THE PRINCIPAL COMMISSIONER OF INCOME TAX vs. APOLLO TYERS LTD,

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ITA/194/2019HC KeralaKLHC01027248201923 September 2021Bench: HONOURABLE MR.JUSTICE S.V.BHATTI,HONOURABLE MR.JUSTICE VIJU ABRAHAM6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the invocation of power under Section 263 of the Income Tax Act to interdict a draft assessment order proposed by the Assessing Officer is unavailable to the Principal Commissioner of Income Tax. The Court reasoned that at the stage of a draft assessment order, the condition required for invoking Section 263, namely that the order is erroneous insofar as it is prejudicial to the interest of the Revenue, does not arise. The Court noted that its view was similar to the view of the Tribunal and was in accordance with the scheme of the Act envisaged by Section 144C and Section 263. Therefore, the questions of law were answered in favour of the assessee and against the Revenue. The Income Tax Appeal was dismissed.

What were the facts?

The Revenue, represented by the Principal Commissioner of Income Tax, Kochi-1, is the appellant in this appeal against an order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench. The respondent is Apollo Tyres Ltd. The dispute concerns an order passed by the Commissioner of Income Tax under Section 263 of the Income Tax Act, 1961. The assessee filed its return for Assessment Year 2012-13. A draft assessment order was issued under Section 144C(1), which the assessee contested before the Dispute Resolution Panel (DRP). The DRP issued directions, leading to a final assessment order. The Commissioner, invoking Section 263, set aside the draft assessment order and directed a de novo assessment. The assessee appealed this order to the ITAT, which allowed the appeal, leading to the present appeal by the Revenue.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether the Tribunal was correct in holding that the Commissioner could not invoke revisionary jurisdiction under Section 263 against a draft assessment order that had merged with the final assessment order. 2. Whether the Tribunal was correct in holding that the order under Section 144C read with Section 143(3) dated 31.03.2016 did not cause prejudice to the revenue. 3. Whether the Tribunal was correct in quashing the order dated 28.02.2018 passed by the Principal Commissioner of Income Tax under Section 263. Contentions: The Revenue argued that the Commissioner was justified in invoking Section 263. The Assessee argued that the Commissioner's power under Section 263 could not be invoked against a draft assessment order, as it had merged with the final assessment order and did not cause prejudice to the revenue. The Tribunal's decision was based on a previous High Court ruling in the assessee's own case (ITA No.36/2017).

Which sections of the Income-tax Act were involved?

Section 263,Section 144C,Section 143(3)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE VIJU ABRAHAM THURSDAY, THE 23RD DAY OF SEPTEMBER 2021 / 1ST ASWINA, 1943 ITA NO. 194 OF 2019 AGAINST THE ORDER IN ITA 108/2018 OF INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH APPELLANT/S: THE PRINCIPAL COMMISSIONER OF INCOME TAX KOCHI -1 INCOME TAX OFFICE, CENTRAL REVENUE BUILDING, I.S PRESS ROAD, KOCHI 682 018. BY ADVS. SRI CHRISTOPHER ABRAHAM P.K.RAVINDRANATHA MENON (SR.) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/S: APOLLO TYERS LTD, 3RD FLOOR AREEKAL MANSION, NEAR MANORAMA JUNCTION, PANAMPILLY NAGAR, KOCHI 682 036. BY ADVS. SRI.JOSEPH MARKOSE (SR.) SRI.V.ABRAHAM MARKOS SRI.ABRAHAM JOSEPH MARKOS SRI.ISAAC THOMAS SRI.P.G.CHANDAPILLAI ABRAHAM SHRI.VIPIN ANTO H.M. SHRI.ALEXANDER JOSEPH MARKOS SHRI.SHARAD JOSEPH KODANTHARA OTHER PRESENT: SC CHRISTOPHER ABRAHAM THIS INCOME TAX APPEAL HAVING COME UP FOR HEARING ON 23.09.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA No.194/2019 -2- J U D G M E N T S.V.Bhatti, J. Heard learned Standing Counsel Mr. Christopher Abraham and learned Senior Counsel Mr. Joseph Markos for parties. 2. The Principal Commissioner of Income Tax, Kochi- 1/Revenue is the appellant. M/s.Apollo Tyres Ltd., Kochi/Assessee is the respondent. The subject matter of the appeal deals with an order of Commissioner of Income Tax in purported exercise of his power under Section 263 of the Income Tax Act, 1961 (for short 'the Act'). The assessee on 26.11.2012 filed returns for the Assessment Year 2012-13. The Assessing Officer issued Annexure-B draft assessment order under Section 144C(1) of the Act. The assessee contested the draft assessment order in Annexure-B, resulting in the issues going before the Dispute Resolution Panel (DRP) -2, Bangalore.

