M/S VOLVO INDIA PVT LTD V. THE COMMISSIONER OF INCOME TAX (LTU)

ITA/400/2016

AI Insights

The case involves M/s Volvo India Pvt. Ltd., which appealed against the order of the Income Tax Appellate Tribunal concerning the Assessment Year 2008-09. The primary issue was the assumption of jurisdiction under Section 263 of the Income Tax Act, 1961, by the Commissioner of Income Tax (LTU), which the Tribunal upheld. The Commissioner had revised the assessment order on the grounds that certain expenditures claimed by the assessee were not examined by the Assessing Officer, specifically a claim under Section 40(a)(ia) for which no TDS was deducted. The High Court found that the Tribunal did not adequately consider the assessee's argument that the amount in question was a provision that was reversed and not a real expenditure.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 695947 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 17-02-2021
• Assessment Year: misc
• Other Referred Cases: MALABAR INDUSTRIAL COMPANY VS. CIT, CIT VS. MAX INDIA LTD., ULTRATECH CEMENT LTD. AND ORS. VS. STATE OF RAJASTHAN AND ORS.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: JEEVAN NEERALGI
• Assessee Lawyers: PAVAN KUMAR
• Keywords: Assessment Year 2008-09; Disallowance; Income Tax; Jurisdiction under section 263; Revision of Orders; TDS; Technical Consultancy Services
• Section: 143(3); 263; 40(a)(ia); 40(a)(i); 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 17TH DAY OF FEBRUARY 2021 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE NATARAJ RANGASWAMY I.T.A. NO.400 OF 2016 BETWEEN: M/S VOLVO INDIA PVT. LTD., YALACHNAHALLY, TAVAREKERE POST, HOSKOTE-562 122 REPRESENTED BY ITS MANAGING DIRECTOR, SRI KAMAL BALI AGED 57 YEARS, SON OF SRI PRATIGYA PAL BALI .... APPELLANT (BY MR. PAVAN KUMAR, ADVOCATE FOR MR. S. PARTHASARATHI, ADVOCATE) AND: THE COMMISSIONER OF INCOME TAX (LTU) JSS TOWERS, 100 FEET RING ROAD, BANASHANKARI IIIRD STAGE, BANGALORE-560085. ... RESPONDENT (BY MR. JEEVAN J NEERALGI, ADVOCATE) THIS I.T.A. IS FILED UNDER SEC. 260-A OF INCOME TAX ACT, 1961, ARISING OUT OF ORDER DATED 20.01.2016 PASSED 2 IN ITA NO.687/BANG/2015 FOR THE ASSESSMENT YEAR 2008- 2009, PRAYING TO: (i) FORMULATE THE QUESTION OF LAW STATED ABOVE; (ii) ALLOW THE APPEAL AND SET ASIDE THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL BEARING ITA NO.687/BANG/2015 DATED 20.01.2016 FOR THE ASSESMENT YEAR 2008-09. THIS I.T.A. COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act' for short) has been filed by the assessee against the order dated 20.01.2016 passed by the Income Tax Appellate Tribunal. The subject matter of the appeal pertains to the Assessment Year 2008-09. The appeal was admitted by a Bench of this Court vide order dated 06.12.2017 on the following substantial questions of law. \"(i) Whether in law, when the AO had taken one of the possible views, was it correct for the Tribunal to hold that assumption of jurisdiction under Section 263 was correct? (ii) Whether, when the appellant though made ad- hoc provision towards expenses on account of technical/consultancy services for engineering services did not claim in the Profit & Loss Account as deduction and claimed only the expenditure on which TDS was 3 made which was allowed by the AO, the said order of the AO can be said to be erroneous for assuming jurisdiction under Section 263 of the Act? (iii) Whether in law, the Tribunal was correct in ignoring the decision of a co-ordinate Bench which was relied upon by the appellant to the effect that no disallowance was called for, while justifying action under Section 263 of the Act? (iv) Whether in law, when a year end provision is made and when the recipient as well as the quantum of payment was unknown, such provision requires deduction of tax at source within the meaning of Section 40(a)(i) of the Act?\" 2. Facts leading to filing of this appeal briefly stated are that the assessee is engaged in the business of manufacture and dealing in tractors, trailers and bus-chasis. The assessee filed its return of income for the year 2008 declaring income of Rs.311,55,75,940/-. The case of the assessee was selected for scrutiny and thereafter the assessment order was passed under Section 143(3) of the Act on 18.10.2012 by the Assessing Officer. Being aggrieved by certain additions/disallowances in the said assessment order, the appellant preferred an appeal before the Dispute 4 Resolution Panel (DRP), Bengaluru. The Dispute Resolution Panel vide order dated 03.09.2012 rejected all the objections of the assessee. The assessee thereupon preferred an appeal before the Tribunal against the order dated 03.09.2012 passed by the Dispute Resolution Panel. 3. In the meantime, the assessee received a notice under Section 263 of the Act on 04.02.2015 on the ground that the claim of the assessee under Section 40(a)(ia) of the Act to the extent of Rs.10,12,02,076/- which included a sum of Rs.2,36,07,661/- for which no TDS was effected that was required to be disallowed under Section 40(a)(ia) of the Act. The assessee filed detailed objections raising the issue of jurisdiction as well as on merits and contended that there was no error much less any error prejudicial to the interest of the revenue and assumption of the jurisdiction under Section 263 of the Act was itself erroneous. The Commissioner of Income Tax (Appeals) however, vide order dated 19.03.2015 rejected the plea of the assessee and concluded the proceedings and remitted the matter to the assessing officer to decide the matter afresh and in accordance with law. 5 Being aggrieved, the assessee filed an appeal before the Tribunal. The Tribunal vide order dated 20.01.2016 has affirmed the order passed by the Commissioner of Income Tax (Appeals). In the aforesaid factual background, the assessee has approached this Court. 