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TMI Blog2023 (11) TMI 1105X X X X Extracts X X X X X X X X Extracts X X X X ..... correct to say that rectification is equal to revision under the Act. Term erroneous used in the section 263 is to be read relating to jurisdictional error on the part of the Assessing Officer in exercise of his powers vested under the law. It cannot be read as to a mistake which is rectifiable under the provisions of section 154 either suo moto or on the application of the assessee. Rectification u/s 154 can be done suo motto either by Assessing Officer himself or by the assessee on application. In the instant case, all the documents and details related to the impugned transaction were on record. We need to understand if such a mistake can lead to holding the order erroneous for the purpose of assuming jurisdiction u/s. 263 to invoke revisionary proceedings. The matter was open before Ld. AO to take appropriate measures for rectification of mistake apparent from records. Thus we find that on this issue, present case is purely on facts which are verifiable from the records of the assessee, examination and verification of the original computation of income and tax vis- -vis the revised computation of income and tax placed on record. Also considering the judicial precedent in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not arise out of conduct of assessment proceedings and making an assessment of total income u/s. 143(3), therefore, Ld. Pr. CIT could not have invoked revisionary proceedings to direct the ld. AO for imposing DDT liability on the assessee in reference to assessment order passed u/s. 143(3). There is no separate order in existence, fastening the assessee with DDT liability by holding it as an assessee in default , contemplated u/s. 115Q. Thus, in absence of the same, in our view, Ld. Pr. CIT is not justified in invoking the revisionary proceeding u/s. 263 and passing an order thereon. Thus, even on this issue, we hold that passing of revisionary order u/s. 263 is not justifiable. Appeal of the assessee is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... her observed that loss, (after indexation) from sale of two investment viz. (i) 11.40% Lakshmi Bilas Bank 2018 for Rs. 1,09,500/- and (ii) 10.75% IDBI Bank PERP 2024 Bonds for Rs 11,97,600/- had been taken in the calculation of LTCG and carried forward to the subsequent years. Again, the same losses for those investments, without Indexation, for Rs. 1,09,500/- and Rs. 11,97,600/- had also been taken into account in the calculation of STCG. Those losses accordingly decreased the quantum of STCG or an amount Rs. 13,07,100/-. Since the loss had been taken in the calculation of LTCG, it would not be available m the calculation of STCG simultaneously. Such mistake led to understatement of STCG of Rs. 13,07,100./- and which in turn led to short levy of revenue. 3.3 It is observed that the A.O. failed to consider the issues as discussed in paragraph 3.1 and 3.2 above while framing the assessment order which, prima facie, has rendered the assessment order dated 19.02.2021 passed u/s. 143(3) of the Act to be erroneous in so far as it is prejudicial to the interest of revenue." 4. Assessee filed its written submission dated 01.03.2023, explaining in detail as to why the impugned assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal to the Ld. CIT, DR as to their admission, no objection was raised and hence, they are admitted for adjudication. We will deal with additional grounds on the first issue later. 6. We first refer to the second issue raised by the Ld. Pr. CIT in the revisionary proceedings which pertains to understatement of short term capital gain (STCG) amounting to Rs. 13,07,100/-. In this respect, assessee had submitted before the Ld. Pr. CIT that it had wrongly adjusted the Long Term Capital Loss of Rs. 13,07,100/- incurred during the year twice, once with Long Term Capital Gain and again with Short Term Capital Gain out of inadvertent mistake in its computation of income as per the normal provisions of the Act. However, the total amount of gain on sale of investments was correctly reflected in the audited balance sheet at Rs. 78,48,519/-. There was no mala fide intention of the assessee and it is a case of inadvertent mistake. 6.1. It was further submitted that there will be no additional tax liability due to the said error as mentioned above since the assessee was liable to pay tax as per section 115JB of the Act and the assessee had surplus tax credit u/s.115JAA for tax paid in earli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustries (supra) held that this phrase i.e. "prejudicial to the interest of the revenue'' has to be read in conjunction with an erroneous order passed by the AO. Their Lordships held that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law. 7.1. On this issue, ld. Pr. CIT in his revisionary order in para 6 has noted that he has examined the revised computation of income furnished by the assessee. Upon his examination, he has noted that gross tax payable under normal provisions of the Act as per the original computation of income is Rs. 76,13,748/- which now comes to Rs. 79,73,887/-. The enhanced gross tax liability under the normal provisions of the Act is Rs. 3,60,139/- which after rectification of the mistake will r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing the STCG by Rs. 13,07,100/-, the tax payable u/s. 115JB of the Act remains the same at Rs. 52,27,263/-, while the Gross tax payable comes to Rs. 79,73,887/- under normal provisions of the Income Tax Act. In this case, the MAT credit available u/s. 115JAA of the Act comes to Rs. 27,46,624/- and the total tax payable per the revised computation is arrived at Rs. 52,27,263/- [which is same as in the original computation of total income as per ROI] after availing the MAT credit of Rs. 27,46,624/- u/s. 115JAA of the Act. Finally, the resultant net figure of tax payable after adjustment of taxes paid remains the same as in the original computation of total income i.e. refund of Rs. 2,07,332/-. Hence, clearly, no additional tax liability arises even after correcting the mistake of wrongly adjusting the LTCL of Rs. 13,07,100/- against STCG. Thus, under no circumstances, the order passed by the Ld. AO can be alleged to be prejudicial to the interest of the revenue is concerned." 