Endurance TechnologiesLtd, Aurangabad V. Pr. Commissioner of Income-tax -1, Aurangabad

ITA 858/PUN/2019

AI Insights

Endurance Technologies Ltd. appealed against the orders of the Principal Commissioner of Income Tax-1, Aurangabad, which had set aside the assessment orders for the assessment years 2013-14 and 2014-15. The primary contention was regarding the treatment of subsidies received from the Government of Maharashtra under the Package Scheme Incentives-2007, which the PCIT directed to be reduced from the cost of the asset for depreciation purposes under Explanation 10 to section 43(1) of the Income Tax Act. The Tribunal found that the Assessing Officer had considered this issue during the assessment proceedings and had taken a plausible view, thus setting aside the PCIT's revision order.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137221 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 13-12-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 02-06-2019
• Other Referred Cases: Malabar Industrial Co. Ltd. vs. CIT, CIT vs. Max India Ltd., ITO vs. Shriniwas Engineering Auto Components Pvt. Ltd., PCIT vs. Welspun Steel Ltd., Hari Iron Trading Co. vs. CIT, CIT vs. Eicher Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Depreciation; Assessment record; TDS; FORM 26AS
• Section: 32; 263; 10; 143(3); 142(1); 14A; 264; 43; 92CA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI S. S. VISWANETHRA RAVI, JUDICIAL MEMBER आयकर अपील सं. / ITA Nos.857 & 858/PUN/2019 िनधाᭅरण वषᭅ / Assessment Years : 2013-14 & 2014-15 Endurance Technologies Ltd., E-92, MIDC Industrial Area, Waluj, Aurangabad- 431136. PAN : AAACE7066P Vs. Pr.CIT-1, Aurangabad. Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: These are the appeals filed by the assessee against the separate orders of the ld. Pr. Commissioner of Income Tax-1, Aurangabad [‘the PCIT’] dated 28.03.2019 for the assessment years 2013-14 and 2014-15 respectively. 2. Since the identical facts and common issues are involved in both the above captioned appeals, we proceed to dispose of the same by this common order. Assessee by : Shri Nikhil S. Pathak & Shri Abhay Avchat Revenue by : Shri Keyur Patel Date of hearing : 14.12.2022 Date of pronouncement : 04.01.2023 ITA Nos.857 & 858/PUN/2019 2 3. For the sake of convenience and clarity, the facts relevant to the appeal in ITA No.857/PUN/2019 for the assessment year 2013-14 are stated herein. ITA No.857/PUN/2019, A.Y. 2013-14 : 4. The appellant raised the following grounds of appeal :- “1. The Order under section 263 of the Income Tax Act, 1961 dated 28.03.2019 passed by the Principle Commissioner of Income Tax - 1 is bad in law. 2. On the facts and in the circumstances of the case and in law the learned Pr. Commissioner of Income Tax -1, Aurangabad has erred in passing an order under section 263 of the Income Tax Act, 1961 dated 28.03.2019 where the assessing officer has taken one view with which the Principle Commissioner of Income Tax has not agreed. 3. On the facts and in the circumstances of the case and in law the learned Pr. Commissioner of Income Tax -1, Aurangabad has erred in passing the direction that the subsidy received should be reduced from cost of asset as per provisions of explanation 10 to sub section of section 43 of the Act. 4. On the facts and in the circumstances of the case and in law the learned Pr. Commissioner of Income Tax -1, Aurangabad has erred in stating that there are undisclosed receipts of assessee as reflected in Form 26AS. 5. The assessee craves leave to add, alter, amend, modify, delete all or any of the grounds of appeal.” 5. Briefly, the facts of the case are as under : The appellant is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of manufacturing and sale of auto components. The Return of Income for the assessment year 2013-14 was filed on 30.11.2013 declaring total income of Rs.118,52,03,920/-. Subsequently, the return of income was revised on 31.03.2015 at total income of ITA Nos.857 & 858/PUN/2019 3 Rs.120,54,68,920/-. Against the said return of income, the assessment was completed by the Asstt. Commissioner of Income Tax, Circle-1, Aurangabad (‘the Assessing Officer’) vide order dated 25.12.2016 passed u/s 143(3) r.w.s. 92CA of the Income Tax Act, 1961 (‘the Act’) at a total income of