Income Tax Appellate Tribunal - Mumbai
Bharti Axa Life Insurance Company ... vs Principal Commissioner Of Income Tax - ... on 19 December, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
"B" BENCH, MUMBAI
BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND
SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER
ITA no.3878/Mum/2018
(Assessment Year :2011-12)
Bharti Axa Life Insurance Co. Ltd.
Unit-1904, 19th Floor
ParineeCresenzo, G-Block
Bandra Kurla Complex ................ Appellant
Near MCA Club, Bandra (E)
Mumbai 400 051
PAN - AACCB7227P
v/s
Dy. Commissioner of Income Tax
................ Respondent
Circle-12(1)(2), Mumbai
Assesseeby : Shri Ajay Vohra
Revenue by : ShriRohit Jain
Date of Hearing - 26.09.2018 Date of Order - 19.12.2018
ORDER
PERSAKTIJITDEY, J.M. The assessee has filed this appeal assailing the order dated 28 th March 2018, passed under section 263 of the Income Tax Act, 1961 (for short "the Act") by the learned Principal Commissioner of Income Tax (PCIT), Mumbai, for the assessment year 2011-12. 2
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2. At the outset, Shri Ajay Vohra, learned Sr. Counsel appearing for the assessee submitted that he does not want to press ground no.2. Accordingly, ground no.2 is dismissed as not pressed.
3. In ground no.1, the assessee has challenged the assumption of jurisdiction under section 263 of the Act by the learned PCIT as well as the validity of the order passed under the said provision.
4. Shorn of unnecessary details briefly the facts are, the assessee company is engaged in life insurance business. For the assessment year under dispute the assessee had filed its return of income on 30 th November 2011, declaring loss of ` 340,47,10,171. Since, in the relevant previous year, the assessee had entered into international transactions with its overseas Associated Enterprises (A.E), the Assessing Officer made a reference to the Transfer Pricing Officer for determining the arm's length price of the international transaction. On the basis of the order passed by the Transfer Pricing Officer under section 93CA(3) of the Act, the Assessing Officer framed a draft assessment order on 27th March 2015. Against the draft assessment order so passed, the assessee raised objections before the Dispute Resolution Panel (DRP). On the basis of directions issued by the DRP, vide order dated 29th December 2015, the Assessing Officer passed the final assessment order under section 143(3) r/w section 144C(13) 3 Bharti Axa Life Insurance Co. Ltd.
of the Act on 29th February 2016.When the matter stood thus, learned PCIT, under purported exercise of power under section 263 of the Act called for and examined the assessment records of the assessee pertaining to the impugned assessment year. After examining the assessment record, he observed that the DRP has held that since the assessee is in life insurance business it has to compute its total income under section 44 r/w rule-2 of First Schedule. He observed, while considering the objections of the assessee against the draft assessment order the DRP has found that the assessee has not filed its return of income for the impugned assessment year as well as the preceding assessment years as per Form-I. He observed, the DRP has worked out the income / loss of the assessee in different assessment years by considering the surplus / deficit declared as per Form-I and as reduced by the surplus / deficit declared in Form-I in the immediately preceding year. He observed, as per the income / loss worked out by the DRP in different assessment years, actual loss to be computed for assessment year 2009-10 under section 44 r/w rule 2 of First Schedule would be ` 107,61,32,231. Whereas, the Assessing Officer after computing the total income of the assessee for the impugned assessment year under section 44 r/w rule 2 of the First Schedule at ` 280,02,18,160, has allowed set-off of loss of Rs.280,02,18,160 out of brought forward loss of assessment year 4 Bharti Axa Life Insurance Co. Ltd.