ITA No.194/2019 -3- The DRP, through Annexure-C dated 15.12.2016, issued directions to the Assessing Officer, which resulted in Annexure- D assessment order dated 25.01.2017. The Commissioner of Income Tax in purported exercise of his jurisdiction and authority under Section 263 of the Act, interfered with the draft assessment order in Annexure-B and set aside the draft assessment order dated 31.03.2016, and directed the Assessing Officer to de novo complete the assessment for the Assessment Year 2012-13. The assessee questioned the order of the Commissioner dated 28.02.2018 in Annexure-E before the Income Tax Appellate Tribunal, Cochin Bench in ITA BI.108/Coch/2018. The Tribunal, through order in Annexure-F dated 03.10.2018, allowed the appeal filed by the assessee. Hence the instant Tax Appeal at the instance of the Revenue. 3. The following substantial questions of law are raised by the Revenue.

ITA No.194/2019 -4- “1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that “the Commissioner is not justified in invoking his revisionary jurisdiction under Section 263 of the IT Act as against the draft assessment orders which in this case already merged with the final assessment order? 2. Whether, on the facts and in the circumstances of the case, and in the light of the Principal law, is the Hon'ble ITAT right in holding that the order u/s 144C r/w 143(3) dated 31.03.2016 did not cause any prejudice to the revenue? 3. Whether, on the facts and in the circumstances of the case as well as in law, is the Hon'ble Tribunal right in quashing the order u/s 263 dated 28.02.2018 passed by the Principal Commissioner of Income Tax, Kochi-1.” 4. In ITA No.36/2017, assessee's own case, this Court has considered similar substantial questions of law and held as follows: “9. Our independent consideration of the circumstances; also the scheme of the Act and the view of the Tribunal are similar, namely that invocation of power under Section 263 of the Act to interdict a draft assessment order proposed by the Assessing Officer is unavailable to Principal Commissioner of

ITA No.194/2019 -5- Income Tax. We hasten to add, for, at that stage, the condition required for invoking Section 263, namely the order being erroneous insofar as it is prejudicial to the interest of Revenue, does not arise. Hence the reasons are in accordance with the scheme of the Act envisaged on one hand by Section 144C and on another by Section 263 of the Act.” 5. The questions of law and the circumstances leading to the subject questions of law, since are identical, by following the very same reasoning and discussion, the questions in the case on hand are answered in favour of the assessee and against the Revenue. The Income Tax Appeal stands dismissed accordingly. Sd/- S.V.BHATTI JUDGE Sd/- VIJU ABRAHAM JUDGE jjj

ITA No.194/2019 -6- APPENDIX OF ITA 194/2019 PETITIONER ANNEXURE ANNEXURE A COPY OF THE ORDER U/S. 92CA (30 DATED 29.1.2016 ANNEXURE B COPY OF DRAFT ASSESSMENT ORDER U/S 143 (3) R.W.S. 144 C (1) DATED 31.3.2016 ANNEXURE C COPY OF THE DRP ORDER DATED 15.12.2016 ANNEXURE D COPY OF ASSESSMENT ORDER U/S 143 (3) R.W.S. 144C DATED 25.1.2017 ANNEXURE E COPY OF 263 ORDER DATED 28./2.2018

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