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TMI Blog2022 (10) TMI 758X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. Transfer Pricing Officer u/s.92CA(1) after obtaining the approval of the ld. CIT-6, Mumbai vide letter dated 30/08/2013. Later, an order u/s.92CA(3) of the Act was passed by the ld. TPO on 31/12/2014 accepting the entire international transactions carried out by the assessee to be at arm's length price. The scrutiny assessment was completed u/s.143(3) of the Act on 26/03/2015 by the ld. AO determining the total income of the assessee at Rs.49,01,98,760/- after disallowing provision for depreciation and addition on account of broken period interest. This assessment was sought to be revised by the ld. PCIT by invoking revision jurisdiction u/s.263 of the Act on the ground that the assessee had debited the following expenses which had been allowed as deduction by the ld. AO without making any enquiries:- (a) Rs. 957.78 lakhs on account of "Revaluation (MTM) of non-convertible debentures. (b) Rs. 862.33 lakhs on account of "Revaluation of Futures and Options net of premium received. 3.1. We find that the very same dispute had arose in the case of the assessee in A.Y.2010-11 and the revision order u/s.263 of the Act was passed by that CIT for A.Y.2010-11 on the very same grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission vide letter dated 16.03.2016 and 18.03.2016. It was submitted that notice under section 142(1) dated 29.11.2013 enclosing a questionnaire was issued by the assessing officer and submissions were filed during assessment proceedings. The AO had examined the issue relating to the explanations submitted during assessment proceedings. It was submitted that AO had raised a specific query in respect of the company's claim for deduction of provision for depreciation on investment, discount on issuance/valuation of debentures and losses on futures & options. In response, assessee had submitted its reply vide letter dated 27.01.2014. It was submitted that AO had discussed the issues and not passed the assessment order in a routine manner. It was submitted by relying on various case law that an order cannot be termed as erroneous merely because AO failed to discuss an issue more elaborately. 5. Further it was argued that the points on which action under section 263 is proposed are such that the year of allowability of the loss becomes only the relevant matter. The losses are allowable in one or the other year and in such case, in accordance with the decision of the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statements for the year under consideration. From the records and order sheet of the assessment records, he observed that no further query was raised by the AO on this issue and considering the quantum of loss in the case of assessee, he might have sought a note on the nature of loss but it is evident that AO has failed to examine the admissibility of such loss. With the above observation he observed that in no way can a perfunctory query and an equally terse response can be construed as an enquiry or examination. Further he rejected the reliance of Supreme Court decisions to claim the above said deductions and he observed that in the given case the issue relates to interest of NCD, which is linked to the performance of specified equity indices over a period of debentures. Ld. CIT observed that the issue under consideration was allowability of interest, and this is a deduction which should have been considered and claimed under section 36 (1) (iii) of the Act . 10. Ld CIT observed that in the case of Equity Linked Debentures (ELD), the advantage of the investor is that the principal amount lent reminds protected and at the same time the lender gets interest linked to the perform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y application of mind. He observed that considering the facts and circumstances of the case warranted the AO to comprehend the nature of the transactions and consider the admissibility of the losses arising there from in accordance with the provisions of law and the instructions of the CBDT. He observed that the present case of the assessee clearly falls with clause (a) of explanation to section 263 of the Act. Based on the above discussion, Ld CIT set aside the assessment order dated 30.01.2014 with a direction to pass an assessment order afresh in accordance with law, applicable judicial decisions and instructions/circulars issued by the CBDT. 13. Aggrieved with the above order, assessee preferred an appeal before us raising the following grounds of appeal:- 1. (a) The Principal Commissioner of Income Tax - 12, Mumbai (hereinafter referred to as CIT) erred in holding that the provisions of section 263 of the Income Tax Act, 1961 ("the Act") were applicable to the facts of the appellant's case. The order dated 28 March 2016 passed by the CIT is bad in law, void, in excess of and/or want of jurisdiction and otherwise illegal and should be quashed. (b) The CIT erred in set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication relating to the losses claimed by the assessee. In this regard he brought to our notice page 129 of the paper book as per which, assessee has filed note on the provisions for depreciation on investments and note on depreciation on investment, discount on issuance/valuation of debentures and losses on futures/options (page 1 of paper book). Further he brought to our notice page 4 and 5 of the paper book as per which assessee has explained the discount on NCD, loss on revaluation of ELN and MTM on futures and options. Further he brought to our notice assessment order dated 30.01.2014, in particular para 7 of the order in which AO has reproduced the submissions of the assessee and accordingly allowed the claim of the assessee. Therefore, he submitted that the assessing officer has applied his mind and decided the issue. It clearly shows that the assessing officer has carried out enquiry. Further he brought to our notice page 48 of the paper book which is schedule to the financial statements containing significant accounting policies and he also brought to our notice the notes given by the company on nonconvertible debentures, he submitted which is different from the note subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the issue to quantify the prejudice caused to the revenue instead of remitting it back to AO for fresh consideration. 18. Considered the rival submissions and material placed on record. We notice that Ld. CIT has invoked provisions of section 263 in this assessment year on the basis that AO has asked for certain clarification from the assessee and those information/clarification was already available on record or part of financial statement. He observed that the AO has completed the assessment without enquiry and not applied his mind on this issue. We notice from the record submitted before us and the similar issue the revenue has raised in the assessment year 2008- 09 wherein similar proceedings were initiated under section 263 of the Act. The Commissioner of income tax at that point of time has set aside the assessment order with the similar finding. We notice that in that 263 order as well Ld. CIT has not quantified how it is prejudicial to the interest of revenue rather discussed the situation and remitted this issue back to the AO for de novo consideration. The coordinate bench has considered the same issue and came to the conclusion as below:- 12. We find that the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer has by necessary implication allowed the claim. Moreover, the basic document for completing the assessment under Section 143(3) of the Act is the computation of income. Therefore, to the extent the claims made for deduction in the computation of come, were disallowed by the Assessing Officer, discussion on the same is found in the assessment order. It is an accepted position that the assessment orders would necessarily deal only with the claims being disallowed and not with the claims being allowed. This is for the reason as observed by the Gujarat High Court in CIT Vs. Nirma Chemicals Ltd 309 ITR 67, that if the Assessing Officer was to deal with all the claims which were to be allowed in the assessment order, the result would be an epictome. This is so, as it would cast an impossible burden upon the Assessing Officer considering his workload and the period of limitation. There was also no reason in the present facts for the Assessing Officer to ask any queries in respect of this claim of the petitioner, as the basic document viz. computation of income at note 21 (Assessment Year 2013- 14) and note 22 (Assessment Year 2014-15) thereof explained the basis of the claim bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to account, he sought certain clarification which was properly submitted by the assessee in writing. Ld. CIT observes that the note submitted by the assessee is nothing but notes forming part of accounts. AO has merely accepted those explanation without applying his mind completed the assessment. It is fact on record that the issue under consideration is not a new issue came up afresh in this assessment year, we notice that similar issue was came up in the earlier assessment year and the coordinate bench has decided the issue on merit as well. In our considered view the learned CIT is not appreciated the fact that AO has applied one of the possible view in this case. 20. We notice that Ld. DR submitted that the case of the assessee falls under explanation - 2 in section 263 of the Act and further relied in the case of Crompton Greaves Ltd (supra). The issue under consideration is, whether the AO has passed the order without enquiries or verification which he should have made. In this case, the assessee has filed the financial statement alongwith the notes and also findings of ITAT in the earlier Assessment Year. AO seeks clarification on those issues. The assessee responds to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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