Income Tax Appellate Tribunal - Kolkata
East India Udyog Ltd., , New Delhi vs Dcit, Circle - 3(1), Kolkata , Kolkata on 23 August, 2019
1
ITA No. 930/Kol/2018
East India Udyog Ltd. AY 2008-09
आयकर अपील य अधीकरण, यायपीठ - "A" कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH: KOLKATA
(सम ) ी ऐ. ट . वक , यायीक सद य एवं डॉ. अजन
ु$ लाल सैनी, लेखा सद य)
[Before Shri A. T. Varkey, JM & Dr. A. L. Saini, AM]
I.T.A. No. 930/Kol/2018
Assessment Year: 2008-09
East India Udyog Ltd. Vs. DCIT CIRCLE - 3(1), Kolkata
[PAN: AAACE 6839 Q]
Appellant Respondent
Date of Hearing 01.08.2019
Date of Pronouncement 23.08.2019
For the Appellant Shri Ashok Tulsyan, FCA
For the Respondent Shri A.K. Nayak, CIT, DR
ORDER
Per Shri A.T.Varkey, JM
This is an appeal preferred by the assessee against the order of Ld. PCIT - 1, Kolkata dated 22.03.2018 for AY 2008-09 u/s 263 of the Income Tax Act, 1961 (herein after referred to as the 'Act').
2. Brief facts of the case are that the appellant company is engaged in the business of manufacture and repairing of transformers. For the AY 2008-09 the appellant had filed return of income on 23.12.2008 declaring total income at Rs.3,51,57,013/-. The return was originally assessed u/s 143(1) at Rs.7,19,96,170/-. While processing the return u/s 143(1) the deduction of Rs.3,68,39,158/- claimed by the appellant u/s 80IC of the Act was disallowed by the AO. The aforesaid intimation was subsequently rectified u/s 154 vide order dated 19.04.2010.In the order u/s 154, the AO allowed the appellant's claim for deduction u/s 80IC and consequently thereafter the income was assessed at the same sum as originally returned by the appellant. Subsequent thereto, the case of the appellant was reopened u/s 147 vide notice dated 31.03.2015. The reasons provided by the AO for 2 ITA No. 930/Kol/2018 East India Udyog Ltd. AY 2008-09 reopening of the assessment was that he was in receipt of information from the Investigating Wing at Delhi regarding some transactions of the appellant with M/s Bhola Motors Pvt Ltd. In the course of re-assessment proceedings, the AO made independent enquiries from M/s Bhola Motors Pvt Ltd and found that there were no discrepancies in the transactions between the appellant and M/s Bhola Motors Pvt Ltd. The AO accordingly re-assessed the income vide order dated 09.02.2016 at the same sum i.e. Rs.3,51,57,010/- as earlier assessed u/s 143(1)/154 of the Act. . Thereafter the Ld. Pr. CIT invoked section 263 of the Act and show caused the assessee vide notice dated 02.02.2018as follows:
(i) As per Section 92E of the I.T. Act, 1961, the audit report is required to be furnished by the due date of 30th September of that assessment year but the e-return filed by the assessee company on 12.02.2008 was a belated return. Hence the deduction u/s 80-IC totaling Rs.3,68,39,158/- was not allowable to the assessee company which resulted in under assessment of income of Rs.3,68,39,158/-.
(ii) AO passed the impugned assessment order without making enquiries or verification which should have been made in this case."
3. In reply, the appellant furnished its objections on 26.02.2018 which is available at Pages 3 to 19 of the paperbook. The Ld. Pr. CIT was however not agreeable to the contentions put forth and by an order dated 22.03.2018she revised the assessment order holding that the AO had passed the order without making due enquiry into the claim of Section 80-IC of the Act. According to the ld. Pr. CIT, there is no ambiguity in Section 92E of the Act as to the date of furnishing of audit report. Since the appellant had filed the return of income belatedly, according to Pr.CIT the claim u/s 80IC was not allowable. He therefore concluded that the AO had accepted the claim of the assessee without any verification. Referring to the judgments of the Hon'ble Supreme Court in the case of Manjunathesware Packing Products and Camphor Works (231 ITR 53) and Hon'ble Delhi High Court in Gee Vee Enterprise Vs Addl. CIT (99 ITR 375), the ld. Pr.CIT held the assessment order dated 09.02.2016 passed by the AO to be erroneous in so far as it was prejudicial to the interests of the Revenue on the ground of failure to make any enquiry. Aggrieved by the revision order of ld. Pr.CIT, the appellant is now in appeal before us.
