Surya Alloy Industries Ltd, Kolkata V. D.C.I.T Cir - 3,kolkata, Kolkata

ITA 769/KOL/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9059 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 10-04-2013
• Court: TRIBUNAL
• Department Lawyers: RAVI JAIN
• Assessee Lawyers: D S DAMLE
• Keywords: Rectification of order; Valuation report; Assessment record
• Section: 143(3); 115JB; 263; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOLKATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA, AM ] I.T.A . NO. 769 /KOL/201 3 ASSESSMENT YEAR : 200 8 - 0 9 SURYA ALLOY INDUSTRIES LTD. VS. COMMISSIONER OF INCOME - TAX, KOL - 1, (PAN: AADCS5890E) KOLKATA ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 1 9 .0 2 .2015 DATE OF PRONOUNCEMENT: 04 .03 .2015 FOR THE APPELLANT: SHRI D. S. DAMLE, FCA FOR THE RESPONDENT: S HRI R AVI JAIN, CIT(DR) ORDER PER SHRI MAHAVIR SINGH, JM : THIS APPEAL BY ASSESSEE IS ARISING OUT OF THE REVISION ORDER PASSED BY CIT , KOLKATA - 1 U/S 263 OF THE INCOME TAX ACT, 1961(HEREINAFTER CALLED AS THE ACT ) VIDE DATED 28 . 0 3 .201 3 . ASSESSMENT W AS FRAMED BY DCIT, CIRCLE - 3, KOLKATA U/S. 143(3) / 115JB OF THE ACT FOR A Y 200 8 - 0 9 VIDE HIS ORDER DATED 2 9 . 04 .20 1 0 . 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE REVISION ORDER PASSED BY CIT U/S. 263 OF THE ACT REVISING THE ASSESSMENT ORDER. FOR THIS, ASSESSEE HAS RAISED FOLLOWING FOUR EFFECTIVE GROUNDS: 1) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT GROSSLY ERRED IN LAW AND ON FACTS IN PASSING THE ORDER U / S 263 OF THE INCOME TAX ACT EVEN THOUGH THE ISSUE IN RESPECT OF WHICH THE ASSESSMENT ORDER WAS CONSIDERED AS ERRONEOUS WAS A MISTAK E APPARENT FROM RECORD, RECTIFIABLE U / S 154 OF THE ACT AND FOR WHICH THE ASSESSEE'S PETITION WAS PENDING BEFORE THE AO. 2) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT ERRED IN EXERCISING HIS EXTRAORDINARY POWERS U / S 263 OF THE ACT EVEN THOUGH THE MATTER WAS RECTIFIABLE U / S 154 OF THE ACT AS THERE WAS A MISTAKE APPARENT FROM RECORD. 3) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT GROSSLY ERRED IN DIRECTING THE AO TO MAKE DE NOVO ASSESSMENT EVEN THOUGH THE SH OW CAUSE NOTICE WAS ISSUED BY THE CIT ONLY IN RESPECT OF THE ONE ISSUE AND THEREFORE SETTING ASIDE THE ASSESSMENT AND DIRECTING THE AO TO MAKE DE NOVO ASSESSMENT WAS BEYOND HIS JURISDICTION. 4) FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF THE CIT DIRECTING THE AO TO MAKE DE NOVO ASSESSMENT BE SET ASIDE AND/OR MODIFIED. 