Income Tax Appellate Tribunal - Chennai
Ford Business Services Center Private ... vs Assessee on 23 August, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH "C" CHENNAI
Before Shri N.S. SAINI, ACCOUNTANT MEMBER AND
SHRI S.S. GODARA, JUDICIAL MEMBER
I.T.A. No.1543/Mds/2007 & 1070/Mds/2008
Asst. Year : 2002-03 & 2003-04
FORD BUSINESS SERVICES CENTER The Asst. Commissioner of Income
PRIVATE LIMITED, Block 1B, RMZ v. Tax, Company Circle -II(1),
Millenia, No.143, MGR Road (North CHENNAI.
Veeranam Salai), Perungudi,
CHENNAI - 600 096.
PAN : AAACF-5984-H.
(Respondent)
(Appellant)
Appellant by : Shri T. Banusekar, CA
Respondent by : Shri Shaji P. Jacob, Addl. CIT
Date of hearing : 23 August 2012
Date of Pronouncement : 5th September 2012
O R D E R
PER BENCH : :
These appeals have been preferred by the assessee against separate orders of CIT, Chennai-I dated 30.3.2007 and dated 20.3.2008 respectively in case No.218(1)/CIT-I/263/2006-07 and in case No. 218(1)/CIT-
I/263/2006-07 for the 2 Ita 1543/Mds/07 & 1070/Mds/08 Asst. Year 2002-03 and 2003-04, in proceedings under sec.263 of the Income Tax Act 1961, in short 'the Act'.
2. In ITA No.1543/Mds/2007, the assessee has raised the following grounds:-
GROUNDS OF APPEAL
1. "The order of learned Commissioner of Income Tax is barred by limitation, is without jurisdiction, contrary to law facts and circumstances of the case and at any rate is opposed to the principles of equity, natural justice and fair play.
2. The learned Commissioner of Income Tax failed to appreciate that the order of the Assessing Officer passed u/s.143(3) was neither erroneous nor prejudicial to the interest of the revenue, much less both to warrant the invocation of powers u/s.263 of the Act.
3. The learned Commissioner ought to have granted sufficient time to the Appellant for presenting facts of the case.
4. The learned CIT erred in directing the Assessing Officer to verify the Capital expenditure and Prior period expenses in relation to hiring of building.
5. The learned CIT has failed to give adequate notice for raising the issue relating to the verification of capital expenditure and prior period expense in relation to hiring of building through the show cause notice and hence could not have considered the same in the order u/s.263 more particularly while accepting the 3 Ita 1543/Mds/07 & 1070/Mds/08 Appellants contention that the rent paid was for the business purposes.
6. The CIT has erred in directing the Assessing Officer not to set off the normal business loss incurred in one undertaking (Ford Information Technology Services India - FITSI) belonging to the Appellant against the income of another undertaking (Accounting Services division - ASD) of the Appellant. The CIT has failed to appreciate that the FITSI has opted out to claim deduction u/s.10A from the earlier Asst. Years.
7. The CIT has erred in directing the Assessing Officer to re-
compute book profit u/s.115JB ignoring the fact that the Appellant had opted out from claiming deduction u/s. 10A in the case of the FITSI. He has failed to appreciate that the explanation to Sec.115JB is to clarify the meaning of 'Book Profits' which is to be increased or decreased only on actual operation of circumstances referred to in clauses (a) to (f) i.e. only when the assessee accounts for such transactions or claim such deductions and not to apply notionally.
8. The CIT has erred in concluding that there is a discrepancy in claim of interest by Appellant without ascertaining full facts. The CIT has also erred in directing the Assessing Officer to allocate the interest on reasonable basis while the claim of interest by Appellant arises on borrowings by respective divisions, which the CIT has failed to recognize.
9. For these grounds and such other grounds that may be urged before or during the hearing of the appeal it is most humbly prayed that the Hon'ble Tribunal may be pleased to 4 Ita 1543/Mds/07 & 1070/Mds/08 a. Annul the order of the learned Commissioner of Income Tax Passed under sec 263.
b. Direct that one or more of the issues set aside by the CIT ought not to have been set aside for reexamination by the Assessing Officer.
c. Pass such other order as the Hon'ble Tribunal may deem fit."