2009-10, thereby, determining the total income at nil. Thus, being of the opinion that the assessment order passed is erroneous and prejudicial to the interest of Revenue, learned PCIT issued a notice to the assessee directing it to show cause why the assessment order should not be revised / set-aside. In response to the said show cause notice, though, the assessee filed a detailed submission explaining why the assumption of jurisdiction under section 263 of the Act is invalid and why the assessment order passed should not be considered as erroneous and prejudicial to the interests of Revenue, however, learned PCITrejecting the submissions of the assessee held that the assessment order passed by the Assessing Officer for the impugned assessment year is erroneous and prejudicial to the interests of Revenue and accordingly set it aside to the Assessing Officer with a direction to pass a fresh assessment order keeping in view the directions of the DRP. While doing so, he also directed the Assessing Officer to the consider the clarifications to be received from the DRP in response to a letter issued by him and also the fact of re-opening of assessment under section 147 of the Act for assessment year 2009-10 against which the assessee has filed a Writ Application in the Hon'ble Bombay High Court.
5. The learned Sr. Counsel for the assessee submitted, the primary conditions required to be satisfied before invoking jurisdiction under 5 Bharti Axa Life Insurance Co. Ltd.
section 263 of the Act are, the order sought to be revised must be erroneous and it must be prejudicial to the interests of Revenue. He submitted, keeping the aforesaid legal position in view, it has to be seen whether exercise power under section 263 of the Act is valid or not. He submitted, the Assessing Officer has passed the impugned assessment order by implementing the directions of DRP after due application of mind. He submitted, the assessee in fact has computed its income under section 44 r/w rule-2 of First Schedule of the Act. Referring to the draft assessment order passed by the Assessing Officer, a copy of which is at Page-44 of the paper book, the learned Sr. Counsel submitted, the Assessing Officer, in fact, has started with the deficit shown in Form-I as per the First Schedule. Drawing our attention to the order passed by the DRP for the impugned assessment year, the learned Sr. Counsel submitted, the DRP has not given any direction to the Assessing Officer to revise the loss determined for the assessment year 2009-10. He submitted, the direction of the DRP is simply confined to the impugned assessment year. He submitted, even otherwise also, the DRP could not have given directions to the Assessing Officer to work out the loss for any earlier year while disposing off the objections of the assessee for the impugned assessment year. He submitted, as per the provisions of section 144C of the Act, the directions of the DRP is year specific. Thus, the 6 Bharti Axa Life Insurance Co. Ltd.
Assessing Officer while implementing the directions of the DRP could not have re-computed the brought forwarded losses of the earlier assessment years. In support of such contention, the learned Sr. Counsel relied upon the following decisions:-
i) ITO v/s MulidharBhagwandas, 52 ITR 335; ii) Marubeni Pvt. Ltd. v/s CIT, 328 ITR 306; iii) ChackolaSpg. &Wvg. Mills Ltd.188 ITR 532; iv) Natwarlal 7 Co. v/s CIT, 50 ITR 783; v) Pt. Hazari Lal v/s ITO, 39 ITR 265; and vi) Max New York Life Insurance Co. Ltd. v/s DCIT, 191 TTJ 897.
6. The learned Sr. Counsel submitted, law is well settled that each assessment year is a separate and distinct unit for the purpose of assessment under the Act. Therefore, any direction of DRP to the Assessing Officer to re-compute the brought forward losses of assessment year 2009-10 would tantamount to a direction for re- opening of assessment of that year which, the learned Sr. Counsel submitted, would be ex-facie illegal and in manifest violation of the Act as well as settled principles of law. He submitted, even assuming that the intent of the DRP was to re-compute the brought forward losses of assessment year 2009-10, then, the DRP would have issued explicit directions to the Assessing Officer. He submitted, in absence of any such directions by the DRP to re-compute the brought forward loss of assessment year 2009-10, the Assessing Officer could not have 7 Bharti Axa Life Insurance Co. Ltd.
