Income Tax Appellate Tribunal - Mumbai
Jet Airways (India ) Ltd, Mumbai vs Pr Cit 5, Mumbai on 23 June, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "J", MUMBAI
Before S/Shri B R Baskaran, AM & C N Prasad, JM
ITA No.3792/Mum/2016
Assessment Year : 2010-11
Jet Airways (India) Ltd., Principal CIT -5
Shiroya Centre Mumbai
Sahar Airport Road, Vs.
Andheri (E)
Mumbai 400 099
PAN AAACJ0920H
(Appellant) Respondent)
Appellant By : Shri Vijay Mehta
Respondent By : Shri Alok Johari
Date of Hearing :17.04.2017 Date of Pronouncement : 23.06.2017
ORDER
The assessee has filed this appeal challenging the validity of assessment order passed by the Principal CIT u/s. 263 of the Act for assessment year 2010-11.
2. The assessment for A.Y. 2010-11 was completed in the hands of the assessee by the Assessing Officer u/s. 143(3) of the Act on 06.03.2014. The learned Principal CIT, upon examination of the record, noticed that the Assessing Officer has not disallowed provision of 3.15 crores relating to redelivery of aircraft. Further, he has also noticed that the Assessing Officer has not initiated penalty proceedings u/s. 271E of the Act for repaying loans otherwise than by way of account payee cheques. Accordingly, he considered the assessment order as erroneous and prejudicial to the interests of the Revenue and initiated revision proceedings u/s. 263 of the Act.
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3. After hearing the assessee, the learned Principal CIT set aside both the issues to the file of the Assessing Officer and directed him to pass assessment order de-novo. Aggrieved the assessee is in appeal before the Tribunal.
4. The first issue relates to claim of the assessee relating to provision of 3.15 crores made for redelivery of aircraft. The learned AR submitted that the assessee has taken certain aircrafts on lease. After expiry of the lease period, the assessee is required to redeliver the aircraft by carrying out necessary repairs in order to restore the aircraft to the same condition, in which it was taken on lease. The assessee usually estimates the amount of expenses that would be incurred on repairing the aircraft and creates provision for the said estimated amount by creating provision every year over the lease period. He submitted that the Assessing Officer considered the claim of the assessee under the head redelivery of aircraft as contingent liability in the earlier years and, accordingly, disallowed the same. However, the ITAT has allowed the claim of the assessee by holding that the provision of expenses so claimed by the assessee is not contingent liability. The learned AR further submitted that the Assessing Officer has called for actual expenses incurred on redelivery in the last seven years, meaning thereby, he has examined the claim of the assessee during the course of assessment proceedings. The assessee has furnished the same vide its letter dated 18.03.2013.
5. The learned AR submitted that the Assessing Officer has examined this issue and has applied his mind on this issue. Hence, the learned Principal CIT is precluded from revising the assessment order on this ground. The learned AR submitted that the assessee made a provision of `.3.15 crores during the year 3 ITA No.3792/Mum/2016 Jet Airways (India)Ltd under consideration and this account was enhanced by another `3.93 crores on account of exchange rate fluctuation. Thus, the aggregate amount debited to this account was `.7.08 crores. The assessee has used the provision during the year under consideration to the extent of `.7.52 crores and, hence, this account has resulted in a credit balance of `.0.44 crores. The assessee has offered this amount of ` 0.44 crores as its income during the year under consideration. These details have been tabulated as under:-
Particulars Amount (in Rs.)
Additional Provisions during the year (net) 3,15,02,264
Add : Adjustment on account of Exchange 3,93,86,671
Fluctuation consequent to restatement of liabilities Total 7,08,88,935 Less :- Amount of Provisions used during the year 7,52,93,463 Net Credit to Profit & Loss Account (44,04,529) Since the claim of the assessee has been allowed by the Tribunal, the assessee has rightly offered the amount of ` 44 lacs as its income. He further submitted that the Hon'ble Bombay High Court has held in the case of Bank of Baroda vs. H C Shrivatsava And Another (2002) 256 ITR 385 that "the Assessing Officer is bound to follow the judgment of the Tribunal in its true letter and spirit. It is necessary for judicial unity and discipline that all the authorities below the Tribunal accept as binding the judgment of the Tribunal". Since the Assessing Officer did not make disallowance as per the decision rendered by the ITAT in the assessee's own case, the Ld A.R submitted that the assessment order cannot be found fault with. 4 ITA No.3792/Mum/2016
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6. He further submitted that the provision claimed by the assessee, if disallowed, then the provision reversed by the assessee should also be excluded, in which case there will be no revenue loss, meaning thereby, no prejudice shall be caused to the revenue.