7.4. We note that on the issue of adjustment of LTCG twice, admittedly, it is a fact on record that it occurred due to an inadvertent mistake on the part of the assessee. Further, it is evidently demonstra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income and tax vis-à-vis the revised computation of income and tax placed on record. Further, considering the judicial precedent in the case of Malabar Industries Ltd. (supra), we find that it is case of bonafide mistake committed by the assessee, which effectively does not result into prejudice caused to the revenue in the year under consideration. Liability of tax for the year under consideration is duly discharged by the assessee which has been evidently demonstrated from the two computations placed on record. Accordingly, on this issue raised by the Ld. Pr. CIT in the revisionary proceeding, no action u/s. 263 of the Act is justifiable. 8. Now, we take up the issue relating to DDT on the proposed dividend in which assessee has raised additional grounds of appeal. Facts relating to this are oozing from the issue recorded by the Ld. Pr. CIT in show cause notice itself, which is already extracted above. Important facts to be noted from the same are that assessee had proposed dividend of Rs. 90 lakh along with DDT of Rs. 7,32,875/- for the FY 2017-18. This fact was reported in Form 3CD in Tax Audit Report u/s. 44AB. Ld. Pr. CIT has also noted the fact of payment of DDT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r: "263. Revision of orders prejudicial to revenue.- (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Income-tax Officer is erroneous insofar as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing afresh assessment." 10.1. In view of the foregoing provision, it is seen that any order passed by the AO which is erroneous as well as which is prejudicial to the interests of the Revenue may be revised by the relevant competent authority provided an opportunity of being heard is given to the assessee and after making (or causing to be made) such inquiry as he deems necessary. Thus, for the application of sec.263(1) of the Act, four conditions are to be satisfied simultaneously: - (i) There should be a proceeding. (ii) There should be an order passed by the AO in such proceeding. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received or deemed to be received or accrued or deemed to accrue or arise. Thus when the assessing officer is determining "total income" of the assessee, he is required to look into the income received or deemed to be received or accrued or deemed to accrue or arise. Section 5 of the Act, reads as under: "5. SCOPE OF TOTAL INCOME (1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which- (a) is received or is deemed to be received in India in such year by or on behalf of such person; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year; or (c) accrues or arises to him outside India during such yer: Provided that in the case of a person not ordinarily resident in India 'within the meaning of sub-section (6) of section 6, the income which accrues or arises to him outside India shall not be so included unless it is derived from a business controlled in or a profession set up in India. …." 12. Coming to the facts of the assessee's case, it is seen that the question which arises for consideration is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this Act for the collection nd recovery of income-tax shall apply." 12.5 It is pertinent to note from the above section that assessee has to be held as 'assessee in default' in respect of the amount of tax payable by it towards distributed profits. Further, it is only after holding the assessee as 'assessee in default' that the collection and recovery of tax payable under this Chapter can be made from the assessee. Provisions relating to collection and recovery of tax are common to both DDT and income-tax. 13. With the back ground of above provisions, Ld. Counsel for the assessee submitted that in case of failure of interest payable u/s.115P of the Act for short payment of DDT, as alleged by the Ld. PCIT in its order dated 30/03/2023 passed u/s.263 of the Act, a separate order will have to be passed for charging interest u/s.115P of the Act. Above view has been taken up by the Hon'ble Supreme Court in the case of Central Provinces Manganese Ore Co. Ltd. reported in [1986] 160 ITR 961 (SC), in respect of levy of interest u/s.215 of the Act. 13.1. Applying the same ratio to the facts of the present case, he submitted that an order levying interest u/s.115P of the Act is a se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has pronounced an order dated 20/09/2017 where CA No. 9178 pertaining to Tata Tea Co Ltd, CA No. 9179 pertaining to George Williamson (Assam) Ltd and CA No. 9180 pertaining to Apeejay Surendra Corporate Service Ltd was decided, reversing the decision of Calcutta High Court in the matter of Jayshree Tea & Industries Ltd and holding that additional Tax can be levied only on the 40% of the dividend income shall be altering the provision of section 1150 for which there is no warrant. Therefore, as