3 ITA No. 930/Kol/2018East India Udyog Ltd. AY 2008-09
4. Assailing the action of the ld. Pr. CIT, the Ld. AR of the appellant argued that the notice issued u/s 263(1) was beyond the period of limitation. The Ld. AR pointed out that issue raised by the ld. Pr.CIT was not the subject matter of the reassessment order dated 09.02.2016. On the contrary, it was the specific subject matter of the order passed u/s 143(1)/154 of the Act dated 19.04.2010. According to the Ld. AR therefore the period of limitation prescribed in Section 263(2) begins from the end of the year in which the order u/s 143(1)/154 was passed. He thus contended that the period of limitation qua the subject matter relating to deduction u/s 80-IC expired on 31.03.2013. In that view of the matter, the Ld. AR claimed that the notice dated 02.02.2018 issued by the ld. Pr.CIT was barred by limitation. In support of this contention, the Ld. AR placed reliance on the judgment of the Hon'ble Supreme Court in the case of CIT Vs Alagendran Finance Ltd (162 Taxman 465).
5. The Ld. AR alternatively contended that the reassessment order dated 09.02.2016 of the AO could not otherwise be regarded as erroneous and prejudicial to the interests of the Revenue since no addition was made on account of the reasons for which the assessment was reopened. Referring to the decisions of the Hon'ble High Courts at Delhi, Bombay and Calcutta the Ld AR of the appellant contended that when the AO did not make any addition on the issue for which he exercised reopening jurisdiction u/s 148 then he could not have proceeded with "other additions" for which no reasons were recorded. As a corollary what the AO could not have done directly while framing the assessment u/s 147, the ld. Pr. CIT could not have done it indirectly by exercising revisionary jurisdiction on "other issues" u/s 263 of the Act.
- CIT Vs Infinity Infotech Parks Ltd (GA No. 1736 of 2014) (Cal HC)
- CIT Vs Software Consultants (341 ITR 240) (Del HC)
- Ranbaxy Laboratories Ltd Vs CIT (336 ITR 136) (Del HC)
- CIT Vs Jet Airways (331 ITR 236) (Bom HC)
6. The Ld. AR further argued that in the show cause notice as well as the impugned order the ld. Pr. CIT had referred to the appellant's alleged failure to furnish audit report under 4 ITA No. 930/Kol/2018 East India Udyog Ltd. AY 2008-09 Section 92E for disallowing the deduction claimed u/s 80-IC by the appellant. He invited our attention to the provisions of Section 92E and the financial statements to show that the appellant had not entered into any 'international transactions' with the AEs and therefore provisions of Section 92E were not applicable to the appellant. He further submitted that the provisions concerning specified domestic transactions u/s 92BA which inter alia included reporting of transactions u/s 80IA(8) & (10) were only introduced by the Finance Act, 2012 with effect from 01.04.2013 and hence were not applicable in the year under consideration i.e. AY 2008-09. The Ld. AR thus contended that the issue on which the assessment order has been set aside by the ld. Pr.CIT in exercise of his powers vested u/s 263 was based on assumption of incorrect facts and erroneous interpretation of applicable provisions of law and therefore the consequent impugned order passed was also bad in law and prayed that it be cancelled.