4. Learned counsel for the assessee while inviting the attention of this Court to the order passed by the Tribunal submitted that the Tribunal has observed that the only ground on which the Commissioner of Income Tax (Appeals) has exercised the power of revision under Section 263 of the Act as the Assessing Officer had failed to disallow a sum of Rs.2,36,07,661/- under Section 40(a)(ia) of the Act. It is further submitted that no claim for deduction was made under Section 40(a)(ia) of the Act in previous Assessment Year ie., 2007-08. Therefore, the assumption of jurisdiction under Section 263A of the Act on incorrect factual premise cannot be sustained in the eye of law. 5. On the other hand, learned counsel for the revenue submitted that the Assessing Officer has not discussed the claim of the assessee with regard to 6 disallowance under Section 40(a)(ia) of the Act and has allowed the same without discussing the same. It is further submitted that invocation of jurisdiction under Section 263A of the Act is justified in the facts and circumstances of the case as the order passed by the Assessing Officer was prejudicial to the interest of the revenue and was erroneous. It is further submitted that no interference is called for in the facts and circumstances of the case. 6. We have considered the submissions made by learned counsel for the parties and have perused the record. Before proceeding further, it is apposite to take note of the relevant extract of Section 263 of the Act, which reads as under: 263. Revision of orders prejudicial to revenue (1) The Commissioner may call for and examine the record of any proceeding under this 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, he, may, after giving the assessee an opportunity of being heard and after making or causing to be made such 7 inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. 7. Thus, from close scrutiny of Section 263 it is evident that twin conditions are required to be satisfied for exercise of revisional jurisdiction under Section 263 of the Act firstly, the order of the Assessing Officer is erroneous and secondly, that it is prejudicial to the interest of the revenue on account of error in the order of assessment. 8. The aforesaid provision was considered by the Supreme Court in ‘MALABAR INDUSTRIAL COMPANY VS. CIT’, 243 ITR 83 and it was held that the phrase ‘prejudicial to the interests of the revenue’ has to be read in conjunction with an erroneous order passed by the Assessing Officer and every loss of revenue as a consequence of the order of the Assessing Officer cannot be treated as prejudicial to the interest of revenue. It was further held that where two views are possible and the Income Tax Officer has taken one view with which the Commissioner does not agree, the order 8 passed by the Assessing Officer cannot be treated as erroneous order prejudicial to the interest of the revenue. The principles laid down in the aforesaid decision were reiterated by the Supreme Court in ‘CIT VS. MAX INDIA LTD.,’ 295 ITR 282 (SC) and recently in ‘ULTRATECH CEMENT LTD. AND ORS. VS. STATE OF RAJASTHAN AND ORS.’, CIVIL APPEAL NO.2773/2020 DECIDED ON 17.07.2020. 9. In the back drop of the aforesaid well settled legal position, we may advert to the facts of the case. The relevant extract of the order passed by the Tribunal which reads as under: \"4.3 The only issue that arises for our consideration in the present appeal is whether the Id.CIT(LTU) was justified in assuming jurisdiction under the provisions of sec.263 of the Act. The only ground on which the Id.CIT(LTU) exercised the power of revision u/s 263 was that the claim of allowance of Rs.2,36,07,661/- under the provisions of sec. 40(a)(ia) was not examined by the AO during the course of assessment proceedings.\" 9 10. However, it is the claim of the assesee that the assessee has not claimed the benefit of the disallowance under Section 40(a)(ia) of the Act for the Assessment Year in question ie., 2008-09 and the same was claimed in the previous Assessment Year ie., 2007-08. Therefore, in our opinion, the matter requires factual adjudication. The Tribunal has not adverted to the aforesaid aspect of the matter and has not considered the submission made by the assessee that the amount of Rs.2,36,07,661/- was not a real amount but only the provision that was directly reversed. 11. In view of the preceding analysis, the matter requires factual adjudication. We are inclined to remit the matter. Therefore, it is not necessary for us to answer the substantial questions of law framed in the appeal. 12. In the result, the impugned order dated 20.01.2016 is hereby quashed and the matter is remitted to the Tribunal for decision afresh in accordance with the observations made in this order. Needless to state that it shall be open for both the parties to raise all the contentions as are admissible in law. 10 Accordingly, the appeal is disposed of. Sd/- JUDGE Sd/- JUDGE GH "