2 ITA NO. 769 /K/201 3 SURYA ALLOY INDUSTRIES LTD. , AY 200 8 - 0 9 3. BRIEF FACTS ARE THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR ON 29 - 09 - 2008. THE ASSESSMENT WAS FRAMED U/S 143(3) R.W.S . SECTION 115JB OF THE ACT BY THE AO VIDE HIS ORDER DATED 29 - 04 - 2010. SUBSEQUENTLY THE ASSESSEE VIDE LETTER DATED 11 - 07 - 2012, WHICH WAS RECEIVED BY THE AO ON 21 - 07 - 2012, POINTING OUT THAT WHILE ASSESSING BOOK PROFIT U/S 115JB OF THE ACT BY THE AO, THE PROV ISION FOR LEAVE ENCASHMENT AND FOR GRATUITY AMOUNTING TO RS.37,54,202/ - WAS NOT ADDED BACK TO UNDER CLAUSE OF EXPLANATION(1) TO SECTION 115JB OF THE ACT. HE REQUESTED THE AO TO RECTIFY THE MISTAKE U/S 154 OF THE ACT, THIS BEING MISTAKE APPARENT FROM RECOR D. THIS APPLICATION OF ASSESSEE FOR RECTIFICATION WAS NOT ACTED UPON. THE RELEVANT APPLICATION READS AS UNDER: - T HIS IS WITH REFERENCE TO THE ORDER PASSED BY YOUR GOODSELF UNDER SECTION 143(3) DATED 29TH APRIL 2010 ASSESSING TOTAL INCOME AT RS.3,00,90,853/ - AND BOOK PROFIT U/S 115JB AT RS.15,05,99,667/ - . WE SUBMIT THAT THE SAID ORDER SUFFERS FROM CERTAIN MISTAKES APPARENT FROM RECORD IN RESPECT OF WHICH WE HEREBY SUO MOTO S UBMIT AN APPLICATION UNDER SECTION 154 OF THE I.T. ACT, 1961. WHILE ASSESSING THE BOOK PROFIT U/S 115JB THE PROVISION FOR LEAVE ENCASHMENT AND PROVISION FOR GRATUITY AGGREGATING TO RS.37,54,202/ - WAS NOT ADDED BACK UNDER CLAUSE (C) OF EXPLANATION (1) TO SECTION 115JB OF THE I. T. ACT. IT IS SUBMITTED THAT THESE PROVISIONS ARE IN THE NATURE OF UNASCERTAINED ESTIMATED LIABILITIES. THE SAME IS EVIDENT FROM THE DISCLOSURE GIVEN IN 'POINT NO. 7 OF NOTES ON ACCOUNTS' TO THE ANNUAL REPORT FOR FY 2007 - 08. IT WOU LD BE NOTED THAT THE PROVISION FOR GRATUITY AND LEAVE ENCASHMENT WAS REASONABLY ESTIMATED FOR THE YEAR ENDED 31ST MARCH 2008 BUT THE COMPANY WAS ABLE TO OBTAIN ACTUARIAL VALUATION REPORT ONLY IN THE SUBSEQUENT YEAR. WE HAVE BEEN GIVEN TO UNDERSTAND THAT TH E APEX COURT IN THE CASE OF CIT VS HEWLETT PACKARD I NDIA (P) LIMITED (314 ITR 55) HAS HELD THAT ONLY WHEN PROVISIONS ARE CREATED ON A SCIENTIFIC BASIS THAT THE SAME IS NOT REQUIRED TO BE ADDED BACK TO THE PROFITS OF BUSINESS. FOLLOWING THE SAME THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF C IT VS . NATIONAL HYDRO ELECTRIC POWER CORPORATION LIMITED (45 DTR 117) AND DELHI HIGH COURT IN THE CASE OF CIT VS IIPEA PARAMOUNT (P) LTD VS CIT (192 TAXMAN 65) HAS HELD THAT UNLESS PROVISIONS FOR POST RETIREMENT BENEFIT S ARE ESTIMATED ON SCIENTIFIC BASIS THE SAME WOULD BE IN THE NATURE OF PROVISIONS OF UNASCERTAINED LIABILITIES SO AS TO FALL UNDER CLAUSE (C) OF THE EXPLANATION TO SECTION 115JB(2) OF THE INCOME - TAX ACT, 1961. IN VIEW OF THE FOREGOING WE SUBMIT THE NON - A DDITION OF PROVISION FOR GRATUITY AND LEAVE ENCASHMENT AGGREGATING TO RS. 37,54,202/ - CONSTITUTED 'MISTAKE APPARENT FROM RECORD' IN THE ASSESSMENT ORDER DATED 29.04.2010 AND DESERVES TO BE RECTIFIED U/S 154 OF THE I. T. ACT. SINCE THE AFORESAID MISTAKES A RC APPARENT FROM THE RECORD, THE ASSESSEE REQUESTS YOU TO KINDLY RECTIFY THEM BY PASSING AN ORDER UNDER SECTION 154 OF THE ACT. 4. SUBSEQUENTLY CIT - I KOLKATA ISSUED SHOW - CAUSE NOTICE