7. Per contra the ld. CIT, DR appearing on behalf of the Revenue supported the order of the Ld. Pr. CIT. The ld. CIT, DR submitted that the Assessing Officer has not at all touched the impugned issue in his order dated 09.02.2016. According to him, the processing of return of income u/s 143(1) was simply an intimation and cannot be treated as an assessment order. He further submitted that the rectification order passed u/s 154 dated 19.04.2010 also stood merged with the intimation u/s 143(1) and hence it could not be treated to be an assessment order. According to ld. CIT, DR, the assessment order was framed for the first time on 09.02.2016 and therefore, the limitation would start from that date and not from 31.3.2011[143(1)/154 passed on 19.4.2010]. He thus claimed that the notice issued u/s 263(1) was well within the period of limitation. The ld. CIT, DR contended that the judgment of the Hon'ble Supreme Court in the case of CIT Vs Alagendran Finance Ltd (supra) was factually distinguishable because in that case the original assessment was completed u/s 143(3) and not 143(1) and taking note of this fact the Hon'ble Supreme Court had held that qua the issues which were the subject matter of the assessment framed u/s 143(3), the period of limitation began from the date of the original assessment order and not the subsequent re-assessment order passed u/s 147 of the Act. To buttress his contention, the ld. CIT, DR relied on the decision of this Tribunal in the case of Vijay Kr. Gupta Vs CIT (142 TTJ 650).
5 ITA No. 930/Kol/2018East India Udyog Ltd. AY 2008-09
8. The Ld. Pr. CIT, DR further submitted that the AO was empowered to make additions on all other issues apart from which the assessment is sought to be reopened in light of Explanation 3 to Section 147 of the Act. According to him therefore even the appellant's alternative plea did not hold any ground. To support his argument, he relied on the decision of the Hon'ble Delhi High Court in the case of Pr.CIT Vs Jakhotia Plastics Pvt Ltd (94 taxmann.com 89). As regards the merits of the case, he supported the order of the ld. Pr.CIT that the claim u/s 80-IC could not have been possibly made in a belated return of income. He therefore supported the order of the ld. Pr.CIT setting aside the assessment order back to the AO for his failure to make any enquiry on this issue.
9. We have carefully considered the submissions of the appellant and perused the material on record. The primary issue to be adjudicated in the present appeal is whether the proceedings u/s 263 which were initiated by the ld. Pr. CIT vide her show cause notice dated 02.02.2018 was barred by limitation as claimed by the appellant. In this case the return was furnished on23.12.2008 declaring total income of Rs.3,51,57,013/-. The return was processed u/s 143(1) assessing total income of Rs.7,19,96,170/-. The difference between the income returned and the income assessed u/s 143(1) arose on account of the disallowance of the appellant's claim u/s 80IC totalling Rs.3,68,39,158/-. Subsequent to issue of intimation u/s 143(1) an application under Section 154 was moved and in the order dated 09.04.2010 passed u/s 154/143(1), the AO revised the total income Rs.3,51,57,010/- after allowing the deduction u/s 80IC as claimed in the return of income. Subsequently the AO initiated proceedings u/s 147 which culminated in passing of the order u/s 147/143(3) dated 09.02.2016 assessing total income of Rs.3,51,57,010/- which was same as was assessed in the order dated 09.04.2010 passed u/s 154/143(1) of the Act. The ld. Pr. CIT thereafter issued an SCN dated 02.02.2018 for revising the assessment order u/s 147/143(3) dated 09.02.2016 on the ground that the AO had erroneously granted the deduction u/s 80IC of the Act. It is the contention of the appellant that the proceedings initiated u/s 263 vide SCN dated 02.02.2018 were beyond the period of limitation which expired on 31.03.2013 whereas it is the ld. CIT, DR's contention that the proceedings were well within the period of limitation which had to be computed with reference to the order dated 09.02.2016 passed 6 ITA No. 930/Kol/2018 East India Udyog Ltd. AY 2008-09 u/s 147/143(3) of the Act. For this proposition the ld. CIT, DR claims that neither the intimation nor the order u/s 154/143(1) dated 09.04.2010 could be regarded to be the order amenable to application of Section 263 of the Act and therefore with reference to these two orders the assessee could not claim the benefit of limitation period.