done so as per the provisions of section 144C of the Act. The learned Sr. Counsel submitted, even learned PCIT while exercising power under section 263 of the Act was himself not sure about the directions of the DRP. That is why, he had written letter dated 22 nd January 2018 to the DRP seeking clarification whether it has given directions for recomputing loss of assessment year 2009-10. Thus, he submitted, when learned PCIT himself was not sure about the directions of the DRP with regard to the working of brought forward loss of assessment year 2009-10 he could not have held the assessment order passed to be erroneous and prejudicial to the interests of Revenue for not implementing the directions of the DRP qua the set-off of brought forward loss of assessment year 2009-10. He submitted, the very fact that learned Commissioner (Appeals) admits that he has not received any clarification from the DRP on the issue makes it clear that the DRP never intended to give any directions to the Assessing Officer to revise the brought forward loss of assessment year 2009-10. Thus, he submitted, when learned PCIT himself was uncertain about the directions of the DRP, he could not have held the assessment order to be erroneous. That is why, he submitted, learned PCIT has not given any clear directions to the Assessing Officer in the order passed under section 263 of the Act and has advised him to keep in view the clarification to be issued by the DRP. Thus, he submitted, in these 8 Bharti Axa Life Insurance Co. Ltd.
circumstances the assessment order cannot be held to be erroneous and prejudicial to the interests of Revenue. In support of his contention, the learned Sr. Counsel relied upon the following decisions:-
i) ITO v/s D.G. Housing Projects Ltd., 343 ITR 329;
ii) DIT v/s Jyoti Foundation, 357 ITR 388;
iii) CIT v/s Prithvi Raj And Co., 199 ITR 424;
iv) CIT v/s O.P. Seth, 201 ITR 635;
v) CIT v/s T. Narayana Pai, 98 ITR 422;
vi) J.P. Srivastava And Sons (Kanpur) Ltd. v/s CIT, 111 ITR 326;
vii) S.B. Sankar v/s State of Kerala and Anr., 171 ITR 689;
viii) CIT v/s Kanda Rice Mills, 178 ITR 446; and
ix) CIT v/s Chawla Trunk House, 139 ITR 182
7. The learned Sr. Counsel submitted,from the notice issued under section 263 of the Act as well as the order passed by the learned PCIT under the said provision, it is evident, only for the purpose of revising the loss for assessment year 2009-10, proceeding under section 263 of the Act was initiated. The learned Sr. Counsel submitted, for the very same reason of revising the loss determined in the original assessment order passed for assessment year 2009-10, the Assessing Officer has re-opened the assessment under section 147 of the Act. In this context, he drew our attention to the notice dated 31 st March 2016, issued under section 148 of the Act as well as reasons for re-
opening as communicated to the assessee which are placed at Pages- 9
Bharti Axa Life Insurance Co. Ltd.
113 to 117 of the paper book. He submitted, challenging the re- opening of assessment under section 147 of the Act for Assessment Year 2009-10 the assessee has filed a Writ Application in the Hon'ble Jurisdictional High Court and the Hon'ble Jurisdictional High Court while entertaining the Writ Application filed vide W.P. no.2919/2016 has passed an interim order on 22nd December 2016, staying further proceedings in pursuance to the notice issued under section 148 of the Act. He submitted, in course of proceedings under section 263 of the Act, though, the aforesaid facts were clearly brought to the notice of the learned PCIT and a submission was made that on the very same issue two parallel proceedings cannot continue, however, learned PCIT has passed the impugned order under section 263 of the Act by indirectly directing the Assessing Officer to re-compute the losses of the earlier years. Thus, he submitted, certain act or thing which the learned PCIT could not have done directly, he has tried to do so indirectly by invoking jurisdiction under section 263 of the Act. The learned Sr. Counsel submitted, in consequence of such action by learned PCIT, assessee is now facing two separate and parallel proceedings for the same cause of action and despite stay being granted by the Hon'ble Jurisdictional High Court the Assessing Officer has been directed to re-compute the losses for the earlier assessment years thereby indirectly circumventing the order of the Hon'ble 10 Bharti Axa Life Insurance Co. Ltd.