FOR REVISING THE ASSESSMENT U/S 263 OF THE ACT FOR THE SAME REASONS, WHICH WERE RAISED BY THE ASSESSEE IN ITS RATIFICATION APPLICATION . THE RELEVANT TEXT OF THE SHOW - CAUSE NOTICE READS AS UNDER: - EXPLANA TION OF YOUR ASSESSMENT RECORD FOR AY 2008 - 09, IT IS OBSERVED THAT THE ASSESSMENT OF YOUR INCOME WAS MADE U/S. 143(3) OF THE INCOME TAX ACT, 1961, VIDE ORDER DATED 3 ITA NO. 769 /K/201 3 SURYA ALLOY INDUSTRIES LTD. , AY 200 8 - 0 9 29.04.2010. ON SUCH EXAMINATION PRIMA - FACIE IT APPEARS THAT THE ASSESSMENT ORDER PASSED BY T HE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE SINCE THE AO HAS NOT TAKEN INTO ACCOUNT AN AMOUNT OF RS.25.75 LAKHS ON ACCOUNT OF PROVISION FOR GRATUITY AND RS.11.79 LAKHS FOR LEAVE PAY. WHILE COMPUTING TAX U/S. 115JB OF THE AC T. THEREFORE, YOU CASE IS BEING CONSIDERED FOR REVISION U/S 263 OF THE INCOME TAX ACT, 1961. HOWEVER, BEFORE MAKING ANY SUCH ORDER OF REVISION, YOU ARE ALLOWED AN OPPORTUNITY TO APPEAR BEFORE THE UNDERSIGNED AND BE HEARD ON 25.03.2013 AT 3.30 P.M. EITHER P ERSONALLY OR THROUGH YOUR AUTHORISED REPRESENTATIVE, ALONG WITH EVIDENCES AND ANY OTHER MATERIALS AS YOU MAY LIKE TO RELY ON IN SUPPORT OF YOUR RETURN OF INCOME FOR AY 2008 - 09. IF YOU FAIL TO RESPOND TO THIS NOTICE, IT WILL BE PRESUMED THAT YOU HAVE NOTHIN G TO SAY IN THE MATTER AND THE CASE WILL BE DECIDED ON MERITS AND EXISTING RECORD. IN VIEW OF THE ABOVE SHOW - CAUSE NOTICE, THE CIT - I KOLKATA PASSED REVISION ORDER DIRECTING THE AO TO CARRY OUT NECESSARY VERIFICATION OF FACTS AND FIGURES. THE ASSESSEE BEF ORE CIT STATED THAT APPLICATION U/S.154 OF THE ACT IS PENDING BEFORE THE AO ON THE SAME ISSUE. BUT ON MERITS, THE ASSESSEE HAS NOT CONTESTED THE ISSUE. AGGRIEVED, AGAINST REVISION ORDER PASSED BY CIT, ASSESSEE CAME IN APPEAL BEFORE TRIBUNAL. 5. WE HAVE HE ARD RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASES. THE ONLY ISSUE IN THIS APPEAL OF THE ASSESSEE IS THAT WHETHER THE MISTAKE APPARENT FROM RECORD RECTIFIABLE U/S 154 OF THE ACT CAN BE CONSIDERED AS AN ERROR IN THE ASSESSMENT ORDER WHICH IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. TH AT THE AS S ESSEE S PETITION U/S.154 OF THE ACT IN RESPECT TO THE SAME ISSUE WAS PENDING BEFORE THE AO AS IS CLEAR FROM THE ABOVE FACTS . DURING THE PENDENCY OF RECTIFICATION PETITION U /S 154 OF THE ACT, THE CIT PROCEEDED WITH ISSUANCE OF SHOW CAUSE NOTICE FOR INITIATING PROCEEDINGS U/S.263 OF THE ACT FOR REVISING THE ASSESSMENT. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT, VIDE ORDER DATED 29 - 04 - 2010 AND ASSESSEE MOVED PETITION U /S 154 OF THE ACT FOR RECTIFYING THE MISTAKE APPARENT FROM RECORD FOR NOT MAKING ADDITION TO BOOK PROFIT U/S 115JB OF THE ACT, THE PROVISIONS FOR LEAVE ENCASHMENT AND GRATITUDE AN AGGREGATING TO RS.37,54,202/ - VIDE PETITION DATED 11 - 07 - 2012. THIS PETITION WAS NOT CONSIDERED BY THE AO TILL 20 - 03 - 2013 I.E. THE DATE OF ISSUANCE OF SHOW CAUSE NOTICE FOR INITIATING REVISION PROCEEDINGS U/S 263 OF THE ACT. WE HAVE GONE THROUGH THE PROVISION OF SECTION 154 OF THE ACT AND SEEN THAT THE AO HAS TO PASS AN ORDER ON TH E APPLICATION SEEKING RECTIFICATION WITHIN SIX MONTHS FROM THE END OF THE MONTH IN WHICH APPLICATION IS RECEIVED. THE RELEVANT OF THE PROVISION OF SECTION 154(8) OF THE ACT READS AS UNDER: - 4 ITA NO. 769 /K/201 3 SURYA ALLOY INDUSTRIES LTD. , AY 200 8 - 0 9 RECTIFICATION OF MISTAKE . 154 (1) (8) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB - SECTION (7), WHERE AN APPLICATION FOR AMENDMENT UNDER THIS SECTION IS MADE BY TH E ASSESSEE [OR BY THE DEDUCTOR] ON OR AFTER THE 1ST DAY OF JUNE, 2001 TO AN INCOME - TAX AUTHORITY REFERRED TO IN SUB - SECTION (1), THE AUTHORITY SHALL PASS AN ORDER, WITHIN A PERIOD OF SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE APPLICATION IS RECEIVED BY IT, - (A) MAKING THE AMENDMENT; OR (B) REFUSING TO ALLOW THE CLAIM.] IT MEANS THAT THE AO HAS TO CARRY OUT THE RECTIFICATION WITHIN A PERIOD OF SIX MO NTHS FROM THE END OF THE MONTH IN WHICH THE APPLICATION IS RECEIVED AND THE PRESENT CASE THE APPLICATION WAS RECEIVED BY THE AO ON 21 - 07 - 2012 AND THIS APPLICATION IS TO BE DISPOSED OF ON OR BEFORE 31 ST JANUARY 2013. BUT INACTION OF THE AO CANNOT BE A HANDICAP FOR THE REVENUE TO CARRY OUT REVISION PROCEEDINGS BY THE CIT FOR REVISING THE ASSESSMENT U/S 263 OF THE ACT. MERELY BECAUSE THE AO COULD NOT RECTIFY THE ORDER U/S 154 OF THE ACT, THE CIT COULD NOT BE PRECLUDED FROM EXERCISING THE REVISIONARY POWERS GRANTED TO HIM U/S 263 OF THE ACT. THE POWERS OF RECTIFICATION U/S 154 OF THE ACT CONFERRED ON THE AO AND POWERS OF REVISION U/S. 263 OF THE ACT CONFERRED ON THE CIT ARE DISTINCT AND DIFFERENT POWERS. THE REVISIONAL POWERS U/S.263 OF THE ACT TO THE CIT ARE OF WIDE AMPLITUDE AND IT ENABLES HIM TO REVISE THE ASSESSMENT IF HE CONSIDERS IT TO BE ERRONEOUS TO THE INTEREST OF REVENUE. THE RATIO LAID DOWN BY HON'BLE SUPREME COURT IN THE CASE OF SOUTH INDIA STEEL ROLLING MILLS V. CIT (1997) 224 ITR 654, 652 (SC), HAS HELD AS UNDER: - THE OTHER CONTENTION OF MRS. RAMACHANDRAN WAS THAT THE COMMISSIONER COULD NOT INVOKE HIS JURISDICTION UNDER SECTION 263 OF THE ACT AND THAT THE MATTER COULD BE DEALT WITH ONLY BY THE INCOME - TAX OFFICER IN EXERCISE OF HIS POWER OF RECTIFICATION UNDER SECTION 155 OF THE ACT. THE SUBMISSION IS THAT SINCE SECTION 155 IS AS SPECIAL PROVISION DEALING WITH PARTNERSHIP FIRMS, THE GENERAL PROVISION CONTAINED IN SECTION 263 COULD NOT BE INVOKED. IT WAS ALSO CONTENDED THAT THE POWER UNDER SECTION 263 CAN ONLY BE INVOKED ON THE BASIS OF THE RECORD AS IT STOOD WHEN THE ORDER WAS PASSED BY THE INCOME - TAX OFFICER AND THAT IT WAS NOT OPEN TO THE COMMISSIONER TO TAKE