10. Having considered the peculiar facts of the present case, we are not inclined to accept the plea put forth by the ld. CIT, DR. It is true that the scope of the adjustment to be carried out in the proceedings u/s 143(1) is limited in nature. Yet in the present case we find that even within the limited scope of the Section 143(1), the AO had applied his mind consciously to the appellant's claim made in the return for availing the deduction u/s 80IC of the Act. Having consciously applied his mind, the AO disallowed such claim and thereby in the intimation issued u/s 143(1), the income assessed was Rs.7,19,96,170/- which was arrived after the disallowance of the claim u/s 80-IC of the Act. Thereafter, acting upon the petition u/s 154, the AO passed a speaking order dated 19.04.2010 in which the appellant's claim for deduction u/s 80-IC was allowed. We therefore find that on two separate occasions the AO had consciously applied his mind and followed the courses permissible in law with regard to allowability of appellant's claim for deduction u/s 80-IC of the Act. In the facts involved in the present case therefore it cannot be said that the before passing of either of the orders dated 30.11.2009& 19.04.2010, the AO had not applied his mind to the facts governing the deduction claimed u/s 80-IC. In our considered opinion, the AO having considered the facts had made conscious decisions first to disallow and then to allow the deduction u/s 80IC of the Act. It may be so that on the merits the ld. Pr. CIT being the supervisory authority of the AO did not agree with the decision taken by his subordinate authority i.e. the AO. However on the given facts of the case it was evident that the mistake alleged by the ld. Pr. CIT in her SCN dated 02.02.2018 occurred in the order passed u/s 154/143(1) dated 09.04.2010 and not in the order passed u/s 147/143(3) dated 09.02.2016. We are therefore convinced that the proceedings u/s 263, if any, qua the issue of grant of deduction u/s 80-IC, could have been initiated only with the period of two years from the end of the FY 2010-11 being the year in which the order u/s 154/143(1) was passed. This proposition is squarely supported by the decision of the Hon'ble Apex Court in the case of 7 ITA No. 930/Kol/2018 East India Udyog Ltd. AY 2008-09 CIT Vs Alagendran Finance Ltd (supra). The relevant extracts of the judgment are as follows:
"12. We may at this juncture also take note of the fact that even the Tribunal found that all the subsequent events were in respect of the matters other than the allowance of 'lease equalization fund'. The said finding of fact is binding on us. Doctrine of merger, therefore, in the fact situation obtaining herein cannot be said to have any application whatsoever. It is not a case where the subject-matter of reassessment and subject-matter of assessment were the same. They were not.
13. It may be of some interest to notice that a similar contention raised at the instance of an assessee was rejected by a 3-Judge Bench of this Court in CIT v. Shri Arbuda Mills Ltd. [1998] 231 ITR 50. This Court took note of the amendment made in section 263 of the Act by the Finance Act, 1989 with retrospective effect from 1-6-1988, inserting Explanation (c) to sub-section (1) of section 263 of the Act stating:
"The consequence of the said amendment made with retrospective effect is that the powers under section 263 of the Commissioner shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in an appeal. Accordingly, even in respect of the aforesaid three items, the powers of the Commissioner under section 263 shall extend and shall be deemed always to have extended to them because the same had not been considered and decided in the appeal filed by the assessee. This is sufficient to answer the question which has been referred." (p. 52) We, therefore, are clearly of the opinion that in a case of this nature, the doctrine of merger will have no application.
14. The Madras High Court in A.K. Thanga Pillai's case (supra), in our opinion, has rightly considered the matter albeit under section 17 of the Wealth-tax Act, 1957 which is in parimateria with the provisions of the Act. Relying on Sun Engg. Works (P.) Ltd.'s case (supra), it was held:
"Under section 17 of the Wealth-tax Act, 1957, even as it is under section 147 of the Income- tax Act, proceedings for reassessment can be initiated when what is assessable to tax has escaped assessment for any assessment year. The power to deal with underassessment and the scope of reassessment proceedings as explained by the Supreme Court in the case of Sun Engg. [1992] 198 ITR 297 , is in relation to that which has escaped assessment, and does not extend to reopening the entire assessment for the purpose of redoing the same de novo. An assessee cannot agitate in any such reassessment proceedings matters forming part of the original assessment which are not required to be dealt with for the purpose of levying tax on that which had escaped tax earlier. Cases of underassessment are also treated as instances of escaped assessment."8 ITA No. 930/Kol/2018
East India Udyog Ltd. AY 2008-09 The order of reassessment is one which deals with the assessment already made in respect of items which are not required to be reopened, as also matters which are required to be dealt with in order to bring what had escaped in the earlier order of assessment, to assessment. An assessee who has failed to file an appeal against the original order of assessment cannot utilise the reassessment proceedings as an occasion for seeking revision or review of what had been assessed earlier. He may only question the extent of the reassessment insofar as the escaped assessment is concerned.
