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TMI Blog2021 (11) TMI 922X X X X Extracts X X X X X X X X Extracts X X X X ..... cted only when any allowance or deduction has been claimed in respect of loss, expenditure or trading liability and the assessee has obtained in cash or in any other manner any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof. We find that Ld. Pr.CIT has grossly erred in applying the provisions of section 41(1) in the present case which in no situation is applicable in the facts of the present case. We find that during the course of the assessment proceeding, the Ld. AO specifically asked Vide questionnaire issued on 17.04.2017, to explain large any other deduction claimed in sch. BP creating a loss without any income in Profit Loss Account and explain mismatch between income/receipt credited to Profit Loss Account considered under other heads of income and income from heads of income other than business/profession, which was replied. AO conducted proper enquiry to verify the withdrawal of provision of ICD and allowed the claim on being satisfied with the details and explanation. Thus, the decision of ld. AO cannot be held to be erroneous. We find that the ld. AO has applied his mind while co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other grounds raised herein 2. The registry has informed that the present appeal is delayed by 37 days. Ld. Counsel for the assessee submitted that the delay in filing the appeal is due to country-wide lockdowns imposed by the government in wake of Covid-19 outbreak. Taking cognizance of the same the government had introduced the taxation and other laws (Relaxation and Amendment of Certain Provisions) Act 2020 in order to relax/extend the statutory timelines for various compliance under various laws including the Income Tax Act 1961. Prayer was made to condone the delay. Ld. DR opposed the request. We however under the given facts and circumstances of the case, are satisfied with the reason giving rise to delay in filing the instant appeal. We condone the delay and admit the appeal for adjudication on merits. 3. Brief facts of the case as culled out from the records are that the assessee company is engaged in the Financial Assistance for industrial development and infrastructure. It declared total loss at ₹ 1,55,62,351/- in the return filed on 30.09.2015. The case was selected for limited scrutiny through CASS and the notices u/s 143(2) & 142(1) of the Act duly served upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable in this office. 5. Now the assessee is in appeal before the Tribunal challenging the jurisdiction of Ld. PCIT assumed u/s 263 of the Act. 6. Ld. Counsel for the assessee apart from placing reliance on written submissions placed on record and relevant extract reproduced in the subsequent paras and also submitted that provision of section 41(1) cannot be the basis for initiating proceeding u/s 263 of the Act and the Ld. Pr. CIT was not justified in alleging that the order passed by the Assessing Officer was erroneous and prejudicial to the interest of the revenue because the Ld. AO has examined the details and applied his mind and after making due verification framed the assessment. Ld. counsel for the assessee referred to the following arguments mentioned in the written submissions: This submission is being made as the impugned order passed u/s 263 is neither erroneous nor prejudicial to the interest of the Revenue. The issue stated by Ld. Pr.CIT in the show cause notice issued u/s 263 on 13.01.2020 has already been dealt and considered by Ld. AO while passing the assessment order u/s 143(3) on 18.12.2017. The submission is placed on record for the following contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns from business and profession' for the impugned year. There is no benefit claimed by the assessee in terms of section 41(1) in respect of the impugned amount. There is no 'tax advantage' derived by the assessee in respect of the impugned amount which is a balance sheet transaction.Extract of the relevant ledger account reproduced as under - 6. Ld. Pr.CIT erred in not considering all the submissions and documentary evidences placed on record in proper perspective. Ld. Pr.CIT thereby erred in concluding that the order passed by Ld. AO u/s 143(3) is erroneous and prejudicial to the interest of revenue by resorting to the provisions of section 41(1). 7. Ld. Pr.CIT in the show cause notice issued on 13.01.2020 stated - [PB 01] "In view of section 41(1) of the provision of the Act the recovered amount of ₹ 14,75,00,000/- which was classified as loss assets and subsequently recovered during the previous year was required to be added back to the assessee's income which was not done by the AO. The omission resulted in under assessment of income to that extent resulted in notional tax effect of ₹ 52,77,406/-." 8. There was no cessation or remission of any liability on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onducted by Ld. AO - no lack of enquiry and C. Application of the mind by Ld. AO 1. Assessee is a Government company in which 100% shareholding is of the Government of Madhya Pradesh. It is engaged in the business of financial assistance for Industrial Development and Infrastructure activity in the state of Madhya Pradesh. 2. The complete control and management is by the Board of Directors on the directives of Government of Madhya Pradesh. Currently, no fresh lending has been done instead assessee is under the process of recovery of loans, interest and investments which have been granted earlier. 