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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI LALIET KUMAR, JM
आदेश / ORDER PER LALIET KUMAR, JM :
This appeal preferred by the assessee emanates from the order of the Ld. Pr. Commissioner of Income Tax-1, Nashik dated 19.03.2018 for the assessment year 2013-14 passed u/s.263 of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟) as per the following grounds of appeal on record:
“1. In the facts and circumstances of the case, submissions made before the AO as well as submissions made before the Pr. CIT provision of law and the case on the subject the learned Pr. CIT-1, Nashik erred in issuing notice u/s.263 and passing the revision order u/s.263. Therefore, it is prayed to declare the notice issued u/s.263 was null and void & the consequent order passed u/s.263 is also null and void.
2. The learned Pr. CIT-1, Nashik erred in initiating proceedings u/s.263 with reference to the issues not covered by the mandate for limited scrutiny for AY 2013-14 in the case of appellant. Therefore, it is prayed to hold that the notice issue for revision u/s.263 & the consequent order passed u/s.263 are null and void ( Pune ITAT decision in the case of Deccan Paper Mills Co. Ltd. reported at 51 CCH 0446 relied).
3. The learned Pr. CIT-1, Nashik erred in passing the order u/s.263 without giving findings as to the error in the assessment order dated 26.11 2015 a condition precedent for revision u/s.263. Therefore, it is prayed to hold that the order passed u/s.263 is null and void.
4. Without properly appreciating the claim of appellant that the Octroi incentive, received under the package scheme of Incentives of the Government of Maharashtra, amounted to Capital Receipt, in view of the Supreme Court decision in the case of Chaphalkar Brothers (300 ITR 0113), Delhi ITAT decision in the case of L.G Electronics Pvt. Ltd. (187 TTJ 0470) & the Pune ITAT decision in the case of Innoventive Industries Ltd in the learned Pr. CIT-1, Nashik erred in setting aside the assessment order dated 26.11. 2015 passed u/s.143(3) of the IT Act, 1961 after due consideration of the issue regarding receipt of Octroi Incentive. Therefore, it is prayed to set aside the revision order dated 19.03.2018 passed u/s.263.
5. Appellant craves leave to add, amend or delete any ground of appeal before or at the time of hearing.”
The Ld. AR of the assessee submitted that the order passed by the Ld. Pr. Commissioner of Income Tax-1 u/s.263 of the Act failed to meet two conditions laid down under the Act i.e. (i) that the order passed by the Assessing Officer should be erroneous and (ii) it should also be prejudicial to the interest of the Revenue. To buttress his contention, the Ld. AR of the assessee has drawn our attention to page 4 of the Paper book where the Assessing Officer had issued questionnaire, at Sr. No.18, it was asked by the AO ,to provide the details of any tax exempt income during the year under consideration. In response thereof the assessee filed reply to the said question which is at Page 7 of PB to the following effect:
“18. Details of any tax exempted income during the year. Also furnish details for expenditure incurred in relation to such income. There is no such exempt income during the year. The company has received Capital Contribution from Govt. of Maharashtra under Package Scheme of Incentive 2007 and the amount received is directly credited to General Reserves as “Capital Subsidy from DIC”. An amount of Rs.1,53,27,300/- is received as incentive by way of refund of taxes paid to local authorities under Package Scheme of Incentives (PSI) 2007 on the basis of Eligibility Certificate issued by the Directorate of Industries, Government of Maharashtra. The company has been granted this Eligibility Certificate to encourage the dispersal of industries to the less developed area of the state and to ensure sustained industrial growth through innovative initiatives of development of key potential sectors and further improving condusive industrial climate in the state of Maharashtra for providing the global competitive age to the states industry. The grant of fiscal incentives are to achieve higher and sustainable economic growth with emphasis on balanced regional development and employment generation. The company has received above refund by way of subsidy as promoter’s contribution and therefore, as this being in the nature of capital receipt, credited to capital reserve account ( As per Accounting Standard-AS-12) on “ Accounting for Government Grants necessary details and other documents will be submitted in next hearing.”
The assessee had also further given details explanation with respect to that subsidy received which is not forming a part of the income and the same are placed at Page 10 to 13 of the paper book vide reply dated 26.10.2015.