The revenue is similarly bound. . . ." (p. 263) The same principle was reiterated by a Division Bench of the Calcutta High Court in CIT v. Kanubhai Engineers (P.) Ltd. [2000] 241 ITR 665 .
15. We, therefore, are clearly of the opinion that keeping in view the facts and circumstances of this case and, in particular, having regard to the fact that the Commissioner of Income-tax exercising its revisional jurisdiction reopened the order of assessment only in relation to lease equalization fund which being not the subject of the reassessment proceedings, the period of limitation provided for under sub-section (2) of section 263 of the Act would begin to run from the date of the order of assessment and not from the order of reassessment. The revisional jurisdiction having, thus, been invoked by the Commissioner of Income-tax beyond the period of limitation, it was wholly without jurisdiction rendering the entire proceeding a nullity.
11. We at this stage are conscious of the ld. CIT, DR's contention that, for the purposes of Section 263, an intimation u/s 143(1) is not regarded as an assessment. In the facts of the case however we are not agreeable with the legal contention put forth by the ld. CIT, DR. It is to be noted that even though Section 143(1) describes the order passed thereunder as intimation but nonetheless it is an order which is passed under Section 143 whose title heading is 'Assessment'. We also note that Section 246A of the Act enlists various orders against which a right of appeal is provided by the Legislature and under Section 246A(1)(a), an order u/s 143(1) is specifically made an appealable order. We therefore find that if the Legislature has provided right of appeal against an intimation u/s 143(1) then there is no reason to hold that such an order is not amenable to revision u/s 263 by the Commissioner. Hence, merely because in the present case the AO initiated reassessment proceeding u/s 147 with regard to some issue other than the grant of deduction u/s 80-IC of the Act, such fact by itself did not extend the limitation period with regard to such issue. Particularly, in view of the fact that this very issue regarding grant of deduction u/s 80IC was the subject matter 9 ITA No. 930/Kol/2018 East India Udyog Ltd. AY 2008-09 of disallowance in the intimation u/s 143(1) which was subsequently deleted by the AO in his order u/s 154 of the Act. If one goes by the ld. CIT's proposition that the grant of deduction u/s 80-IC was erroneous; then it is evident from the facts of the present case that the deduction was consciously allowed by the AO by an order u/s 154/143(1) dated 09.04.2010 and therefore error, if any, had crept in the said order, and not in the latter order u/s 147/143(3) dated 09.02.2016. In view of these peculiar facts, we hold that the decision of this Tribunal in the case of Vijay Kr. Gupta Vs CIT (supra) relied upon by the ld. CIT, DR was factually distinguishable and hence not applicable. Respectfully following the ratio decidendi laid down by the Hon'ble Apex Court in the case of CIT Vs Alagendran Finance Ltd (supra), we therefore hold that the proceedings u/s 263 had become barred on 31.03.2013 and consequently therefore the impugned order dated 22.03.2018 is held to be bad in law and accordingly quashed.