3. Simalarly, in ITA No.1070/Mds/2008, the assessee's grounds read as follows :-
1. "The order of learned Commissioner of Income Tax is barred by limitation, is without jurisdiction, contrary to law facts and circumstances of the case and at any rate is opposed to the principles of equity, natural justice and fair play.
2. The learned CIT has failed to give an opportunity of being heard in spite of the Appellant requesting for same. While the notice u/s 263 dt. 10.3.08 was received by the Appellant on 14.3.08 and responded on 20.3.08, the Order was passed on 20.03.08 without hearing the Appellant which is against all principles of natural law and justice.
3. The learned CIT has failed to appreciate that the order of the Assessing Officer passed u/s.143(3) was neither erroneous nor prejudicial to the interest of the Revenue, much less both to warrant the invocation of powers u/s.263 of the Act.5
Ita 1543/Mds/07 & 1070/Mds/08
4. The CIT has erred in directing the Assessing Officer to re- compute book profit under section 115JB. The CIT has failed to provide an opportunity to the assessee and in not pointing out exact error in his notice, namely, the issue relating to quantification of foreign exchange earned from export turnover subject to deduction u/s 10A and 10B.
5. The CIT has erred in comparing appellant's computation under section 115JB for the relevant Asst. Year (A.Y) with that of A.Y. 2002-03. The CIT has failed to consider the fact that the appellant had opted out of S.10A in A.Y. 2002-03 whereas no such option was exercised in A.Y. 2003-04. The appellant's computation has been duly certified in Form 29B as required under sub section (4) of section 115JB and hence the CIT's contention that the order is erroneous and prejudicial to the interests of Revenue is wrong in facts.
6. The CIT has erred in directing the Assessing Officer to set off the brought forward business loss and unabsorbed depreciation before allowing for deduction under sections 10A and 10B.
7. The CIT has incorrectly applied the decision of Hon. Karnataka High Court in the case of CIT vs Himatasingike Seide Ltd in 286 ITR 555. Reference is drawn to the decision by the Hon'ble Tribunal for the Asst. Year 2001-02 (ITA No.308 & 572/Mds/05) in the case of the assessee wherein the appellant claim was allowed on similar ground.
8. The conclusion of CIT that the creation of investment division is only to divert the interest expenditure to units other than those eligible for deductions under sec.10A and sec.10B is wrong. 6
Ita 1543/Mds/07 & 1070/Mds/08
9. The CIT has erred in concluding that there is a discrepancy in claim of interest by Appellant without ascertaining full facts. The CIT has also erred in directing the Assessing Officer to allocate the interest on reasonable basis while the claim of interest by Appellant arises on borrowings by respective divisions which the CIT has failed to recognize."
4. The Authorised Representative before us has submitted that regarding Asst. Year 2002-03, apart from challenging the applicability of sec.263 of the Act in exercising revisional jurisdiction by the CIT he is only pressing ground Nos.6 and 7 ie. rest of the grounds are not pressed. In the same tune, he has submitted that regarding Asst. Year 2003-04 as well apart from challenging the applicability of sec.263proceedings, the assessee is pressing Ground Nos.2 to
7. Regarding Ground No.8, he has submitted that keeping in view the smallness of the amount involved ie. only .6 lakhs towards creation of Investment Division, the same is not seriously contested.
In view of this, the Authorised Representative has pleaded that apart from the fact that the CIT has wrongly invoked jurisdiction u/s.263 of the Act, on merits two identical issues are involved in both cases ie. deduction under sec.10A and 10B of the Act as well as computation of book profit under sec.115JB of the Act.
7
Ita 1543/Mds/07 & 1070/Mds/08
5. Besides this, qua Asst. Year 2003-04 the Authorised Representative has submitted that there is no adjudication by CIT regarding assessee's submissions in response to notice issued under sec.263 of the Act. By drawing our attention to the concluding para of CIT's order, he has submitted that in addition to assessee's pleas raised qua both the above issues in the appeals, he would have no objection if both appeals are remitted back to CIT for afresh adjudication in accordance with law.
