Madras High Court
Commission Of Income Tax vs L & T Infrastructure Development ... on 3 June, 2013
Author: Chitra Venkataraman
Bench: Chitra Venkataraman, K.B.K.Vasuki
In the High Court of Judicature at Madras Dated: 03.06.2013 Coram The Honourable Mrs.JUSTICE CHITRA VENKATARAMAN and The Honourable Ms.JUSTICE K.B.K.VASUKI Tax Case (Appeal) No.87 of 2010 Commission of Income Tax Chennai .. Appellant Vs. L & T Infrastructure Development Projects Ltd., Mount Poonamallee Road Manapakkam, Chennai. .. Respondent APPEAL under Section 260A of the Income Tax Act against the order dated 09.10.2009 made in I.T.A.No.856/Mds/09 on the file of Income Tax Appellate Tribunal 'B' Bench for the assessment year 2004-05. For Appellant : Mr.T.Ravikumar For Respondent : Dr.Anita Sumanth -------- J U D G M E N T
(Judgment of the Court was delivered by CHITRA VENKATARAMAN,J.) This Tax Case (Appeal), filed at the instance of the Revenue as against the order of the Income Tax Appellate Tribunal for the assessment year 2004-05, was admitted by this Court on the following substantial question of law:
"Whether on the facts and circumstances of the case, the Tribunal was right in setting aside the order of the Commissioner of Income Tax under Section 263 of the Act?"
2. The Commissioner of Income Tax revised the assessment by issuing notice under Section 263 of the Income Tax Act, 1961, on the ground that the assessment made, particularly with reference to the claim under Section 14A of the Income Tax Act, was erroneous and prejudicial to the interest of the Revenue.
3. It is seen that the assessee had borrowed secured loans by issue of redeemable non-convertible debentures to the tune of Rs.60 crores, but utilized the same towards investment in shares. The assessee claimed interest and finance charges to the extent of Rs.4.46 crores to pay interest on the debentures issued. Alleging that the Assessing Officer had not considered the provisions of Section 14A of the Income Tax Act in a proper perspective and that the interest claimed by the assessee was not related to the funds deployed in activities from which income had been shown during the year, the assessment was revised after giving notice to the assessee.
4. The assessee resisted the revision of the assessment on the ground that it had used its own funds as well as borrowed funds for investment in special purpose vehicles for carrying out various project related advisory services. In the circumstances, the assessee contended that Section 14A of the Income Tax Act was not applicable to the case on hand. The assessee further pointed out that the company did not make any investment from the date of issue of redeemable non-convertible debentures, i.e, between 17.3.2004 and 31.3.2004 and hence, the assumption that the same had been utilized on purposes unrelated to business, was not correct. The assessee also questioned the legality of the issuance of notice under Section 263 of the Income Tax Act, on the ground that when there was no income claimed as exempt, the question of invoking Section 14A would not be correct. The assessee also questioned the jurisdiction in issuing notice under Section 263 of the Income Tax Act, which did not specify the ground on which the assessment order was found to be erroneous and prejudicial to the interest of the Revenue.
5. After hearing the assessee, the Commissioner of Income Tax confirmed the proposal, thereby rejected the contention of the assessee. He reasoned out that in Form 3CD report, the assessee had stated that it is a Non-Banking Financial Company without accepting public deposits; there was no details on the receipt of the income relating to Engineering and financial services and the other source of income was interest income; the major item of expenditure debited in the account was interest and finance charges of Rs.4,46,10,370/-, for which no details were available either in the letter dated 12.7.2006 or in any of the schedules. Thus, the Commissioner held that when there were no materials to show as to whether the deposits made had any correlation to the debentures raised and the purpose not being clear from the records, the assessment merited to be revised. In the circumstances, setting aside the order of assessment, the Assessing Officer was directed to re-consider the issue in proper perspective. Aggrieved by this, the assessee went on appeal before the Income Tax Appellate Tribunal.
