Income Tax Appellate Tribunal - Amritsar
M/S. Osaka Alloys And Steel (P) Ltd, ... vs Deputy Commissioner Of Income Tax ... on 26 June, 2024
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH, AMRITSAR
BEFORE DR. MITHA LAL MEENA, ACCOUNTANT MEMBER
AND SH. UDAYAN DAS GUPTA, JUDICIAL MEMBER
I.T.A. No. 257/Asr/2019
Assessment Year: 2014-15
M/s Osaka Alloys andVS. Dy. Commissioner of Income Tax
Steel P. Ltd, Jalandhar Circle-II, Jalandhar
[AN: AAACO7097G]
(Appellant) (Respondent)
Appellant by: Sh. Rohit Kapoor, CA & Sh. V.S. Aggarwal, ITP
Respondent by: Sh. Bharat Bhushan Garg, CIT DR
Date of Hearing : 04.06.2024
Date of Pronouncement : 26.06.2024
ORDER
Per Dr. M. L. Meena, AM:
The captioned appeal has been filed by the assessee against the order of the Principal Commissioner of Income Tax [hereinafter referred to as (the Pr.CIT), Jalandhar, dated 28.02.2019 in respect of Assessment Years: 2014- 15 setting aside the assessment order passed by the Assessing Officer (in short "the AO")by holding it to be erroneous and prejudicial to the interests of the revenue wherein the assessee has raised the following grounds of appeal in ITA No. 257/Asr/2019:
1. That order u/s 263 of the Act, passed by Commissioner of Income Tax, Jalandhar-1 is illegal, bad in law and without jurisdiction.
2. That Commissioner of Income Tax, Jalandhar-1 has grossly erred in holding that 2 I.T.A. No. 257/Asr/2019 Assessment Year: 2014-15 assessment order passed by the Assessing Officer ('AO') was erroneous and prejudicial to the interest of revenue. That invocation of provisions of section 263 of the Act is illegal & bad in law as the conditions embedded in section 263 were not complied with.
3. That the Ld. PCIT has erred in invoking clause (a) of explanation 2 of section 263(1) of as the explanation does not authorize unfettered powers to the CIT to revise each and every order passed by the AO.
4. That the Pr. Commissioner of Income Tax erred in law as well as in facts while passing the impugned order u/s 263 of the act. That the PCIT has failed to appreciate that the AO has taken a plausible view by not including the subsidies in the book profit as the same does not partake the character of income as per various clauses mentioned in section 2(24) of the income Tax Act, 1961. That the PCIT has erred in appreciating the fact that once the receipt is not included in income, the same shall also not form part of book profit.
5. That the order of the Learned Commissioner of Income Tax, Jalandhar-1('Ld. CIT') u/s 263 is arbitrary, unjust, is based on assumptions & presumptions since no prejudice was caused to revenue.
6. That the order passed by the Pr. CIT is unjust as the PCIT has failed to appreciate that the AO has made proper enquiry and it is not the case where no enquiry has been made.
7. That on the facts & circumstances of the case, Commissioner of Income Tax, Jalandhar-1 has grossly erred in setting aside the assessment framed with the directions to pass fresh order after considering all aspects of the matter and after carrying out proper enquiries. That the CIT has erred in not making proper enquiry to establish that assessment order is erroneous and prejudicial to interests of revenue.
8. That the Appellant requests for leave to add or amend the grounds of appeal before the appeal is heard or disposed.
2. Apropos ground no. 2-3 and 5-6, the appellant has challenged the 3 I.T.A. No. 257/Asr/2019 Assessment Year: 2014-15 invocation of provisions of section 263 and the impugned order as illegal and bad in law as the conditions embedded in section 263 were not complied with..
3. Briefly, the facts of the case are that the assessee is a company engaged in the manufacturing business of producing Lead Ingots, Lead Alloy Ingots, Lead Oxides, and similar products. The assessee had filed its income tax return on 29.11.2014 declaring income of Rs. 18860/- under normal provision of the Income Tax Act, 1961 ('the Act'). The assessment was made under section 143(3) of the Act, after considering the submission of the assessee and material facts available on record.