2.1 The Ld. AR of the assessee, submitted that AO made sufficient enquiry during the assessment proceeding. He had further drawn our attention to the decision of the Hon‟ble Supreme Court in the case of Chaphalkar Brothers (300 ITR 0113) whereby the issue of subsidy was decided holding that this kind of subsidy is revenue in nature and not capital in nature. It was also submitted by the Ld. AR of the assessee that the subsidy received by the assessee was held to be revenue in nature and there was no error in the view taken by the Assessing Officer further there is no loss to the revenue.
2.2 The Ld. AR of the assessee further submitted that case of assessee was selected for limited scrutiny and therefore it was not possible for the Assessing Officer to conduct full-fledged assessment without complying the CBDT circular in this regard . For that purpose he has drawn our attention to the order of the Ld. Pr. Commissioner of Income Tax wherein the Ld. Pr. Commissioner of Income Tax at Para 6 of his order had admitted that the case of the assessee was under assessment for limited scrutiny only for the purpose of verification of reason i.e. “Delayed payment of tax and return filed late”.
Per contra, the Ld. DR had submitted firstly on the issue of limited scrutiny that once the Assessing Officer had issued questionnaire beyond the limited scrutiny then it is presumed that the Assessing Officer had expanded scope in accordance with Board Circular for converting limited scrutiny into full-fledged scrutiny. As no contrary document was placed before the Bench therefore it should be presumed to be opened in accordance with law.
3.1 Further the Ld. DR fairly admitted that adequate enquiry was made by the Assessing Officer at the time of original assessment as it is evident from the various pages referred by the Ld. AR.
We have heard the rival contentions and perused the material available on record. As mentioned by the Ld. AR that two conditions are required to be fulfilled for invoking provisions u/s. 263 of the Act i.e. . (i) order passed by the Assessing Officer held to be erroneous and (ii) it should also be prejudicial to the interest of the Revenue. We find the Hon‟ble Supreme Court in the matter of Malabar Industrial Co. Ltd., (2000) 243 ITR 83(SC) has specifically held that “in order to assume the revisionary jurisdiction u/s.263, the order of the Assessing Officer must be erroneous so far as it is prejudicial to the interest of the Revenue.”
4.1 If we look into the facts of the present case, it is evidently clear that the Assessing Officer had made adequate enquiry for the purpose of finding the true character and nature of the subsidy received by the assessee i.e. whether the same was capital in nature or revenue in nature. After making sufficient enquiry, the Assessing Officer had allowed the claim of the assessee and held the subsidy to be revenue in nature. It is correct that the Assessing Officer has not written voluminous order accepting the contentions of the assessee. In our view, the Assessing Officer is not required to write detailed order accepting the contentions of the assessee, once the same is in accordance with law. In our view, the Assessing Officer is only required to write decision on contentious issues placed before him and not to write decision on the issues on which sufficient enquiry was made and the Assessing Officer and after enquiry AO is satisfied that the issue is covered in favor of the assessee in accordance with the provisions of law.
4.2 Having held so, we do not find any error in the order passed by the Assessing Officer once sufficient enquiry were made by the Assessing Officer to the true character of the subsidy received by the assessee. Further we also find that the issue of subsidy is squarely covered by the decision of the Hon‟ble Supreme Court in the case of Chaphalkar Brothers (supra). In view of the matter, we fail to understand how the order passed by the Assessing Officer can be said to be erroneous and prejudicial to the interest of the revenue. For the purpose of coming to the conclusion, the order passed by the Assessing Officer is prejudicial to the interest of the revenue, it is necessary that there should be loss to the revenue. Once the issue is covered in favour of the assessee then it cannot be said there will be loss to the revenue.
Thus, order passed by the Pr. Commissioner of Income Tax fail on both counts i.e. (i) order passed by the Assessing Officer is not erroneous and (ii) there is no loss to the revenue and hence it is not prejudicial to the interest of the Revenue. Therefore, we are of the opinion that the order passed by the Ld. Pr. Commissioner of Income Tax invoking the provisions of section 263 was not in accordance with law and the same is liable to be struck down. We order accordingly.
5.1 As we had held the order of PCIT is not in accordance with law therefore we had not examined the issue of limited scrutiny and is left open to be decided by us in an appropriate case.
In the result, appeal of the assessee is allowed.
Order pronounced on 11th day of February, 2020.