Jurisdictional High Court. In support of such contention, the learned Sr. Counsel relied upon the following decisions:-
i) State of Tamil Nadu v/s K. Shyam Sunder, AIR 2011 SC 3470;
ii) K.C. Gajapati Narayana Deo &Anr., v/s State of Orissa, AIR 1953 SC 375; and
iii) CIT v/s Shri Paul John, 200 Taxman 154 (Ker.).
8. Finally, the learned Sr. Counsel submitted, the proceeding under section 263 of the Act has been initiated solely on the basis of Revenue audit objection and without any independent application of mind by learned PCIT. Thus, he submitted, for this reason also the revision order passed is legally unsustainable. For such proposition, he relied upon the following decisions:-
i) CIT v/s SohanaWoolen Mills, 207 CTR 178;
ii) Bongaigaon Refinery & Petrochemicals Ltd. v/s UOI, 287 ITR 120;
iii) Vinay Pratap Thacker v/s CIT, ITA no.2939 of 2011;
iv) Aditi Developers v/s ACIT, 49 SOT 664;
v) Lotus Energy India Ltd. v/s CIT, 53 ITR 227;
vi) Surinder Kumar Jain v/s ITO, ITA no.2481 of 2014;
vii) Jaswinder Singh v/s CIT, 150 TTJ 33; and
viii) Shri Sartaj Singh v/s PCIT, ITA no.154 of 2015.
9. In conclusion, the learned Sr. Counsel submitted, the primary conditions of section 263 of the Act having not been satisfied, the impugned order passed by the learned PCIT deserves to be quashed. 11
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10. The learned Departmental Representative relied upon the observations of learned PCIT.
11. We have patiently and carefully heard the learned Counsels appearing for the parties and considered rival submissions. We have also perused the materials on record and applied our mind to the decisions cited at the bar. A careful scrutiny of the notice dated 22 nd December 2017, issued under section 263 of the Act as well as the impugned order passed under section 263 of the Act by the learned Principal Commissioner leaves no room for doubt that the only conceivable reason for which he considers the final assessment order passed by the Assessing Officer in pursuance to the directions of the DRP to be erroneous and prejudicial to the interests of Revenue is due to set-off of brought forward loss of assessment year 2009-10 against the total income computed for the impugned assessment year under section 44 r/w rule 2 of the First Schedule.
12. As could be seen from the facts on record, in the assessment order dated 25th March 2014, passed under section 143(3) of the Act for the assessment year 2009-10, the Assessing Officer after taking note of the surplus / deficit as declared in Form-I has determined the total loss at ` (-) 405,93,06,230, and has allowed carry forward of the same. While completing the final assessment order for the impugned 12 Bharti Axa Life Insurance Co. Ltd.
assessment year in pursuance to the directions of the DRP the Assessing Officer has computed the income of the assessee under section 44 r/w rule-2 of the First Schedule at ` 280,02,18,160, and after set-off of a part of brought forward loss of assessment year 2009-10 has determined the total income at nil. The aforesaid factual position has not been disputed even by the learned PCIT. However, referring to certain direction / working of the DRP in order dated 29th December 2015 passed for the impugned assessment year, learned PCIT has formed an opinion that the loss for assessment year 2009-10 has to be worked out at ` (-) 107,61,32,231, and this amount can be carried forward and will be available for set-off against the total income computed for the impugned assessment year. Thus, according to learned PCIT, after set-off of re-adjusted brought forward loss of assessment year 2009-10 amounting to ` 107,61,32,231, against the total income computed for the impugned assessment year of ` 280,02,18,160, there should be a positive income of ` 172,40,85,929.