4. The Ld. Pr. CIT while initiating the proceedings under section 263 of the Act, vide show cause notice u/s 263 dated 25.10.2018. The Ld. Pr. CIT has pointed out certain discrepancies in the Assessment Order by observing that the order of the Ld. Assessing Officer is erroneous and prejudicial to the interest of revenue in as much as the AO had failed to carry out necessary inquiries and verification on the issue that the appellant company had calculated the book profit at Rs. 1,03,951/- after claiming a deduction under section 80IB amounting to Rs. 4,40,52,629/-. The Pr. CIT asserted that calculation of book profit by allowing the deduction of Rs. 4,40,52,629/- was incorrect and accordingly, passed the order under section 263 of the Act.4
I.T.A. No. 257/Asr/2019 Assessment Year: 2014-15
5. The Ld. Counsel for the assessee has submitted that the order of the Ld. Pr.CIT u/s 263 is arbitrary, unjust, which is based on assumptions & presumptions since there was no prejudice caused to revenue; that the Pr. CIT has failed to appreciate the fact that the AO has made proper enquiry, and it was not the case where no enquiry has been made and that the Pr.CIT, Jalandhar-1 has grossly erred in setting aside the assessment framed with the directions to pass fresh order after considering all aspects of the matter and after carrying out proper enquiries. Thus, the Ld. AR argued that the Pr. CIT has failed to establish that the assessment order was erroneous and prejudicial to the interests of revenue.
6. Regarding the issue of deduction of Rs. 4,40,52,629/- the appellant in reply dated 27.11.2018, stated that the amount of Rs. 4,40,54,329/- constituted capital receipts, and thus, these aforesaid amounts are beyond the purview of income chargeable to tax. The Ld. AR submitted the breakdown of deduction of Rs. 4,40,52,629/- which is reproduced hereunder: -
Particulars Amount Explanation offered by the appellant Self-credit of 26725474 That the amount of Rs. 26725474/- has been included in excise duty the profit and loss account under the head 'other income'.
Pleaserefer page no 28 of the PB. That the mentioned amount constitutes a capital receipt and, therefore, cannot be categorized as part of the book profit of the 5 I.T.A. No. 257/Asr/2019 Assessment Year: 2014-15 company.
CST Refund 1754106 The component related to the refund of CST, VAT, and Receivable excise duty has been reduced from the purchase price, in (Refer Page 98- the books of accounts acknowledging these as capital
99) receipts. Therefore, the net profit includes the amount VAT Refund 7023954 refund of CST, VAT, and excise duty. Consequently, these Receivable(Refer amounts were deducted from the Book Profit for page-100-103 calculating the tax payable as per Minimum Alternate Tax Excise Duty paid 8777120 (MAT) provisions. The amount of CST, VAT and Excise Duty on purchase is shown as receivable under the head other current (Refer page- assets. Please refer page no 26 of the PB.The copy of
104) ledger account of CST,VAT and Excise duty on purchases as submitted before the AO and CIT(A) is enclosed as per page 98 to104 of volume-2 PB. That the entry posted in the books of accounts was purchase account debit and party account credit. Subsequently, the respective VAT,CST and excise duty has been debited and correspondingly purchase has been credited.
7. The Ld. AR argued that the deduction claimed by the appellant was not related to section 80IB but was specifically on account of capital receipts. Thus, the Ld. AR contended that proper enquiry was made by the AO and therefore, the deduction claimed stood explained by the appellant and verified by the AO. At the time of hearing, the Council of the assessee Mr. Rohit kapoor, Chartered Accountant filed the written submission on 04.06.2024 which are filed on record.