7. With regard to the second issue relating to initiation of penalty proceedings u/s. 271E of the Act, the learned AR submitted that the Assessing Officer did not levy penalty u/s. 271E of the Act after considering the facts of the case and, hence, this issue has become academic.
8. The learned DR submitted that the profit and loss account of the assessee does not show the credit of Rs.0.44 crore and, hence, the claim of the learned AR requires verification. He further submitted that the assessing officer did not examine actual expenditure incurred against the provision and hence his examination cannot be considered to be adequate. Further the Assessing Officer did not discuss about this claim of the assessment order and hence it is not clear as to whether the AO applied his mind on this issue or not. The learned DR placed his reliance on the decision rendered by the co-ordinate bench in the case of Horizon Investment Co. Ltd (ITA No.1593/Mum/2013 dated 27-06-2014), wherein it is held that the application of mind on the part of the Assessing Officer should be demonstrated. He further submitted that the assessing officer, in the instant case, did not examine the issue in proper perspective and hence in view of the Explanation 2 to sec. 263 inserted by Finance Act, 2015 w.e.f 1.6.2015, which has been held to have retrospective operation by the Co-ordinate bench of ITAT in the case of M/s Crompton Greaves Ltd Vs. CIT (ITA No.1994/Mum/2013 dated 01-02- 5 ITA No.3792/Mum/2016 Jet Airways (India)Ltd 2016), the assessment order shall be deemed to be erroneous and prejudicial to the interest of the revenue. He further submitted that the assessee has given only primary details and the same has been accepted by the Assessing Officer without examination. Hence, it cannot be considered to be a proper enquiry.
9. In the rejoinder, the learned AR submitted that the amount of 0.44 crores has not been shown in the credit side of the Profit and Loss account, but reduced from the expenses. He furnished a working sheet to support his contentions. He submitted that the assessing officer has also been disallowing only the net amount of provisions every year. During the year under consideration, the net amount of provisions has worked to a negative figure and, hence, the Assessing Officer did not consider the same. But as per the policy adopted by the Assessing Officer, this should have been excluded from the income.
10. We have heard rival contentions and perused the record. Before going into the merits of the issue, we would like to discuss about the legal position with regard to the power of Learned Principal CIT to invoke revision proceedings under section 263 of the Act. The scope of revision proceedings initiated under section 263 of the Act was considered by Hon'ble Bombay High Court, in the case of Grasim Industries Ltd. V CIT (321 ITR 92) by taking into account the law laid down by the Hon'ble Supreme Court. The relevant observations are extracted below:
Section 263 of the Income-tax Act, 1961 empowers the Commissioner to call for and examine the record of any proceedings under the Act and, if he considers that any order passed therein, by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, to pass an order upon hearing the assessee and after an enquiry as is necessary, enhancing or modifying the assessment or cancelling the 6 ITA No.3792/Mum/2016 Jet Airways (India)Ltd assessment and directing a fresh assessment. The key words that are used by section 263 are that the order must be considered by the Commissioner to be "erroneous in so far as it is prejudicial to the interests of the Revenue". This provision has been interpreted by the Supreme Court in several judgments to which it is now necessary to turn. In Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83, the Supreme Court held that the provision "cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer" and "it is only when an order is erroneous that the section will be attracted". The Supreme Court held that an incorrect assumption of fact or an incorrect application of law, will satisfy the requirement of the order being erroneous. An order passed in violation of the principles of natural justice or without application of mind, would be an order falling in that category. The expression "prejudicial to the interests of the Revenue", the Supreme Court held, it is of wide import and is not confined to a loss of tax. What is prejudicial to the interest of the Revenue is explained in the judgment of the Supreme Court (headnote) :
"The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law."
The principle which has been laid down in Malabar Industrial Co. Ltd. [2000] 243 ITR 83 (SC) has been followed and explained in a subsequent judgment of the Supreme Court in CIT v. Max India Ltd. [2007] 295 ITR 282."