per this decision of the Supreme Court, full amount of dividend by tea company is taxable u/s 1150. The AR of the assessee filed additional grounds of appeal holding that an order of revision u/s 263 presupposes existence of an order and, as such, there cannot be any revision of a non existing order u/s 115P. According to him, in absence of an order u/s 115P of the Act imposing interest for short payment of DDT, the PCIT has no power to revise the impugned assessment order dated 19/02/2021 passed u/s 143(3) because section 1150 of the Act was never a part of the said order. It is the argument of the assessee that section 1150 starts with a non obstante clause and, therefore, is an indep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts with a non obstante clause as follows: "Notwithstanding anything contained in an other provision of this Act and subject to the provisions of this section, in addition to the income-tax chargeable in respect of the total income of a domestic company for any assessment year, any amount declared, distributed or paid by such company by way of dividends (whether interim or otherwise) on or after the 1st day of April, 2003 (but on or before the 31st day of March, 2020), whether out of current or accumulated profits shall be charged to additional income-tax (hereafter referred to as tax on distributed profits) at the rate of fifteen percent.." It, therefore, appears that the non obstante clause has been used since tax u/s 1150 is an additional imposition apart from tax on income of the company as because dividend declared, distributed or paid by a company is not its income. This is a requirement to tax something which is not the income or deemed income of the assessee company. The dividend is taxed in the hands of the company, and it has to be considered as exempt income in the hands of the shareholder. The use of the non obstante clause cannot be stretched to mean that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er for DDT liability which forms part of the assessment order itself. Since Ld. AO failed to take cognizance of DDT liability on the assessee, Ld. PCIT has rightly invoked revisionary proceedings u/s. 263. 15. We have heard the rival contentions and perused the material available on record. We deal with the additional ground taken by the assessee on this issue raised by Ld. Pr. CIT for invoking the revisionary proceedings u/s. 263 in the instant case. The moot point before us, raised by the Ld. Counsel is that invoking revisionary proceedings u/s. 263 requires existence of an order under the Act, in absence of which jurisdiction u/s. 263 cannot be assumed. In the present case, the issue relates to DDT liability on the proposed dividend declared by the assessee. According to the Ld. Counsel, there is no order which raises a demand on the assessee by holding it as an assessee in default as required u/s. 115Q and, therefore, no revision can be done. 15.1. With the gainful understanding of the relevant provisions which we have already dealt in the above paragraphs, it is noted that an assessment order passed u/s. 143(3) requires the AO to make an assessment of 'total income or loss' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed under this Act" and not under the class "any order of assessment in sub-section (3) of section 143", mentioned in section 246A(1)(a). 15.3.3. Thus, appeal remedy available to the assessee in respect of DDT liability would fall under a different class of liabilities as mentioned in section 246A which can be challenged by the assessee by denying the liability under the Act. However, for demand raised on the assessee by undertaking regular assessment u/s 143(3) for assessing the total income, appeal would lie under the different clause as stated above. Therefore, there will be two different appeals for the demands raised under different sections of the Act. 15.4 On the second aspect for drawing analogy from the provisions relating to tax deduction at source, the said liability is fastened on the assessee separately, by the provisions contained in section 201(1)/(1A) after holding the assessee as 'assessee in default'. A separate proceeding is undertaken on the assessee as a deductor for default in compliance with the TDS provisions and order is passed by holding the assessee as 'assessee in default' to fasten him with TDS liability. However, while making regular assessment for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment passed u/s 143(3) is an assessment of total income of the assessee which is separate and distinct from any other order. DDT liability is distinct and separate from the liability to pay income-tax on the total income of an assessee which is created by charging section 4. Revision of an order u/s. 263 pre-supposes existence of an order. In view of the above discussion, levy of interest u/s. 115P and any liability of DDT u/s. 115O does not arise out of conduct of assessment proceedings and making an assessment of total income u/s. 143(3), therefore, Ld. Pr. CIT could not have invoked revisionary proceedings to direct the ld. AO for imposing DDT liability on the assessee in reference to assessment order passed u/s. 143(3). There is no separate order in existence, fastening the assessee with DDT liability by holding it as an 'assessee in default', contemplated u/s. 115Q. Thus, in absence of the same, in our view, Ld. Pr. CIT is not justified in invoking the revisionary proceeding u/s. 263 and passing an order thereon. Thus, even on this issue, we hold that passing of revisionary order u/s. 263 is not justifiable. 15.7. Accordingly, impugned order passed by Ld. Pr. CIT on both t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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