3. Assessment u/s 143(3) for the impugned year was completed on 18.12.2017. Vide questionnaire issued on 17.04.2017, assessee was required to - [PB 128] a. Explain large any other deduction claimed in sch. BP creating a loss without any income in Profit & Loss Account b. Explain mismatch between income/receipt credited to Profit & Loss Account considered under other heads of income and income from heads of income other than business/profession 4. Assessee submitted details in respect of amount shown in the return for AY 2015-16 as per point no. 32 in BP i.e. computation of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken by the Ld. AO cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in this regard. 10. Without prejudice to the above and strictly in alternate, the assessee has unabsorbed brought forward loss of ₹ 127,77,68,266 which is available for set off. The tax liability on the addition, if any, made shall be set off against the above referred loss. Thus, there is no loss to the Revenue. 11. Reliance is placed on the following judicial precedents - a. Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. - [2000] 243 ITR 83 b. Hon'ble Jurisdictional High Court of Madhya Pradesh in the case of Ratlam Coal Ash Co. - [1987] 34 Taxman 443 c. Hon'ble Jurisdictional High Court of Madhya Pradesh in the case of Mehrotra Brothers - [2004] 270 ITR 157 d. Hon'ble Jurisdictional Bench of Indore ITAT in the case of Bhanwar Singh - ITA No. 659/Ind/2019 - order dated 29.07.2021 - Para 24 e. Hon'ble jurisdictional ITAT Indore Bench in the case of Vinod Bhandari - ITA 350/Ind/2017 & others, order dated 20.03.2020 - Para 43 to 46 f. Hon'ble Jurisdictional Bench of Indore ITAT in the case of Narottam Mishra - [2015] 25 ITJ 206 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidences placed on record in the paper book which is summarized in the table below: Sr. No. Particulars Amount (Rs.) Amount (Rs.) 1 Net profit as per audited financial statements (85,69,05,758) 2 Add: Provision of bad debts - Term Loan 1,60,70,000 Provision of bad debts - ICD 15,35,66,255 Depreciation as per books 39,23,231 Interest on Term Loan from IDBI 18,39,42,917 35,75,02,403 3 [1-2] (49,94,03,355) 4 Depreciation as per Income Tax (41,52,794) 5 [3-4] (50,35,56,149) 6 Income considered separately Dividend income 21,91,060 Rent received 8,65,707 Diminution in value of shares 8,90,772 (39,47,539) 7 Profit and Gains from Business or Profession [5-6] (50,75,03,688) 10. From the above table we observe that since it was a case of loss, the loss has been reduced to the extent of add back of provision for bad debts. 11. To examine this aspect whether Ld. PCIT was justified in holding the order of Ld. A.O as erroneous and prejudicial to the interest of revenue, we will first go through the relevant provision of Section 263 of the Act and settled judicial precedence:- 263. (1) The Principal Commissioner or Commissioner may call fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation.-In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse cannot be had to section 263(1) - Held, yes - Whether if due to an erroneous order of ITO, revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to interests of revenue - Held, yes - Assessee-company entered into agreement for sale of estate of rubber plantation - As purchaser could not pay installments as scheduled in agreement, extension of time for payment of installments was given on condition of vendee paying damages for loss of agricultural income and assessee passed resolution to that effect - Assessee showed this receipt as agricultural income - Resolution passed by assessee was not placed before Assessing Officer - Assessing Officer accepted entry in statement of account filed by assessee and accepted same - Commissioner under section 263 held that said amount was not connected with agricultural activities and was liable to be taxed under head 'Income from other sources' - Whether, where Assessing Officer had accepted entry in statement of account filed by assessee, in absence of any supporting material without making any enquiry, exercise of jurisdiction by Commissioner under section 263(1) was justified - Held, yes 15. At this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x does not feel satisfied with the conclusion. (viii) The Commissioner of Income-tax, before exercising his jurisdiction under section 263 must have material on record to arrive at a satisfaction. (ix) If the Assessing Officer has made enquiries during the course assessment proceedings on the relevant issues and the assessee has detailed explanation by a letter in writing and the Assessing allows the claim on being satisfied with the explanation of the assessee, the decision of the Assessing Officer cannot be held to be simply because in his order he does not make an elaborate discussion in that regard. 16. After going through the settled judicial precedents and the principles laid down by the Hon'ble Courts and examining the facts of the case in light thereof, we observe that during the impugned year assessee was engaged in the process of recovery of loans and interest which was granted earlier and no fresh lending was done in the impugned year. Thus, in the impugned year when the excess provision made for bad and doubtful debts on ICD was written back in respect of recovery of ICD of ₹ 14,75,00,000/- from Som Distilleries Limited, the same was deducted from the net ..... X X X X Extracts X X X X X X X X Extracts X X X X
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