12. We also find merit in the alternate argument of the ld. AR that the ld. Pr.CIT could not have invoked her revisionary jurisdiction u/s 263 in the given facts of the appellant's case. As noted the proceedings u/s 147 were initiated by the AO on the basis of certain information received from Investigating Wing at New Delhi with regard to appellant's transaction with M/s Bhola Motors Pvt Ltd. With reference to these transactions alone the AO had recorded his satisfaction that in his opinion income chargeable to tax had escaped assessment. In the course of reassessment proceedings, after conducting independent enquiries from M/s Bhola Motors Pvt Ltd the AO was satisfied that no income had escaped assessment with reference to these transactions. In the circumstances we find that once the AO found his reasons to believe, to be factually unsustainable, then the only course open for him was to close such proceedings and it was no more open for him to travel to other unconnected and unrelated issues. In the circumstances what the AO himself could not have done directly in the proceedings u/s 147, the ld. Pr. CIT could not achieve it by resorting to proceedings u/s 263 of the Act. In this regard, we may gainfully refer to the decision of the Hon'ble Delhi High Court in the case of CIT Vs Software Consultants (supra) wherein on similar facts the Hon'ble High Court while upholding the order of the Tribunal quashing the ld. CIT's revision order, made the following observations:
10 ITA No. 930/Kol/2018East India Udyog Ltd. AY 2008-09
9. One of the contentions, which has been accepted by the tribunal is that the order of the Assessing Officer cannot be regarded as erroneous even if the Assessing Officer had failed to carry out necessary verification and required enquiries in respect of the share application money, as no addition has been made on account of the reasons for reopening, which were recorded before issue of notice under Section 148 of the Act. It has been held that the Assessing Officer could not have made an addition on account of share application money as no addition has been made on account of FDRs of Rs.20 lacs. The tribunal has noticed and recorded that in the reasons for reopening it was mentioned that the assessee had made investment in form of FDRs of Rs.20 lacs but in the assessment order passed under Section 147/143(3) of the Act it has been held that the respondent assessee had been able to show and establish the genuineness of and capacity to make the said investment.
10. Similar issue had arisen before this Court in Ranbaxy Laboratories Ltd. v. CIT, [2011] 336 ITR 136/ 200 Taxman 242/ 12 Taxmann.com 74 (Delhi). In the said case, the Division Bench had also examined Explanation 3 to Section 147, which was inserted by Finance (No.
2) Act of 2009 with retrospective effect from 1st April, 1989. Reference was made to the decision of the Bombay High Court in CIT v. Jet Airways (I) Ltd., [2011] 331 ITR 236/[2010] 195 Taxman 117 in which it has been held as under:
"The effect of section 147 as it now stands after the amendment of 2009 can, therefore, be summarised as follows : (i) the Assessing Officer must have reason to believe that any income chargeable to tax has escaped assessment for any assessment year ; (ii) upon the formation of that belief and before he proceeds to make an assessment, reassessment or recomputation, the Assessing Officer has to serve on the assessee a notice under sub-section (1) of section 148;
(iii) the Assessing Officer may assess or reassess such income, which he has reason to believe, has escaped assessment and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the section ; and (iv) though the notice under section 148(2) does not include a particular, issue with respect to which income has escaped assessment, he may none the less, assess or reassess the income in respect of any issue which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the section."
11. Thereafter, the High Court referred to the decision of the Rajasthan High Court in the case of CIT v. Shri Ram Singh, [2008] 306 ITR 343 in which it has been observed as under:
"It is only when, in proceedings under section 147 the Assessing Officer, assesses or reassesses any income chargeable to tax which has escaped assessment for any assessment year, with respect to which he had 'reason to believe' to be so, then only, in addition, he can also put to tax, the other income, chargeable to tax, which has escaped assessment, and which has come to his notice subsequently, in the course of proceedings under section 147.11 ITA No. 930/Kol/2018
East India Udyog Ltd. AY 2008-09 To clarify it further, or to put it in other words, in our opinion, if in the course of proceedings under section 147, the Assessing Officer were to come to the conclusion, that any income chargeable to tax, which, according to his 'reason to believe', had escaped assessment for any assessment year, did not escape assessment, then, the mere fact that the Assessing Officer entertained a reason to believe, albeit even a genuine reason to believe, would not continue to vest him with the jurisdiction, to subject to tax, any other income, chargeable to tax, which the Assessing Officer may find to have escaped assessment, and which may come to his notice subsequently, in the course of proceedings under section 147."