6. On behalf of the Revenue, the assessee's plea for remitting the case back to CIT under sec.263 order pertaining to Asst. Year 2003-04 only has not been contested. However, a submission has been made by the Departmental Representative that since CIT's order pertaining to Asst. Year 2002-03 is self- speaking, it does not call for any interference either on the ground of non- application of mind or on merits. So, he has preferred to support CIT's order for Asst. Year 2002-03.
7. We have heard both parties at length and also perused the relevant findings as referred. It transpires that regarding both Asst. Years in question the Assessing Officer had finalized the assessments under sec.143(3) on 28.5.2005 and 23.2.2006 respectively. Regarding Asst. Year 2003-04, we observe that the 8 Ita 1543/Mds/07 & 1070/Mds/08 CIT had issued notice to the assessee for revising the assessee finalized by Assessing Officer on 10.3.2008. On 19.3.2008, the assessee submitted a reply to the said notice and prayed for opportunity of hearing. As it is evident from the CIT's order, it is clear that the assessee's submission have not even been considered and in casual fashion, the CIT has revised the aaessment as under:-
"The assessee in written submission dated 19.02.2008 has sought personal hearing. The personal hearing could have been sought and granted while filing the reply. I have duly considered the assessee's written submissions. The issues are also common to the Asst. Year 2002-03. I have also only set aside the assessment with the direction to examine the correctness of assessee's computation of book profit under section 115JB and computation of total income under normal provisions considering whether the brought forward business loss and unabsorbed depreciation should be deducted before the deduction under section 10B/10A. A.O. shall afford full opportunity to the assessee before finalizing the assessment consequent to this order."
A perusal of the operative part reproduced herein above makes it amply clear that while revising assessment finalized by the Assessing Officer under sec.143(3) of the Act, the CIT has not even considered the assessee's plea of hearing on merits merely by observing that the assessment has 'only' been set aside. We are not 9 Ita 1543/Mds/07 & 1070/Mds/08 convinced with the CIT's above said conclusions. It is settled law that under sec.263 of the Act, the CIT concerned can proceed only after affording the assessee opportunity of being heard. Once the assessee has sought opportunity of hearing before CIT so as to explain its submission in detail, it was not appropriate for the CIT to conclude that since the assessment was only set aside on the issues of assessee's computation of book profits under sec.115JB and that of deduction under sec.10A and 10B, the assessee did not require any opportunity of further hearing. We hold that u/s. 263 of the Act, the CIT has got jurisdiction to revise any assessment if it suffers from 'an error prejudicial to the Revenue. 'But the said jurisdiction is not absolute. The legislature in its wisdom has also provided opportunity of hearing to the assessee as the revision of assessment already finalized may entail civil consequences for the assessee. In the case in hand, we notice that there is neither effective opportunity of hearing nor proper application of mind by CIT. In this view of the matter, we feel that since CIT has not acted in accordance with law whilst observing that the assessee did not require any opportunity of hearing as assessment was only set aside to the Assessing Officer. Although the Departmental Representative has stoutly supported the CIT's order quo Asst. Year 2002-03, but in order to avoid multiplicity of lis and in the larger interest of justice as well as in view of the fact that the CIT himself has observed that both the issues (supra) are common in both Asst. Years, we deem it appropriate to restore the case back to the file of 10 Ita 1543/Mds/07 & 1070/Mds/08 CIT for decision afresh in accordance with law after affording adequate opportunity of hearing to the assessee.
8. As already stated herein above, the Authorised Representative has not seriously contested Ground No.8(supra) raised in appeal pertaining to Asst. Year 2003-04. Hence keeping in mind the fair submission of Authorised Representative as well as being conscious of the smallness of amount involved, we do not deem it proper to interfere qua the CIT's order. Consequently, in view of our above discussion, both the appeals stand partly allowed for statistical purpose.
9. Order pronounced in open Court on Wednesday , the 5th day of September 2012.
Sd/- sd/-
( N.S. SAINI ) (S.S. GODARA )
ACCOUNTAT MEMBER JUDICIAL MEMBER
Chennai,
Dated : 05th September 2012
Jls.
Copy to:-
(1) Applicant
(2) Respondent
(3) CIT(A)-II, Coimbatore
(4) CIT-III, Coimbatore
(5) D.R. (6) Guard file