Rs.121,60,37,920/- after making addition of Rs.1,05,69,000/- u/s 14A of the Act. Subsequently, on verification of the assessment record, the ld. PCIT formed an opinion that the assessment order passed by the Assessing Officer is erroneous and prejudicial to the interests of the Revenue for the following reasons :- (i) The appellant company received incentives/subsidy of Rs.4,80,18,000/- from the Government of Maharashtra under the Package Scheme Incentives- 2007 during the year under consideration for the purpose of setting up of the plant. (ii) The ld. PCIT was of the opinion that the said inventive amounts received should go to reduce the cost of actual cost for the purpose of allowability of depreciation under the provisions of Explanation 10 to section 43(1) of the Act. 6. Accordingly, the ld. PCIT issued a show cause notice u/s 263 dated 10.09.2018. In response to show cause notice, it was ITA Nos.857 & 858/PUN/2019 4 submitted that the issue sought to be revised in exercise of power vested with the ld. PCIT u/s 263 was already considered during the assessment proceedings by the Assessing Officer and took one of the plausible view and, therefore, in such circumstances, the question of exercise of revision power does not arise. Thereafter, the ld. PCIT also noticed that there is a discrepancy between the gross receipts as per the TDS statements and the amount disclosed in the return of income and the Assessing Officer had failed to reconcile these discrepancies. Accordingly, the ld. PCIT given an opportunity to the assessee to explain the discrepancies between Form 26AS and the amount shown in the return of income. On receipt of the said notice, the appellant company filed a detailed explanation as to how the discrepancies had arisen between the amount shown in the return of income and the statement as per Form 26AS. On due consideration of the explanation offered by the appellant company, the ld. PCIT held that the Assessing Officer had failed to enquire and verify as to the applicability of Explanation 10 to section 43(1) as well as difference of discrepancies between the income shown in the return of income and the receipts reflected in Form 26AS. Accordingly, the ld. PCIT held that failure of the Assessing Officer to conduct necessary enquiry in this regard, rendered the assessment order erroneous and prejudicial to the interests of the Revenue. Therefore, the ld. PCIT set-aside the ITA Nos.857 & 858/PUN/2019 5 assessment order with the direction to the Assessing Officer to do de novo assessment after affording reasonable opportunity of being heard the assessee vide order dated 28.03.2019. 7. Being aggrieved, the appellant is in appeal before us in the present appeal. 8. During the course of hearing of appeal, the ld. AR had not pressed the ground of appeal nos.1, 2, 4 and 5 and the same are dismissed as not pressed. 9. The only ground of appeal no.3 pressed by the ld. AR during the course of hearing of appeal challenges the direction of the ld. PCIT to Assessing Officer to examine the applicability of Explanation 10 to section 43(1) in respect of subsidy received from the Government of Maharashtra under the Package Scheme Incentives- 2007. It is submitted before us that during the course of assessment proceedings under consideration, the Assessing Officer had called for the details of the subsidy received from the Government of Maharashtra under the Package Scheme Incentives- 2007 as well as regarding nature of subsidy whether capital in nature or revenue vide notice u/s 142(1) dated 06.09.2016 vide query no.17, which is placed at page no.11 of the Paper Book. The ld. AR also took us through the explanation filed before the Assessing Officer in response to query no.17 which is placed at page no.19 to 24 of the Paper Book. The ld. AR also took us to the ITA Nos.857 & 858/PUN/2019 6 explanation offered by the appellant in response to query no.22, wherein, it is submitted that the provisions of Explanation 10 to section 43(1) have no application. The ld. AR also placed reliance on the decision of the Co-ordinate Bench of this Tribunal in the case of ITO vs. Shriniwas Engineering Auto Components Pvt. Ltd. vide ITA No.2992/PUN/2017 for A.Y. 2014-15 decided on 27.04.2022, wherein, it was held that the incentives received under the Package