12. The Division Bench in Ranbaxy Laboratories Ltd. (supra) considered the judgment of the Supreme Court in the case of V. Jagamohan Rao v. CIT EPT, [1970] 75 ITR 373 and CIT v. Sun Engg. Works (P.) Ltd. [1992] 198 ITR 297 / 64 Taxman 442 and has then elucidated:
"18. We are in complete agreement with the reasoning of the Division Bench of the Bombay High Court in the case of CIT v. Jet Airways (I) Limited [2011] 331 ITR 236 (Bom). We may also note that the heading of section 147 is "income escaping assessment" and that of section 148 "issue of notice where income escaped assessment". Sections 148 is supplementary and complimentary to section 147. Sub-section (2) of section 148 mandates reasons for issuance of notice by the Assessing Officer and sub-section (1) thereof mandates service of notice to the assessee before the Assessing Officer proceeds to assess, reassess or recompute the escaped income. Section 147 mandates recording of reasons to believe by the Assessing Officer that the income chargeable to tax has escaped assessment. All these conditions are required to be fulfilled to assess or reassess the escaped income chargeable to tax. As per Explanation 3 if during the course of these proceedings the Assessing Officer comes to conclusion that some items have escaped assessment, then notwithstanding that those items were not included in the reasons to believe as recorded for initiation of the proceedings and the notice, he would be competent to make assessment of those items. However, the Legislature could not be presumed to have intended to give blanket powers to the Assessing Officer that on assuming jurisdiction under section 147 regarding assessment or reassessment of the escaped income, he would keep on making roving inquiry and thereby including different items of income not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. For every new issue coming before the Assessing Officer during the course of proceedings of assessment or reassessment of escaped income, and which he intends to take into account, he would be required to issue a fresh notice under section 148.
19. In the present case, as is noted above, the Assessing Officer was satisfied with the justifications given by the assessee regarding the items, viz., club fees, gifts and presents and provision for leave encashment, but, however, during the assessment proceedings, he found the deduction under sections 80HH and 80-I as claimed by the assessee to be not admissible. He consequently while not making additions on those items of club fees, gifts and presents, etc., proceeded to make deductions under sections 80HH and 80-I and accordingly reduced theclaim on these accounts.12 ITA No. 930/Kol/2018
East India Udyog Ltd. AY 2008-09
20. The very basis of initiation of proceedings for which reasons to believe were recorded were income escaping assessment in respect of items of club fees, gifts and presents, etc., but the same having not been done, the Assessing Officer proceeded to reduce the claim of deduction under sections 80HH and 80-I which as per our discussion was not permissible. Had the Assessing Officer proceeded to make disallowance in respect of the items of club fees, gifts and presents, etc., then in view of our discussion as above, he would have been justified as per Explanation 3 to reduce the claim of deduction under sections 80HH and 80-I as well."
13. On the second aspect raised by the Commissioner of Income Tax with regard to the Assessing Officer accepting the loss return of Rs.1,02,756/-, we are of the view that the same did not require exercise of revisionary power under Section 263 of the Act. The observations of the Assessing Officer were only to the extent of stating that he had accepted the return. Benefit of carry forward of loss can be claimed in case a return is filed under Section 139(1). It is not the case of the Revenue that the assessee had tried to claim benefit of carry forward of loss on the basis of the order passed under Section 147/143(3) of the Act.
14. For exercise of power under Section 263 of the Act, it is mandatory that the order passed by the Assessing Officer should be erroneous and prejudicial to the interest of the Revenue. In the present case, the Assessing Officer did not make any addition for the reasons recorded at the time of issue of notice under Section 148 of the Act. This position is not disputed and disturbed by the Commissioner of Income Tax in his order under Section 263 of the Act. Sequitur is that the Assessing Officer could not have made an addition on account of share application money in the assessment proceedings under Section 147/148. Accordingly, the assessment order is not erroneous. Thus, the Commissioner of Income Tax could not have exercised jurisdiction under Section 263 of the Act."(emphasis supplied)
13. Respectfully following the above decision (supra), we hold that the order of the ld. Pr. CIT u/s 263 is legally unsustainable and accordingly the same is hereby cancelled.
14. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 23rd August, 2019
Sd/- Sd/-
(Dr. A. L. Saini) (A. T. Varkey)
Accountant Member Judicial Member
Dated: 23rd August, 2019
Biswajit, Sr. PS
13
ITA No. 930/Kol/2018
East India Udyog Ltd. AY 2008-09
Copy of the order forwarded to:
1 Appellant - East India Udyog Ltd., B-41, Maharani Bagh, New Delhi - 110 065.
2 Respondent - DCIT, CIRCLE - 3(1), Kolkata.
3 CIT(A) - 4, Kolkata (sent through e-mail)
4 CIT
5 DR (sent through e-mail)
/True Copy, By order,
Assistant Registrar/H.O.O
ITAT Kolkata