13. In view of the aforesaid factual position, the basic issues which arise for consideration are, firstly, whether in the given facts and circumstances of the case the impugned assessment order passed by the Assessing Officer can be considered to be erroneous and prejudicial to the interests of Revenue and secondly, while exercising revisional jurisdiction under section 263 of the Act for the impugned 13 Bharti Axa Life Insurance Co. Ltd.
assessment year i.e., A.Y. 2011-12, learned PCIT is competent to revise the loss determined in the assessment order passed under section 143(3) of the Act for the assessment year 2009-10. So far as the first issue relating to the correctness of the assessment order passed by the Assessing Officer is concerned, undisputedly, the said assessment order has been passed by the Assessing Officer under section 143(3) of the Act r/w section 144C(13) of the Act. A reading of the provision contained under section 144C of the Act and specifically sub-section (13) of section 144C of the Act makes it clear that on receipt of the directions issued by the DRP, it is mandatory upon the Assessing Officer to pass the final assessment order strictly in conformity with the directions of the DRP. On a careful scrutiny of the order dated 29th December 2015, passed by the DRP for the impugned assessment year, we are unable to locate any direction by the DRP to the Assessing Officer to re-adjust or re-determine the loss as computed in the assessment order passed for assessment year 2009-
10. What the DRP has directed the Assessing Officer to do is to consider the income of the assessee for the impugned assessment year at ` 212,34,56,000, before making any adjustment on account of dividend and section 14A of the Act. There is absolutely no direction by the DRP to re-adjust or re-work out the loss determined in the assessment order passed for the preceding assessment years. It is 14 Bharti Axa Life Insurance Co. Ltd.
further evident from the final assessment order that the Assessing Officer has implemented the aforesaid direction of the DRP in letter and spirit and after computing the total income of the assessee as per the provisions of the Act the Assessing Officer has allowed set-off of brought forward loss of assessment year 2009-10. That being the case, it cannot be said that the assessment order passed is erroneous.
14. The next issue which arises for consideration and which is the most crucial issue is, while invoking revisional jurisdiction under section 263 of the Act for the impugned assessment year, whether learned PCIT could have revised the loss determined in the assessment order passed for assessment year 2009-10? On a perusal of the assessment order dated 25th March 2013, passed under section 143(3) of the Act r/w section 144C of the Act for assessment year 2009-10, it is very much clear that while completing the assessment the Assessing Officer has determined the loss for that year at `405,93,06,230 and has allowed carry forward of the same. It is an accepted factual position that the aforesaid assessment order passed for the assessment year 2009-10 still holds good as it has neither been subjected to any proceeding under section 263 of the Act nor it has been varied/disturbed by any other mode or manner. Though, the Assessing Officer has initiated action under section 147 of the Act for the purpose of revising the income / loss determined in the said 15 Bharti Axa Life Insurance Co. Ltd.
assessment order, however, it is a fact on record that such re- assessment proceeding has been stayed by the Hon'ble Jurisdictional High Court. Thus, as on date, the assessment order passed under section 143(3) of the Act for Assessment Year 2009-10 remains valid and so also the loss determined therein.
15. It is equally true that at this stage learned PCIT could not have exercised jurisdiction under section 263 of the Act, to revise the assessment order passed for the assessment year 2009-10 insofar as it relates to computation of income / loss. Therefore, learned PCIT having no authority in law to initiate any action to rectify an error, if at all there is any, in the assessment order passed for assessment year 2009-10, has attempted to do so by invoking his revisional jurisdiction for assessment year 2011-12. One cannot lose sight of the fact that only for the purpose of revising the loss determined in the assessment order passed for Assessment Year 2009-10, learned PCIT has revised the assessment order passed for the impugned assessment year. We fail to understand how the loss determined in the assessment order passed under section 143(3) of the Act for assessment year 2009-10 can be revised without disturbing the said assessment order. Thus,what the learned PCIT could not have done directly, has tried to do so indirectly by exercising his revisional power for assessment year 2011-12 to revise the assessment order passed for assessment year 16 Bharti Axa Life Insurance Co. Ltd.