INTO ACCOUNT THE DISSOLUTION OF THE ASSESSEE - FIRM, WHICH TOOK PLACE AFTER THE PASSING OF THE ORDER, BECAUSE THAT CIRCUMSTANCE IS NOT DISCLOSED IN THE RECORD BEFORE THE INCOME - TAX OFFICER. AS POINTED OUT BY THE HIGH COURT, NO QUESTION AS TO THE COMPETENCE OF THE COMMISSIONER TO EXERCISE HIS P OWERS OF DECISION WAS RAISED BY THE ASSESSEE EITHER BEFORE THE COMMISSIONER OR BEFORE THE TRIBUNAL. EVEN OTHERWISE THERE IS NO MERIT IN THIS CONTENTION. MERELY BECAUSE THE INCOME - TAX OFFICER COULD HAVE RECTIFIED THE ORDER, THE COMMISSIONER COULD NOT BE PRE CLUDED FROM EXERCISING THE POWER CONFERRED ON HIM UNDER SECTION 263. THE POWER OF RECTIFICATION CONFERRED ON THE INCOME - TAX OFFICER UNDER SECTION 155 AND THE POWER OF REVISION CONFERRED ON THE COMMISSIONER UNDER SECTION 263 ARE DISTINCT POWERS. THE PRINCIP LE THAT ONE IS A SPECIAL PROVISION AND THE OTHER IN A GENERAL PROVISION HAS NO APPLICATION. THE REVISIONAL POWER CONFERRED ON THE COMMISSIONER UNDER SECTION 263 IS OF WIDE AMPLITUDE. IT ENABLES THE COMMISSIONER TO REVISE AN ORDER PASSED BY THE ASSESSING OF FICER, IF HE CONSIDERS IT TO BE 5 ITA NO. 769 /K/201 3 SURYA ALLOY INDUSTRIES LTD. , AY 200 8 - 0 9 ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. WE FIND NO REASON TO L IMIT THIS POW E R BY REF ER ENCE TO SECTION 155. IN THE PRESENT CASE BEFORE US, THE CIT HAS REACHED TO A PRIMA FACIE CONCLUSION THAT ASSESSMENT O RDER IS ERRONEOUS AND SO ALSO PREJUDICIAL TO THE INTEREST OF REVENUE FOR THE REASON THAT THE AO HAS NOT DISALLOWED PROVISION FOR GRATUITY AMOUNTING TO RS.25.75 LAKHS AND PROVISION FOR LEAVE ENCASHMENT AMOUNTING TO RS.11 , 79,202 WHILE FRAMING ASSESSMENT U/S. 143(3) OF THE ACT AND THEREAFTER COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. EVEN NOW BEFORE US, ON MERITS THE ASSESSEE HAS NOTHING TO SAY RATHER THE ASSESSEE ON MERITS HAS CONCEDED THIS ISSUE THAT THE SAME IS SUBJECT - MATTER OF RECTIFICATION U/S. 154 OF T HE ACT. AS THE ISSUE IS COVERED BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF SOUTH INDIA STEEL ROLLING MILLS (SUPRA), WE CONFIRM THE ORDER OF CIT REVISING THE ASSESSMENT. BUT THE ASSESSMENT CANNOT BE DIRECTED TO BE REFRAMED DE - NOVO AND AO WILL G O INTO THE ISSUES RAISED BY CIT IN HIS ORDER I.E. THE ISSUE OF PROVISION OF LEAVE ENCASEMENT AND PROVISION OF GRATUITY. THE ISSUE OF ASSESSEE S APPEAL IS DISMISSED. 6. IN THE RESULT, APPEAL OF ASSESSEE IS DISMISSED . ORDER IS PRONOUNCED IN THE OPEN COURT ON 04 /03/2015 . SD/ - SD/ - ( SHAMIM YAHYA ) (MAHAVIR SINGH) ACCOUNTANT MEMBER J UDICIAL MEMBER DATED : 4TH MARCH , 201 5 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . A PPELLANT SURYA ALLOY INDUSTRIES LTD., 1/1, CAMAC STREET, KOLKATA - 700 016 . 2 RESPONDENT CIT, KOL - 1, KOLKATA . 3 . THE CIT (A), KOLKATA 4. 5. CIT KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .