty incentive while computing the income under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under section 263 of the Income Tax Act, 1961 (for short the Act ) by the learned Commissioner of Income Tax (LTU), Mumbai, for the assessment years 2013 14 and 2014 15. 2. Brief facts are, the assessee, an Indian company, is engaged in manufacturing of cement. The Assessing Officer passed draft assessment orders under section 143(3) r/w section 144C(1) of the Act for the assessment year 2013 14 on 30th December 2016 and for the assessment year 2014 15 on 29th December 2017. Against the draft assessment orders, since, the assessee did not file any objections before the Dispute Resolution Panel, final assessment orders were passed under section 144C(3) of the Act in due course. 3. Learned Commissioner of Income, in exercise of power under section 263 of the Act, called for the assessment records pertaining to the impugned assessment years and after perusing them found that in the years under consideration assessee had received excise duty exemption in respect of its plant at Gagal, Himachal Pradesh. However, in the returns filed assessee did not offer the excise duty exemption as income on the plea that it is capital receipt and the Assessing Officer has accepted it. Notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found that in the grounds raised by the assessee concerning the aforesaid issue, a reference has been made to the final assessment orders. Therefore, to get clarity on the inconsistencies arising between the grounds raised and the arguments advanced by the learned Counsel, the appeals were re fixed for further hearing and were finally heard on 3rd September 2019 on all the issues arising in the appeals. In the course of hearing on the aforesaid date, the learned Counsel has raised the following additional grounds: WITHOUT PREJUDICE TO GROUND I, GROUND IV ORDER PASSED BY THE LD. CIT REVISING DRAFT ASSESSMENT ORDER IS BAD IN LAW: 1. On the facts and circumstances of the case and in law, the learned CIT erred in invoking the provisions of section 263 of the Income tax Act, 1961 ( the Act ), for revising the draft order passed by Deputy Commissioner of Income tax (LTU) [ the A.O ] u/s 143(3) of the Act dated December 30, 2016, ( the draft orde ) on the alleged the ground that the said draft order was erroneous and prejudicial to the interest of revenue. 2. The Appellant therefore, prays that the order passed by the Ld. CIT revising the draft assessment order be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submitted, since the draft assessment orders are not assessment orders in strict sense of the term, they cannot be subjected to proceeding under section 263 of the Act. He submitted, at the stage where the draft assessment order is passed, the assessment proceedings are still pending. Hence, the draft assessment order cannot be revised. He submitted, to give effect to the directions of learned Commissioner, the Assessing Officer is required to pass the order under section 143(3) r/w section 263 of the Act which is possible only if the final assessment order is revised / set aside. Moreover, the demand can be enforced as a consequential result only on revision of the final order. Thus, he submitted, the orders passed under section 263 of the Act should be declared void ab initio and quashed. In support of such contention, the learned Counsel relied upon the following decisions: i) Apollo Tyres Ltd. v/s ACIT, [2017] 53 ITR (T) (Coch.) 548; ii) Bausch Lomb India Pvt. Ltd. v/s ACIT, [2017] 189 TTJ 860 (Del.); and iii) Apollo Tyres Ltd. v/s ACIT, 108/Coch./2019, dtd 03.10.2018. 8. Shri Anadi Varma, the learned Departmental Representative submitted, the intention o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself was invalid, the same could not be rectified by merely passing a corrigendum as the jurisdictional defect cannot be cured by issuing such corrigendum. Thus, he submitted, both, the revision order as well as corrigendum has to be quashed. 11. We have considered rival submissions and perused the material on record. We have also applied our mind to the decisions relied upon. There is no dispute with regard to the factual position that in the show cause notice issued under section 263 of the Act as well as the revision orders passed under section 263 of the Act, learned Commissioner has referred to the date of draft assessment orders passed under section 144C(1) of the Act. The orders under section 263 of the Act for the assessment years 2013 14 and 2014 15 were passed by learned Commissioner on 4th February 2019 and 6th February 2019 respectively. The corrigendum were issued by learned Commissioner substituting the reference to the draft assessment orders with the final assessment order in the orders passed under section 263 of the Act, on 24th April 2019. As per section 154(7) of the Act, any mistake apparent from the record can be rectified suo motu within a period of four ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, learned Commissioner has referred to the dates of draft assessment orders passed under section 144C(1) of the Act. In reply to the aforesaid show cause notices issued under section 263 of the Act, the assessee had filed objections before learned Commissioner. Neither in the said objections nor in course of proceedings before learned Commissioner, the assessee raised any objection regarding the jurisdictional error committed by the learned Commissioner by referring to the draft assessment order in the show cause notices. Only after the revision orders were passed under section 263 of the Act, wherein, learned Commissioner again referred to the draft assessment orders, due to inadvertent error for which corrigendum were subsequently issued, the assessee in the appeals filed before the Tribunal raised the jurisdictional issue challenging the validity of the assessment orders on the plea that the draft assessment orders cannot be subjected to proceedings under section 263 of the Act. In our view, the aforesaid issue raised by the assessee is not bona fide. Had the assessee been honest and serious in its stand and approach, it should have raised this issue of validity of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to revise the assessment orders on the issue of not bringing to tax the excise duty exemption received by the assessee. 15. Since, we have already dealt with the factual aspect of this issue earlier, it is not necessary to deal with them over again. 16. The learned Counsel for the assessee submitted, in the course of original assessment proceedings, the Assessing Officer has duly examined assessee s claim of excise duty exemption as a capital receipt. He submitted, the assessee has adequately disclosed the reasons for not offering excise duty exemption to tax in the original as well as revised computation of income and also in the notes appended to computation of income. He submitted, in the course of assessment proceedings, the Assessing Officer has raised specific query with regard to the nature of excise duty exemption. In this context, he drew our attention to the notice dated 24th October 2016, issued under section 142(1) of the Act, a copy of which is at Page 10 of the paper book. He submitted, in response to the specific query raised by the Assessing Officer, the assessee in its reply dated 26th December 2016, explained the reason for not offering excise duty exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner cannot refuse to follow the decision of the higher Courts or the Tribunal. He submitted, when the Assessing Officer has passed the assessment order on the basis of law laid down by the Courts and Tribunal, it cannot be termed as erroneous only because such decision is not acceptable to the Revenue. In this context, he relied upon the decision of the Hon ble Gujarat High Court in Garden Silk Mills Ltd. v/s CIT, [1996] 221 ITR 861 (Guj.). The leaned Counsel submitted, for exercising jurisdiction under section 263 of the Act, twin conditions of erroneous as well as prejudicial to the interests of Revenue have to be fulfilled. He submitted, when the assessment orders passed by the Assessing Officer on the issue of excise duty exemption are in conformity with the principle laid down by the Hon'ble Supreme Court as well as different High Courts, such order cannot be held to be erroneous even if there may be prejudice caused to the Revenue. For such proposition, he relied upon the following decisions: i) CIT v/s Gabriel India Ltd., [1993] 203 ITR 108 (Bom.); ii) CIT v/s Paul Brothers, [2005] 216 ITR 548 (Bom.); iii) Russel Properties Pvt. Ltd. v/s ACIT, [1977] 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Tribunal in ACIT v/s Manas Salt Iodization Industries Pvt. Ltd., [2015] 38 ITR 502 (T) (Gau.). Without prejudice to the aforesaid submission, the learned Counsel submitted, the assessee has strong case on merit also as the issue is squarely covered in favour of the assessee by various decisions of the Hon'ble Supreme Court as well as different High Courts. In this context, he relied upon the following decisions: i) Shree Balaji Alloys v/s CIT, [2011] 333 ITR 335 (J K); ii) CIT v/s Ponni Sugars Chemicals Ltd, [2008] 306 ITR 392 (SC); and iii) CIT v/s Chaphalkar Brothers, [2018] 400 ITR 279 (SC). 21. Drawing our attention to the industrial policy resolution and exemption/subsidy scheme of the Government of Himachal Pradesh and Uttarakhand and similar scheme issued by the Jammu Kashmir Government, the leaned Counsel for the assessee submitted, the nature of excise duty exemption is identical, hence, the decisions of the Hon'ble Supreme Court and different High Courts would squarely apply to assessee s case as well. Thus, he submitted, due to all these factors, the assessment orders can neither be held as erroneous nor prejudicial to the interests ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal or revenue in nature, the learned Departmental Representative submitted, this has to be examined and decided by the Assessing Officer after verifying the exemption scheme, relevant case laws and other materials on record. 23. We have considered rival submissions and perused the material on record. We have also applied our mind to the decisions relied upon. The core issue which needs to be addressed at the very outset is, the validity of exercise of power under section 263 of the Act. It is fairly well settled that for exercising power under section 263 of the Act, twin conditions of erroneous and prejudicial to the interests of Revenue have to be satisfied cumulatively. The factual matrix would reveal that in the return of income filed for the assessment year 2013-14, the assessee did not offer the following income/receipt, as noted below, on the plea that they are in the nature of capital receipts. Sales Tax Incentives ₹ 99,17,41,517 Excise Duty Incentives ₹ 254,44,56,144 Refund of Royalty ₹ 25,17,62,233 24. Even wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , wherein, he has treated it as revenue receipt. Though, it may be a fact that the Assessing Officer in the annexure attached to the notice issued under section 142(1) of the Act has called upon the assessee to justify its claim that the aforesaid receipts are capital in nature and the assessee has also replied to the query raised by the Assessing Officer, however, thereafter, as it appears from the facts on record, the Assessing Officer has neither applied his mind to the reply of the assessee nor carried the enquiry any further to ascertain the correctness of assessee s claim of excise duty incentive as capital receipt. When the Assessing Officer has treated the sales tax incentive and refund of royalty as revenue receipt, he should have provided proper reasoning and justification why he omitted the excise duty exemption from being considered as revenue receipt. The aforesaid omission on the part of the Assessing Officer is glaring considering the fact that in the preceding assessment years including A.Y. 2008 09 and 2012 13, the Assessing Officer had added back all the three items of receipts viz. sales tax incentive, excise duty incentive as well as refund of royalty both under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital or revenue depends upon various factors, including, the scheme formulated by the Government allowing incentive/subsidy. Therefore, the Assessing Officer is required to examine the issue factually and only thereafter apply the ratio laid down in the judicial precedents. In the facts of the present case, the Assessing Officer has not even undertaken the exercise required to be undertaken by him in the first step to factually examine the nature of incentive. Therefore, allowance of assessee s claim in respect of excise duty incentive while computing the income under the normal provisions without necessary inquiry has certainly made the assessment order erroneous and prejudicial to the interest of Revenue. That being the case, the conditions of section 263 of the Act are fulfilled so as to enable the learned Commissioner to revise the assessment orders under section 263 of the Act. Therefore, in our considered opinion, the exercise of power under section 263 of the Act in the facts of the present case is valid. Though, we respectfully agree with the ratio laid down in the decisions cited before us by learned Counsel for the assessee, however, they would not be of any help to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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