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TMI Blog2023 (9) TMI 1530X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was very much considered by AO during the course of assessment proceedings. The view taken by AO was one of the possible views which, considering the amendment to Sec. 2(14), was one of the possible view. CIT-DR has argued that the aforesaid notice was issued without DIN and therefore, the same was to be treated as an invalid notice - This argument could not be accepted since non- mentioning of DIN was not the fault of the assessee. Secondly, assessment order has taken cognizance of the reply filed by the assessee. Thirdly, the validity of notice u/s 142(1), as rightly pointed out by Ld. AR, could not be challenged in these proceedings. Further, it is not the case of Ld. Pr. CIT in the impugned order that the assessment was framed on the basis of an invalid notice. Therefore, this argument stand rejected. Voluntary disallowance as offered by the assessee was not considered by Ld. AO. However, it is undisputed fact that the assessee has not earned any exempt income during the year and therefore, no such disallowance could otherwise have been made by Ld. AO considering the decision of State Bank of Patiala[ 2018 (11) TMI 1565 - SC ORDER] and Chettinad Logistics P. Ltd. [ 2018 (7) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due application of mind. The same supports the case of the assessee. Bank interest has already been offered by the assessee as business income and considering the same as income from other sources would be tax neutral. The set-off of current year s business losses is allowable to the assessee against capital gains as rightly submitted by Ld. AR. Therefore, the assessment order could not be held to be erroneous or prejudicial to interest of revenue, on these scores. Assessee appeal allowed. - HON BLE SHRI MAHAVIR SINGH, VP AND HON BLE SHRI MANOJ KUMAR AGGARWAL, AM For the Appellant : Shri T. Banusekar (CA) Shri Vishwa Padmanabhan, (CA) - Ld.ARs For the Respondent : Dr. S. Senthil Kumaran (CIT) Ld. DR ORDER Manoj Kumar Aggarwal (Accountant Member) 1. By way of this appeal, the assessee assails the invocation of revisionary jurisdiction u/s 263 by Ld. Pr. Commissioner of Income Tax, Chennai-3 (Pr. CIT) vide impugned order dated 31-03-2022 in the matter of an assessment framed by Ld. AO u/s.143(3) of the Act on 28-12-2019 accepting the returned income of the assessee. The grounds taken by the assessee are as under: - 1. For that the order of the Principal Commissioner of Income tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been placed on various case laws the copies of which have been placed on record. Our attention has been drawn to financial statements to support the case of the assessee. A plea of possible view has also been taken. The Ld. CIT-DR, on the other hand, submitted that impugned issue was not examined by Ld. AO during the course of original assessment proceedings and therefore, jurisdiction u/s 263 was validly exercised. Both the sides have filed written submissions which have duly been considered by us. The Ld. AR has averred that Ld. AO issued notice u/s 142(1) on 05.10.2019 and raised a specific query on the issue of income under the head capital gains. The same was duly responded to by the assessee. Accordingly, a view was taken in the assessment order which was one of the possible views and hence, this fact do not justify invocation of impugned revision u/s 263. Arguments of Ld. CIT-DR 3.1 The Ld. CIT-DR averred that notice dated 05.10.2019 issued u/s 142(1) during the course of original assessment proceedings, as relied upon by Ld. AR is an invalid notice since the same has been issued without Document Identification Number (DIN). The Ld. CIT-DR referred to CBDT Circular No.19/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts were not verified by Ld. AO and Explanation 2 to Sec. 263 was applicable. Relance has been placed on the decision of Hon ble High Court of Gauhati in the case of CIT vs. Jawahar Battacharjee (24 Taxmann.com 215) as well as the decision of ITAT Chennai Special bench in Rajalakshmi Mills Ltd. vs. ITO (121 ITD 343) to support the application of Sec. 263. 3.4 The Ld. CIT-DR also referred to the decision of Hon ble High Court of Delhi in CIT vs. Jansampark Advertising Marketing Pvt. Ltd. (56 Taxmann.com 286) wherein it was held that it was necessary on the part of the appellate authorities to ensure effective enquiry, if AO fails to conduct proper enquiry. The decision of Hon ble Apex Court in Kapurchand Shrimal vs CIT (131 ITR 451) was also cited which held that appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, issue appropriate directions to the authority against whose decision the appeal is preferred, to dispose of the whole or any part of the matter afresh unless forbidden from doing so by the statute. 3.5 The Ld. CIT-DR thus submitted that in the present case, Ld. AO has not made enquiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, Ld. AR relied on the decision of Hon ble Delhi High Court in the case of CIT vs Usha International Ltd. (348 ITR 485) which held that when a regular order of assessment is passed in terms of the said sub-section (3) of section 143, a presumption can be raised that such an order has been passed with due application of mind. It is well known that a presumption can also be raised to the effect that in terms of clause (e) of section 114 of the Indian Evidence Act, the judicial and official acts have been regularly performed. If it was to be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the assessing officer to reopen the proceeding without anything further, the same would amount to giving premium to an authority exercising quasi-judicial function to take benefit of its own wrong. Therefore, once the relevant facts are placed on record, it is presumed that Ld. AO has looked into the same and made appropriate enquiries. The Ld. AR distinguished the case laws being relied upon by Ld. CIT-DR and submitted that the same do not apply to the present case. 4.5 Regarding voluntary disallowance u/s 14A as offered by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny to buy shares of Aircel Ltd. in favour of another entity. It does not debar the assessee company from investing in the shares of Aircel Ltd. Thus, there is no element of non-compete obligation inherent in the agreement which would trigger the provisions of Sec. 28(va) as alleged in the impugned order. 