6. One of the issues raised by the assessee before the Income Tax Appellate Tribunal related to lack of jurisdiction of the Commissioner of Income Tax to revise the assessment. The assessee contended that the proposal by the Commissioner under Section 263 of the Income Tax Act failed to satisfy the twin conditions enunciated under Section 263 of the Income Tax Act, in so far as the notice issued under Section 263 failed to pin-point any error in the assessment order warranting revision. In any event, the assessee contended that when there was no investment during the period when the redeemable non-convertible debentures were issued, the question of considering Section 14A of the Income Tax Act did not arise. After analysing the case, the Tribunal pointed out that the notice issued under Section 263 of the Income Tax Act pointed out no specific error and that only bald and vague statements had been used. Hence, the revisional proceedings were devoid of any basis. The Tribunal further found that when a specific contention was taken by the assessee as to the absence of materials satisfying the twin conditions under Section 263, the Commissioner of Income Tax had overlooked the reply and objection made by the assessee. The Tribunal further pointed out that the assessee had borrowed secured loans by issue of redeemable non-convertible debentures to the tune of Rs.60 crores and there were no materials to hold that the assessee made any investment from the date of issue of redeemable non-convertible debentures between 17.3.2004 and 31.3.2004. In the circumstances, the assumption that it was utilized for non-tax investments was not correct. Hence, the Tribunal allowed the appeal filed by the assessee, thereby set aside the order of the Commissioner of Income Tax. Aggrieved by this, the Revenue has filed the present appeal.
7. Learned Standing Counsel appearing for the Revenue contended that the Tribunal committed serious error in overlooking the fact that when the details regarding investment and the purpose for borrowing were not made properly and there was no correlation, rightly, the Commissioner of Income Tax revised the order of assessment. He further pointed out that the order of assessment made no reference at all to the enquiry made on this aspect. In the circumstances, the Tribunal committed serious error in interfering with the order of the Commissioner of Income Tax. He placed reliance on the decision reported in 346 ITR 452 (TTK LIG Ltd. V. Assistant Commissioner of Income) to support his contention that the Commissioner of Income Tax has jurisdiction under Section 263 of the Income Tax Act, to revise the order of assessment.
8. We do not agree with the contention of the learned Standing Counsel appearing for the Revenue. As far as the reliance placed on the decision reported in 346 ITR 452 (TTK LIG Ltd. V. Assistant Commissioner of Income) is concerned, the same merits to be distinguished on the facts of the case before us. As already pointed out, in paragraph 6 of the order of the Tribunal, it is clearly pointed out that the notice issued under Section 263 of the Income Tax Act made no specific reference to materials showing the assessment as erroneous and prejudicial to the interest of the Revenue warranting revision of the order of assessment. Thus, unless the basis of revision satisfying the twin conditions, namely, erroneous and prejudicial to the interest of the Revenue, are pointed out by the Commissioner of Income Tax in invoking Section 263 of the Income Tax Act, certainly, the asssessee is entitled to raise the question of jurisdiction. Assumption of revisional jurisdiction can be justified only on the basis of materials indicating the order of assessment as erroneous and prejudicial to the interest of the Revenue. Thus, in the absence of materials, the Commissioner of Income Tax nevertheless seeks to set aside the assessment for fresh enquiry. However, it is obvious that the exercise of power is only for enquiry and not on facts existing.
9. As far as the present case is concerned, the Tribunal, as a matter of fact, found that the redeemable non-convertible debentures were issued between 17.3.2004 and 31.3.2004 and there were no investments made during this period. Being pure and simple factual finding, which has not been denied by the Revenue, we do not find there exists any ground to accept the case of the Revenue to dislodge the findings of the Tribunal.
10. In the light of the fact that the notice fails to point out the basis for revision and that the factual finding as regards the issuance of redeemable non-convertible debentures is not correlated to any investment made during this period, we have no hesitation in rejecting this appeal, thereby confirming the order of the Income Tax Appellate Tribunal. Accordingly, this Tax Case (Appeal) stands dismissed. No costs.
sl To
1. The Income Tax Appellate Tribunal 'B' Bench
2. The Commissioner of Income Tax I Chennai