8. The Ld Counsel Mr. Rohit Kapoor has argued that no prejudice was 6 I.T.A. No. 257/Asr/2019 Assessment Year: 2014-15 caused to revenue and that the AO had made proper enquiry while framing assessment u/s 143(3). The learned counsel further pointed out that invoking section 263 was unwarranted as the assessment order was not prejudicial to the interest of the revenue. The counsel pointed out that the subsidy received is capital receipts and the appellant was eligible for exemption u/s 80IB.The counsel further argued that the claim of the CIT that the appellant had reduced deduction claimed u/s 80IB from book profits was incorrect. In this regard the assessee produced computation of income at page no 41 of the written submissions and argued that appellant had claimed deduction u/s 80IB to the tune of Rs. 4,31,33,781/- and reduced sum of Rs. 44052629/-. The said fact has been verified by the assessing officer. The said basic exercise has not been done by the Pr.CIT. In this regard the AR further placed reliance upon the following judgments: -
A) DwarkadhisBuildwell Pvt. Ltd. v. CIT - ITA No.3097/Del/2014 - order dated 1 July 2019.
B) 2017 (9) TMI 529 - DELHI HIGH COURT PR. COMMISSIONER OF INCOME TAX - 3, NEW DELHI VERSUS DELHI AIRPORT METRO EXPRESS PVT. LTD.
C) 2013 (7) TMI 483 - DELHI HIGH COURT Other Citation: [2013] 357 ITR 388 DIT VERSUS JYOTI FOUNDATION 7 I.T.A. No. 257/Asr/2019 Assessment Year: 2014-15 D) 2012 (3) TMI 227 - DELHI HIGH COURT Other Citation: [2012] 343 ITR 329 INCOME TAX OFFICER VERSUS DG HOUSING PROJECTS LTD E) 2019 (4) TMI 1044 - DELHI HIGH COURT THE COMMISSIONER OF INCOME TAX. VERSUS KOHINOOR FOODS LIMITED F) 2017 (9) TMI 1238 - DELHI HIGH COURT PR. COMMISSIONER OF INCOME TAX -6 VERSUS MODICARE LIMITED G) 2017 (4) TMI 1435 - DELHI HIGH COURT PR. COMMISSIONER OF INCOME TAX-12 VERSUS LAKSHYA SETH H) 2022 (8) TMI 510 - ITAT CUTTACKASHOK KUMAR MOHAPATRA VERSUS PR. CIT, BHUBANESWAR I) 2022 (3) TMI 1282 - ITAT DELHIEVON TECHNOLOGIES (P) LTD.
VERSUS ITO WARD 1 (3) DEHRADUN J) 2021 (10) TMI 273 - ITAT RAIPURM/S R.R. ISPAT LIMITED VERSUS CIT-1, RAIPUR K) 2019 (12) TMI 253 - ITAT MUMBAIM/S. ESSAR SHIPPING LIMITED VERSUS PR. CIT-5 L) 2018 (2) TMI 2025 - ITAT MUMBAISHRI SURENDRA L. HIRANANDANI VERSUS PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL - I MUMBAI M) Sh. NarainSingla, 8 I.T.A. No. 257/Asr/2019 Assessment Year: 2014-15 N) SANJAY JAIN V. PCITITA NO. 140/CHD/2021 8.1 The counsel of the assessee placed further placed reliance upon the case of Meerut Roller Flour Mills (P.) Ltd v Commissioner of Income tax 110 taxmann.com 170 (Allahabad)/[2019] 267 Taxman 18, [2017] 77 taxmann.com 15 (SC) SUPREME COURT OF INDIA Commissioner of Income-tax v. Nirav Modi among following other case laws: -
A) CIT v Hindustan Marketing & Advertising Co. Ltd.196 Taxman 368 B) Copy of judgment of ITAT, Amritsar Bench SMT. ANITA MALPOTRA V.INCOME-TAX OFFICER 109 TTJ 76 C) Loil Continental Foods Ltd. vs. Pr. CIT in ITA No. 577/Chd/2019 Chd-
Trib.