Scheme Incentives- 2007 from Government of Maharashtra, shall not go to reduce the actual cost of the asset u/s 43(1) for the purpose of availing depreciation u/s 32 placing reliance on the decision of the Hon’ble Bombay High Court in the case of PCIT vs. Welspun Steel Ltd., 264 Taxman 252 (Bombay). Thus, it was contended that the order passed by the Assessing Officer cannot be termed as “erroneous and prejudicial to the interests of the Revenue” and the ld. PCIT ought not to have exercised the power of revision under the provisions of section 263 of the Act. 10. On the other hand, ld. CIT-DR contends that there was no evidence to show that the Assessing Officer had examined the issue of applicability of Explanation 10 to section 43(1) to subsidy in question. Therefore, it cannot be said that the Assessing Officer took a plausible view. Failure of the Assessing Officer to examine the issue in proper perspective renders the assessment order erroneous and prejudicial to the interests of the Revenue and, ITA Nos.857 & 858/PUN/2019 7 therefore, the ld. PCIT was justified in exercising the power of revision u/s 263 of the Act. 11. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to the validity of assumption of jurisdiction u/s 263 by the ld. PCIT. The Parliament had conferred the power of revision on the Commissioner of Income Tax u/s 263 of the Act in case the assessment order passed is erroneous and prejudicial to the interests of revenue. In order to invoke the power of revision, the above two conditions are required to be satisfied cumulatively. References in this regard can be made to the decision of the Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT, 243 ITR 83 (SC) and in the case of CIT vs. Max India Ltd., 295 ITR 282 (SC). The error in the assessment order should be one that it is not debatable or plausible view. In a case where the Assessing Officer examined the claim took one of the plausible views, the assessment order cannot be termed as an “erroneous”. 12. In the present case, the ld. AR had demonstrated before us the issue sought to be revised by the ld. PCIT in exercise the power vested with him u/s 263, was examined by the Assessing Officer and took a plausible view during the course of assessment proceedings. No doubt the assessment order is silent on this point. But, generally, the issues which are acceptable to the Assessing ITA Nos.857 & 858/PUN/2019 8 Officer do not find mention in the assessment order and it cannot be said that the Assessing Officer had not applied his mind as observed by the Hon’ble Punjab & Haryana High Court in the case of Hari Iron Trading Co. vs. CIT, 263 ITR 437 (P&H) and the Hon’ble Delhi High Court in the case of CIT vs. Eicher Ltd., 294 ITR 310 (Delhi). Therefore, it cannot be said that the Assessing Officer had failed to make an enquiry, no further enquiry is necessary and all the facts were before the Assessing Officer. Consequently, we are of the considered opinion that the proposition that the assessment order is erroneous for want of an enquiry or proper enquiry would have no application to the facts of the present appeal. Therefore, the ld. PCIT cannot invoke the jurisdiction u/s 263 of the Act in respect of this issue. Accordingly, we set-aside the order of revision u/s 263 on this point. 13. In the result, the appeal filed by the assessee in ITA No.857/PUN/2019 for A.Y. 2013-14 stands partly allowed. ITA No.858/PUN/2019, A.Y. 2014-15 : 14. Since the facts and issues involved in both the above captioned appeals are identical, therefore, our decision in ITA No.857/PUN/2019 for A.Y. 2013-14 shall apply mutatis mutandis to the appeal of the assessee in ITA No.858/PUN/2019 for A.Y. ITA Nos.857 & 858/PUN/2019 9 2014-15 respectively. Accordingly, the appeal of the assessee in ITA No.858/PUN/2019 for A.Y. 2014-15 is partly allowed. 15. To sum up, both the above captioned appeals of the assessee stands partly allowed. Order pronounced on this 04 th day of January, 2023. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 04 th January, 2023. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The Pr. CIT-1, Aurangabad. 4. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “A” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 5. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.