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TMI Blog2009 (10) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... ee on 30.10.2002 declaring a loss of Rs.4,70,68,429/-. The assessment order under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the'Act') was passed on 28.2.2005 and the income was assessed at Rs.11,03,91,000/- under Section 115JB of the Act. Thereafter, the Commissioner of Income Tax (CIT) exercised jurisdiction under Section 263 of the Act and issued a notice to the respondent on 8.3.2007. The CIT was of the opinion that the assessment order was erroneous and prejudicial to the interest of Revenue on the following grounds :- (a) The deduction under Section 80-IA was allowed at Rs.2427.79 lacs as against admissible deduction of Rs.1962.55 lacs, i.e. to the extent of gross total income calculated under the normal provisions of the Act, meaning thereby, excess deduction to the extent of Rs.465.24 lacs. The mistake resulted into over assessment of loss to the extent of Rs.465.24 lacs. (b) The provision for doubtful debts at Rs.818.03 lacs debited in the Profit and Loss account was not added back for calculating the book profit under Section 115JB. The mistake resulted into underassessment of income to the extent of Rs.818.03 lacs. After considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT was correct in law in holding that the assessment order was neither erroneous nor prejudicial to the interest of Revenue. 5. As is clear from the narration of facts recapitulated above, insofar as deduction under Section 80-IA is concerned, it was allowed at Rs.2427.79 lacs. However, vide rectification order dated 13.2.2007 the AO himself corrected the same to Rs.1962.55 lacs. The revisional order under Section 263 of the Act came to be passed by the CIT subsequently, i.e. on 8.3.2007. In this revisional order, the CIT opined that admissible deduction under Section 80-IA was Rs.1962.55 lacs as against Rs.2427.79 lacs originally granted by the AO in the assessment order. However, before the CIT could point out this error, the same was corrected by the AO himself in the rectification order. Therefore, even if on this aspect revisional order is treated as correct, on the basis of which the CIT directed the AO to pass fresh orders, that exercise had already been done by the AO. 5We may point out at this stage that while holding that the CIT lacked jurisdiction under Section 263 of the Act to modify the assessment order after the rectification thereof under Section 154 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act and to revise the original assessment order when such an order was not in existence at the time of initiation of the proceedings. Consequently, we have no option but to answer the question in the negative, i.e. in favour of the assessee and against the Department. However, law and justice are not distant neighbors. We, therefore, deem it proper to part with this case with the observation that as the order of rectification is no longer in existence, the appropriate authority shall be at liberty to resort to appropriate proceedings with reference to the order dated 30.3.1982, if otherwise not forbidden under the law." 6. Prima facie, this approach of the Tribunal seems to be correct. In any case, in the facts of the present appeal, it is not even necessary to into this question inasmuch as even as per the revisional order passed by the CIT under Section 263 of the Act, the benefit under Section 80-IA should have been restricted to Rs.1962.55 lacs, which had been done by the AO by passing rectification order under Section 154 of the Act. In the facts of this case, therefore, the question of law No. (2) does not arise for consideration. 7. The second ground for passi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es." 9. The question in this case is as to whether the provision for doubtful debt made in the books was required to be added back under clause (5) of the aforesaid explanation to Section 115JB(2). 10. Before the CIT it was argued by the assessee that their advocates had examined the issue in detail with reference to the various decisions of the Supreme Court and the High Courts and opined that since this was not a provision for any unascertained liability, but it was merely a provision for diminution into the value of the assets and, therefore, it was not to be added back for calculating book profits under Section 115JB of the Act. It was also submitted before the CIT that the AO had decided not to add back this provision made for bad debts for calculating book profit under Section 115JB of the Act after due application of mind and after taking note of the decision of the Supreme Court in the case of Apollo Tyres Ltd. v. Commissioner of Income Tax, Kochi, 255 ITR 273 and, therefore, when such an opinion of the AO was plausible, merely because the CIT was of different opinion could not be a ground to pass an order under Section 263 of the Act. This contention of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issues for fresh adjudication and decision. The Assessing Officer is directed to decide these issues afresh as per law and after giving reasonable opportunity to the assessee company of being heard." 