D) Commissioner of Income Tax vs. Anil Kumar Sharma 194 taxman 504 8.2 The assessee has additionally placed reliance upon the following case laws: -
A) [2023] 152 taxmann.com 565 (Delhi) HIGH COURT OF DELHI Principal Commissioner of Income-tax v. H.T.L Ltd.* B) [2022] 141 taxmann.com 512 (Gujarat) HIGH COURT OF GUJARATPrincipal Commissioner of Income-tax v. Shukla Dairy (P.) Ltd.* C) [2021] 130 taxmann.com 496 (Gauhati) HIGH COURT OF GAUHATICMJ Breweries (P.) Ltd. v. Union of India 9 I.T.A. No. 257/Asr/2019 Assessment Year: 2014-15 D) [2022] 145 taxmann.com 590 (Calcutta) HIGH COURT OF CALCUTTA Principal Commissioner of Income-tax v. Reeta Lakhmani* (E) Malabar Industrial Co. Ltd. v/s CIT (2000) 243 ITR 83 (SC) in which it has been stated as under: -
(F) [2024] 161 taxmann.com 213 (Pune - Trib.) IN THE ITAT PUNE BENCH 'A' Bajaj Housing Finance Ltd. v. Principal Commissioner of Income-tax (G) [2024] 162 taxmann.com 664 (Patna - Trib.) IN THE ITAT, PATNA Gyan Infrabuild (P.) Ltd. v. Principal Commissioner of Income-tax
9. The Ld. CIT (DR), on the other hand submitted that the Pr. CIT mentioned in the impugned order that the explanation of the assessee was accepted by the AO without making any verification and independent enquiry in this regard. So, the entire order related to this particular issue is erroneous. The invoking of section 263 of the Act is proper. He reiterated the observation of the Ld. Pr. CIT in the order U/s 263 of the Act which are reproduced hereunder: -
The main issue involved in the instant proceedings u/s 263 is that the AO has failed to work out correct book profit u/s 115JB by allowing deduction u/s 80IB in computation of book profit u/s 155JB.
3.5 The facts of the case are that the assessee has a unit claimed as exempt u/s 801B at Samba in Jammu & Kashmir. Further, it has a unit at Jalandhar which is not exempt u/s 801B. As per Section 115 JB of the Act, an assessee is liable to pay tax at 10 I.T.A. No. 257/Asr/2019 Assessment Year: 2014-15 the rates of 18-1/2 per cent on the book profit if the income tax payable on the total income is less than 18-1/2 per cent of its Book Profit. The said Section also provides for computing the book profit starting with the profits as per Profit & LOSS account prepared in accordance with the provisions of Part-ll of Schedule VI of Companies Act 1956. the said Section also provides for allowing certain deductions. However, deduction u/s 80 IB is not one of them. Hence the assessee was required to compute the Book Profit u/s 115 JB without claiming deduction in respect of the profits of 80 IB unit. On perusal of the records it is revealed that assessee has arrived at the book profit after claiming deduction u/s 80 1B which is incorrect. The Assessing Officer has passed the order without examining the same. Further, there is no dispute with regard to the question of law as to whether deduction of 80 IB is to be claimed even while computing Book Profit u/s 115 JB. The AO should have made inquiries into this issue and only then passed the assessment order. Failure to make the necessary inquiries on this issue has made the order erroneous.
4 Thus, it is a clear case of the order being erroneous in so far as it is prejudicial to the interest of the revenue. is also pertinent to note here that the assessee vide its submissions dated 20.12.2017 before the Assessing Officers has itself admitted that the deduction u/s 80IB of the Act has been wrongly claimed by it while computing book profit u/s 115JB in the case.
4. In view of the above facts and discussions, I am satisfied that the assessment order passed by the Assessing Officer on 13.12.2016 is erroneous in so far as it is prejudicial to the interests of the revenue. Therefore, the said order passed on 13.12.2016 is set aside to this extent to the file of the assessing officer to pass fresh order after making necessary enquiries/investigations in the light of the discussions made above and after giving due opportunity to the assessee of being heard.
10. We have heard the rival contentions, perused the material on record and impugned orders. As per statute, the section 263 has two limbs, firstly the 11 I.T.A. No. 257/Asr/2019 Assessment Year: 2014-15 assessment order is erroneous and secondly, it is prejudicial to the interest of revenue. The AR drew the attention of the bench towards the fact that the AO passed the order after making a detailed enquiry and examination of books of account and submissions made by the assessee. Further, the AR also brought to the knowledge of the bench that during the assessment proceedings the assessee has submitted the copy of ledgers and documents before the AO (APB, Pgs. 94-104).