2009-10. This, in our view, is in excess of jurisdiction or without jurisdiction, hence, legally unsustainable. More so, when there is absolutely no direction by the DRP to revise the loss determined for assessment year 2009-10. In fact, the impugned order passed under section 263 of the Act makes it clear that learned PCIT himself was not very much clear whether the directions of the DRP pertained to determination of loss for assessment year 2009-10. That is why he has sought a clarification from the DRP vide letter dated 22 nd January 2018, and as mentioned by him, till the date of passing of the impugned order he has not received any clarification from the DRP on the issue. Thus, when the learned Principal Commissioner himself was uncertain about the directions of the DRP with regard to the determination of loss for assessment year 2009-10, he could not have considered the assessment order passed to be erroneous and prejudicial to the interest of Revenue on account of set-off of loss pertaining to assessment year 2009-10.
16. One more aspect which is of crucial importance is the fact that on the very same issue of determination of loss pertaining to assessment year 2009-10 and 2010-11, the Assessing Officer has re-opened the assessments under section 147 of the Act. It is also a fact on record that the re-opening of the assessment for the aforesaid assessment years have been challenged by the assessee before the Hon'ble 17 Bharti Axa Life Insurance Co. Ltd.
Jurisdictional High Court and the Hon'ble Jurisdictional High Court has stayed the re-assessment proceedings. This fact was brought to the notice of the learned PCIT in course of revision proceeding. This is evident not only from the impugned order of the learned Principal Commissioner but also other materials brought on record. As could be seen, the re-opening of assessment for assessment year 2009-10 and 2010-11 were much prior to the initiation of proceeding under section 263 of the Act for the impugned assessment year. Thus, the learned PCIT being aware of the fact that re-assessment proceedings on identical issue for assessment years 2009-10 and 2010-11 are pending and are also subjudice before the Hon'ble Jurisdictional High Court has still proceeded to pass the impugned order with a direction to the Assessing Officer to revise the loss determined for assessment year 2009-10. Thus, in a way, learned PCIT has attempted to sit in judgment over a matter which is already subjudice before the Hon'ble Jurisdictional High Court. When the Assessing Officer has already initiated re-assessment proceedings for assessment year 2009-10 and 2010-11 on the issue of determination of loss, learned PCIT could not have initiated proceeding under section 263 of the Act, since, two parallel proceedings on the same issue and at the same time cannot continue. Once the assessee brought to the notice of learned Principal Commissioner that proceedings under section 147 of the Act have 18 Bharti Axa Life Insurance Co. Ltd.
already been initiated on the very same issue and the matter is subjudice before the Hon'ble Jurisdictional High Court, the learned Principal Commissioner should have done well to desist himself from continuing further with the proceedings initiated under section 263 of the Act.
17. In any case of the matter, in our opinion, the Assessing Officer having passed the assessment order in compliance to the directions of the DRP, the assessment order so passed cannot be held to be erroneous and prejudicial to the interests of Revenue. Therefore, the primary conditions of section 263 of the Act are not fulfilled in the present case. The decisions relied upon by the learned Sr. Counsel for the assessee clearly support our aforesaid view. In this view of the matter, we have no hesitation in holding that the assumption of jurisdiction under section 263 of the Act by the learned PCIT in the instant case is invalid, hence, as a natural corollary, the impugned order passed under section 263 of the Act in pursuance thereto deserves to be quashed. Accordingly, we do so by restoring the assessment order passed by the assessing officer.
18. Before parting, we must observe, since we have quashed the revision order passed on the reasonings mentioned above, we have not deliberated on the other propositions advanced by the learned Sr. Counsel for the assessee. Ground raised is allowed. 19
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19. In the result, assessee's appeal is partly allowed.
Order pronounced in the open Court on 19.12.2018 Sd/- Sd/-
MANOJ KUMAR AGGARWAL SAKTIJIT DEY
ACCOUNTANT MEMBER JUDICIAL MEMBER
MUMBAI, DATED: 19.12.2018
Copy of the order forwarded to:
(1) The Assessee;
(2) The Revenue;
(3) The CIT(A);
(4) The CIT, Mumbai City concerned;
(5) The DR, ITAT, Mumbai;
(6) Guard file.
True Copy
By Order
Pradeep J. Chowdhury
Sr. Private Secretary
(Sr. Private Secretary)
ITAT, Mumbai