11. The Tribunal, however, has accepted the submission of the assessee and reversed the order of the CIT on the aforesaid issue taking note of various case laws. It is pointed out by the Tribunal that the judgment of the Madras High Court in Beardbell Ltd. (supra) was considered by the Special Bench of the Tribunal (Kolkata) in the case of JCIT v. Usha Martin Industries Ltd., 288 ITR (AT) 64, holding that the provision for bad and doubtful debts is made when the assessee is of the opinion that its entire debt may not be realized and part of the debt may become irrecoverable. Therefore, the question whether it is an ascertained or unascertained liability does not arise as clause (c) of explanation to Section 115JA would not be applicable. The Tribunal also relied upon the judgment of this Court in the case of CIT v. El Dupont India Ltd. (ITA No. 599/2007), holding that the issue relating to provision made for doubtful debts while computing the book profits under Section 115J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t? It was argued for the assessees by Shri G.C. Sharma that the word "erroneous" means that the order must appear to be wrong on the face of it. In other words, he equated the "error" with "error of law apparent on the face of record" which is a well known ground for the review of a quasi judicial order by this court under article 226. We are unable to agree with this interpretation. The intention of the legislature was to give a wide power to the Commissioner. He may consider the order of the Income Tax Officer as erroneous not only because it contains some apparent error of reasoning or of law or of fact on the face of it but also because it is a stereo typed order which simply accepts what the assessee has stated in his return and fails to make inquiries which are called for in the circumstances of the case." He submitted that the view taken in the aforesaid judgment was reaffirmed by this Court in Duggal Co. v. CIT, 220 ITR 456. 13. Mr. Ajay Vohra, learned counsel appearing for the respondent, on the other hand, submitted that Section 115JB of the Act was pari materia with Section 115JA and insofar as calculation of book profits under both these provisions are conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the present case "debt" under consideration is "debt receivable" by the assessee. The provision for bad and doubtful debt, therefore, is made to cover up the probable diminution in the value of asset, i.e., debt which is an amount receivable by the assessee. Therefore, such a provision cannot be said to be a provision for liability, because even if a debt is not recoverable no liability could be fastened upon the assessee. In the present case, the debt is the amount receivable by the assessee and not any liability payable by the assessee and, therefore, any provision made towards recoverability of the debt cannot be said to be a provision for liability. Therefore, in our view Item (c) of the Explanation is not attracted to the facts of the present case. In the circumstances, the AO was not justified in adding back the provision for doubtful debts of Rs. 92,15,187/- under Clause (c) of the Explanation to Section 115JA of the 1961 Act." 14. He further submitted that the AO was to only examine whether books of accounts are certified by the authorities under the Companies Act. He reinforced the submission that where two views are possible, the order of the AO could not be treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and sale of units by the assessed was undoubtedly bona fide and this was accepted by the Assessing Officer. Under these circumstances, the question of the Commissioner invoking his powers under Section 263 of the Act would not arise. Following the decision of this court in Vikram Aditya and Associates P. Ltd. [2006] 287 ITR268(Delhi), we find no substance on the merits of the case. In any event, in view of the decision of the Supreme Court in Malabar Industrial Co. Ltd. [2000] 243 ITR 83 the exercise of power by the Commissioner under Section 263 of the Act is not warranted, if it is assumed that two views are possible on the issue." 18. Further, even if two views were possible, and the view taken by the AO was plausible one, it by the CIT, that would not provide sufficient ground for the CIT to assume jurisdiction under Section 263 of the Act merely because he had a different view in Malabar Industrial Co. (supra), the Supreme Court gave the following interpretation to this provision :- "A bare reading of this provision makes it clear that the prerequisite to exercise of jurisdiction by the Commissioner suo moto under it, is that the order of the Income Tax Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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