4.8 The Ld. AR further submitted that non-compete clause was in connection with the sale and purchase agreement which was mentioned in the call option agreement in the context of the overall transactions of restructuring that were envisaged. The sale and purchase agreement dated 14.09.2016 was a separate agreement entered into between the assessee company, its promoters and GCSH setting out terms for the sale of shares which would be acquired by the assessee pursuant to a merger of M/s Deccan Digital Networks Pvt. Ltd. (DDNPL) with Aircel Ltd. The consideration of Rs. 100.50 crores received by the company was not in connection with the sale and purchase agreement which has been referred to in the relevant clause. 4.9 The Ld. AR also controverted the other submissions made by Ld. CIT-DR. It was submitted that the definition given in the Wealth Tax Act was not relevant to the discuss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as offered to tax as capital gains. The Ld. Pr. CIT noted that as per call option termination agreement, the assessee received the sum in relation to the non-compete and non-solicit obligations. As per the provisions of Sec. 28(va), the aforesaid sum was to be treated as business income and not as capital gains as offered by the assessee. The assessment as business income would imply higher tax outgo for the assessee. 6.2 The second issue was that the assessee wrongly set-off current year business losses of Rs. 24.87 Lacs against Long Term Capital Gains (LTCG). The third issue was that the assessee failed to add back bank interest of Rs. 3.54 Lacs in the return of income. The fourth issue was that the assessee made investments and disallowance as per Rule 8D(2)(ii) works out to be Rs. 40.88 Lacs. However, Ld. AO failed to disallow the same at the time of completing the assessment. Therefore, the assessment order was held to be erroneous and prejudicial to the interest of the revenue and the assessee was show-caused on all these aspects. 6.3 Regarding call termination receipts, the assessee submitted that this issue was examined by Ld. AO at the time of original assessment proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to purchase share of Aircel Ltd. in future. Subsequently, the agreement was terminated for consideration of Rs. 100.50 Crores. In effect this would imply transfer of business itself. It could not be said that a particular activity of the business has been stopped and the said sum would be chargeable u/s 28(va). 6.5 Regarding set-off of business losses against capital gains, it was submitted that the same was very much permissible and there was no bar against the same as per the provisions of Sec.71(2). Regarding Bank interest, it was submitted that the same was offered as business income. Regarding disallowance u/s 14A, the assessee submitted that the investment did not fetch any exempt income during the year and therefore, no such disallowance could have been made. 6.6 However, rejecting assessee s submissions and after verifying Memorandum of Association (MOA), Ld. Pr. CIT held that the assessee company was formed mainly for the dealing in shares and therefore, impugned income was to be assessed as business income only. The action of Ld. AO in not seeing the MOA while dealing with this issue during the assessment makes the order erroneous and prejudicial to the interest of reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he course of assessment proceedings. The view taken by Ld. AO was one of the possible views which, considering the amendment to Sec. 2(14), was one of the possible view. 8. The Ld. CIT-DR has argued that the aforesaid notice was issued without DIN and therefore, the same was to be treated as an invalid notice. However, this argument could not be accepted since non- mentioning of DIN was not the fault of the assessee. Secondly, assessment order has taken cognizance of the reply filed by the assessee. Thirdly, the validity of notice u/s 142(1), as rightly pointed out by Ld. AR, could not be challenged in these proceedings. Further, it is not the case of Ld. Pr. CIT in the impugned order that the assessment was framed on the basis of an invalid notice. Therefore, this argument stand rejected. 9. The other argument of Ld. CIT-DR is that the voluntary disallowance as offered by the assessee was not considered by Ld. AO. However, it is undisputed fact that the assessee has not earned any exempt income during the year and therefore, no such disallowance could otherwise have been made by Ld. AO considering the decision of Hon ble Apex Court in the case of State Bank of Patiala vs CIT (259 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of Hon ble Apex Court in Kapurchand Shrimal vs CIT (supra) merely states that appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue. However, in the present case, the view taken by Ld. AO is one of the plausible views and the same is not contrary to any law. 13. In the case law of Hon ble Delhi High Court in the case of CIT vs Usha International Ltd. (supra), it was held that once assessment is framed u/s 143(3), a presumption can be raised that such an order has been passed with due application of mind. The same supports the case of the assessee. 14. We also find that bank interest has already been offered by the assessee as business income and considering the same as income from other sources would be tax neutral. The set-off of current year s business losses is allowable to the assessee against capital gains as rightly submitted by Ld. AR. Therefore, the assessment order could not be held to be erroneous or prejudicial to interest of revenue, on these scores. 15. Finally, considering the fact and circumstances of the case, the impugned order is unsustainable in law and liable to be quashed. We order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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