11. We shall take up the first issue on which the revision order was passed. The learned Principal CIT has taken the view that the deduction claimed under the head "provision for redelivery of aircraft" is not allowable as deduction and, accordingly, passed the impugned revision order setting aside the assessment order and 7 ITA No.3792/Mum/2016 Jet Airways (India)Ltd directing the Assessing Officer to pass the order de-nova. It is a well settled principle of law that, if the Assessing Officer has taken a possible view, then the assessment order cannot be considered to be prejudicial to the interest of the revenue. It is also well settled principle that, in order to invoke the provisions of sec. 263, the learned CIT is required to show that the order is not only erroneous but also prejudicial to the interests of the revenue.
12. The learned AR submitted that the assessing officer had made identical disallowance of the identical claim made in the earlier years. He further submitted that the said claim was allowed by the Tribunal in ITA Nos. 4087/Mum/2000, 3691/Mum/2002, 3201/Mum/2003, 6084/Mum/2003 and 7390/Mum/2004 relating to assessment years 1997-98 to 2001-02. The learned AR also stated that identical disallowance made in AY 2002-03 to 2007-08 has been allowed by the Tribunal. Thus, we notice that this issue has been a recurring issue in the past and the said claim has been allowed at ITAT level.
13. Since the impugned claim has been allowed by the Tribunal, it was contended that the Assessing Officer did not prefer to disallow the claim made under the head "Provision for redelivery of aircraft". It was also submitted that the Hon'ble jurisdictional Bombay High Court has held in the case of Bank of Baroda (supra) that the decision of ITAT is binding on the assessing officer. Accordingly, it was contended that the order passed by the Assessing Officer cannot be considered to be erroneous and prejudicial to the interests of revenue, since it has followed the decision rendered by ITAT.
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14. We find merit in the said contentions of the learned AR. Since the claim of the assessee has been held to be allowable by the ITAT in the earlier years, in our considered view, non-disallowance of the same would not make the assessment order an erroneous only, since the same results in a possible view, that too, backed by the order passed by the Tribunal. The learned AR invited our attention to the assessment order passed by the Assessing Officer for assessment year 2014-15 in order to substantiate his contention that the Assessing Officer has been disallowing only the net amount of provision. If that be the case, the net amount of provision has worked to a negative figure of 0.44 crore during the year under consideration and hence no disallowance is required to be made.
15. This issue can be looked from another angle also. It is the case of the revenue that the provision made by the assessee is required to be disallowed. If it is considered to be correct for a moment, then the reversal of the provision is not taxable. During the year under consideration, the total provision made is Rs.7.08 crores and the amount reversed is Rs.7.52 crores. Hence, disallowance of the provision amount of Rs.7.08 crores and removal of the reversal amount of Rs.7.52 crores offered by the assessee would result in removal of the net amount of Rs.0.44 crore, in which case, there would be no prejudice caused to the revenue. Under this reasoning also, it cannot be held that the assessment order was prejudicial to the interest of the revenue. If the provision is allowed, then the actual expenditure equal to the amount of the provision, if it has not been debited to Profit and loss account should be allowable as deduction. Hence, on this count also it would result in tax neutral position. We notice that the learned Principal CIT has failed to 9 ITA No.3792/Mum/2016 Jet Airways (India)Ltd properly appreciate the facts surrounding the issue from these angles, which demonstrates that no prejudice is caused to the revenue.
16. The learned DR contended that the actual expenses incurred against the provision made by the Assessing Officer have not been examined by the Assessing Officer. This contention has to be rejected, since the impugned revision order passed by learned Principal CIT is not concerned about actual expenses. Further, we notice that the assessee has furnished the details of actual delivery charges incurred by the assessee for the last seven years.
17. In view of the foregoing discussions, we are unable to sustain the order passed by learned Principal CIT on this issue.
18. The next issue relates to the non-initiation of penalty proceedings u/s 271E of the Act. The learned AR submitted that the assessing officer did not impose penalty in the set aside proceedings and he has dropped the penalty proceedings. In this view of the matter, we are not inclined to deal with this issue as the same would be academic in nature.
19. In the result, the appeal filed by the assessee is treated as allowed.
Order pronounced in the open court on this day of 23rd June 2017 Sd/- Sd/-
(C N Prasad ) (B R Baskaran)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dated : 23rd June, 2017.
SA
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ITA No.3792/Mum/2016
Jet Airways (India)Ltd
Copy of the Order forwarded to :
1. The Appellant.
2. The Respondent.
3. The CIT(A), Mumbai.
4. The CIT
5. The DR, 'J' Bench, ITAT, Mumbai BY ORDER
//True Copy// (Assistant Registrar)
Income Tax Appellate Tribunal, Mumbai