11. Thus, the Ld. AR contended that as all the documents were submitted before the AO and PCIT, as such, the jurisdictional provisions as laid down in the act have duly been complied with by the assessee. The Ld. AR contended that it is the duty of the Pr.CIT to make minimal enquiry and to hold as to how the order passed by the AO is erroneous or prejudicial to the interest of the revenue by considering the submissions made by the assessee and analyzing every record available with him before passing the order u/s 263 of the act. In the present case, the Pr.CIT has not given any adverse view in the lieu of documents submitted by the assessee. Therefore, it cannot be said that the assessment order of the AO is erroneous or prejudicial to the interest of the revenue.
12. In the case of Pr. Commissioner of Income-tax (Central) v. Kanin 12 I.T.A. No. 257/Asr/2019 Assessment Year: 2014-15 (India)*TEJINDER SINGH DHINDSA AND PANKAJ JAIN, JJ.IT APPEAL NOS. 205 AND 213 OF 2019 (O&M) †APRIL 21, 2022 141 taxmann.com 83; the Hon'ble jurisdictional Punjab and Haryana High Court, on the similar facts of the assessee's case, has observed that the CIT has failed to undertake any enquiry to establish that the assessment order was erroneous and prejudicial to the interest of the revenue. Their Lordships observed that it was incumbent upon the Pr.CIT to undertake an enquiry as regards to the issues. The matter can be restored to the AO only after the Pr.CIT undertakes the enquiry himself.
13. From the facts on record and the aforesaid cases relied upon by the counsel of the assessee, it appropriate to observe, in the present case, that the necessary enquiries were being made by the AO. It is pertinent to mention that the view of ld. Assessing Officer being a plausible view, and therefore, the assessment order could not be considered erroneous or prejudicial to interest of revenue. The assessee has also placed reliance upon the case of CIT v/s Max India Ltd. (2007) 295 ITR 282 (SC) to support the contention that to invoke section 263, it is a judicial requirement to satisfy twin conditions as per statute and a jurisdictional requirement as laid down by various courts, as under:
(i) The order of the Assessing Officer sought to be revised is erroneous;
and
(ii) it is prejudicial to the interests of the Revenue. If any one of them is 13 I.T.A. No. 257/Asr/2019 Assessment Year: 2014-15 absent i.e. if the assessment order is not erroneous but it is prejudicial to the Revenue, Sec.263 cannot be invoked.
14. In this regard the the Hon'ble Mumbai High Court in the Judgment of Sh. Narayan Tatu Rane Vs. ITO, I.T.A. No. 2690/2691/Mum/2016, 70 taxmann.com 227 dt. 06.05.2016 confirm the finding of the ITAT that provisions of clause (a) of Explanation 2 to sec. 263 does not authorize or give unfettered powers to the Ld. Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made.
15. Thus, the provision u/s 263 cannot be invoked to correct each, and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous as also prejudicial to revenue's interest, that the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase 'prejudicial to the interest of the Revenue' must be read in conjunction with an erroneous order passed by the AO. Every loss of Revenue because of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. For example, if the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two views are possible and AO has taken one view with which the CIT does not agree, it cannot be treated 14 I.T.A. No. 257/Asr/2019 Assessment Year: 2014-15 as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law. This view gets supports from Malabar Industrial Co. Ltd. v/s CIT (2000) 243 ITR 83 (SC).
16. Considering the factual matrix and the judicial precedents, we do not concur with the Pr.CIT that the AO did not verify the deduction claimed by the appellant and that the order was passed without application of mind. Accordingly, we hold that the Ld. Pr.CIT finding, and observation are infirm and perverse to the facts on record. Accordingly, the order passed by the Pr. CIT under section 263 of the Act, is being held to be bad in law and as such, quashed.
17. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 26/06/2024
Sd/- Sd/-
(Udayan Das Gupta) (Dr. Mitha Lal Meena)
Judicial Member Accountant Member
DOC*
Copy of the order forwarded to :
(1) The Appellant
(2) The Respondent
(3) The CIT
(4) The DR, I.T.A.T.
True Copy
By Order