M/S.APPOLLO TYRES LTD. vs. THE DEPUTY COMMISSIONER OF INCOME TAX

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ITA/196/2013HC KeralaKLHC01026081201317 October 2013Bench: HONOURABLE MR.JUSTICE A.M.SHAFFIQUE,HONOURABLE THE CHIEF JUSTICE DR. MANJULA CHELLUR7 pages
AI SummaryDismissed

What did the High Court hold?

The High Court affirmed the opinion of the Tribunal. The Tribunal had held that the Commissioner correctly exercised his powers under Section 263 of the Income Tax Act, 1961. The Tribunal found that the Assessing Officer had not applied his mind to the assessment, making the order erroneous and prejudicial to the interest of the revenue. The Tribunal relied on the Supreme Court decision in Malabar Industrial Co. Ltd. v. CIT, which states that an order is erroneous if the Assessing Officer has not applied his mind, and prejudicial if it is likely to result in a loss of revenue. The High Court agreed that the procedure adopted by the AO had implications on tax computation causing prejudice to the revenue. Therefore, the High Court found no good ground to interfere with the Tribunal's opinion and dismissed the appeal, directing fresh consideration by the assessing authority.

What were the facts?

The assessee, M/s. Appollo Tyres Ltd., is in appeal before the High Court of Kerala against an order of the Income Tax Appellate Tribunal (ITAT). The ITAT had confirmed an order passed by the Commissioner of Income Tax (CIT) under Section 263 of the Income Tax Act, 1961. The CIT's order, dated March 15, 2010, had found the assessment order dated December 31, 2007, passed by the Assessing Officer (AO) under Section 143(3) to be erroneous and prejudicial to the interest of the revenue. Consequently, the CIT remanded the matter back to the AO for fresh consideration. The ITAT, by its order dated February 8, 2013, upheld the CIT's revisional powers and the remand.

What were the issues?

1. Whether the Commissioner of Income Tax erred in exercising revisional jurisdiction under Section 263 of the Income Tax Act, 1961, by holding that the Assessing Officer's assessment order was erroneous and prejudicial to the interest of the revenue, despite the AO having considered the nine specific points raised by the Commissioner? Assessee's contention: The Assessing Officer had considered the nine points raised by the Commissioner, and therefore, there was no erroneous consideration. The AO is not required to conduct a roving inquiry into each item while accepting returns. Revenue's contention: The revenue argued that the Commissioner correctly exercised his powers under Section 263, as there was no proper application of mind by the AO, making the assessment order erroneous and prejudicial to the revenue. The Tribunal relied on the Apex Court decision in Malabar Industrial Co. Ltd. v. CIT and the Bombay High Court decision in Grasim Industries Ltd. v. CIT.

Which sections of the Income-tax Act were involved?

Section 263,Section 143(3),Section 38(2),Section 36(i)(va)/43B,Section 14A,Section 32(i)(iia)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE THURSDAY, THE 17TH DAY OF OCTOBER 2013/25TH ASWINA, 1935 ITA.No. 196 of 2013 () ----------------------- AGAINST THE ORDER/JUDGMENT IN ITA 316/2010 of I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT(S)/APPELLANT: ----------------------- M/S.APPOLLO TYRES LTD., 6TH FLOOR, CHERUPUSHPAM BUILDINGS, SHANMUGHAM ROAD, KOCHI-31(PAN:AAACA69900). BY ADVS.SRI.JOSEPH MARKOSE (SR.) SRI.V.ABRAHAM MARKOS SRI.BINU MATHEW SRI.TOM THOMAS (KAKKUZHIYIL) SRI.ABRAHAM JOSEPH MARKOS RESPONDENT(S)/RESPONDENT: ------------------------- THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1(1), RANGE-1, ERNAKULAM KOCHI-682018. BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 17-10-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

MANJULA CHELLUR, C.J & A.M.SHAFFIQUE, J. ---------------------------------------------- I.T.A.No. 196 of 2013 ---------------------------------------------- Dated this the 17th October, 2013 JUDGMENT Manjula Chellur, C.J. Heard learned Senior Counsel Sri.Joseph Markose appearing for the appellant assessee. 2. Writ Petition was filed questioning the revisional jurisdiction exercised by the Commissioner of Income Tax under Section 263 of the Income Tax Act (for short, 'the Act'). It is not in dispute that regular assessment was completed under Section 143(3) of the Act on 31.12.2007. Several issues came up for consideration before the Commissioner of Income Tax (Appeals) and even the appellate authority proceeded to pass orders on 23.6.2008. Meanwhile, the Commissioner of Income Tax, who is the authority under the Act, passed order dated 15.3.2010 exercising its revisional powers under Section 263 of the Act. According to the revisional authority, several issues raised in the order passed under Section 263 of the Act were not explained properly and further through the material available on record,

ITA.196/13 2 though tried to be explained by the assessee, it was not satisfactory, therefore, the matter came to be remanded for fresh consideration by the Assessing Officer, as the order passed by the Assessing Officer is erroneous and is prejudicial to the interest of revenue. Issues (1) to (ix) in Annexure A3 order read as under: (i) In the computation of depreciation on building used for residential purpose, the sale value of office building was wrongly adjusted resulting in allowance of excess depreciation. (ii) Depreciation at appropriate rate is being claimed and allowed in respect of vehicles purchased under Dealer Vehicle Scheme on the full value without considering the deposit amount. (iii) Depreciation on computer accessories has been allowed @ 60% as against 25% allowable. Excess depreciation has to be withdrawn. (iv) The Assessing Officer has omitted to include the deposits collected from the dealers under

Dealer

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Expansion Programme (ATW Showroom) as income of the assessee. (v) 1/8th portion of the Corporate Office building

ITA.196/13 3 has been let out and the AO has disallowed 1/8th depreciation on that building under section 38(2). However, the AO has failed to consider proportionate disallowance on repairs and maintenance expenditure of the building. (vi) The Assessing Officer has omitted to disallow the Employees as well as Employers contribution towards PF for the month of March 2005 which were not paid under section 36(i)(va)/43B of the Act. (vii) The AO has omitted to include the receipts as per TDS certificates filed. It was also not verified by the AO whether the entire miscellaneous receipts of 31,14,449/- ₹ accounted represents receipts as per TDS certificates. (viii) The AO has omitted to disallow proportionate expenditure on exempted income (dividend) under section 14A of the Act. Similarly, income from sale of investment is computed under capital gains and, therefore, expenses attributable to acquisition of the investments cannot be deducted while computing the income from business. (ix) According to the details of additions to P&M

ITA.196/13 4 during the year furnished as per annexure to the Depreciation statement, an amount of 2,00,75,230/- relates to P&M installed at ₹ the office premises, the value of which cannot be considered for additional depreciation under clause (b) of second proviso. The excess additional depreciation granted under section 32(i)(iia) on P&M installed at office premises requires to be withdrawn.” 3. This order of the Commissioner was challenged before Tribunal, who confirmed the order of the Commissioner by order dated 8.2.2013. Aggrieved by this, the appellant assessee is before us. 4. According to learned Senior Counsel, Commissioner failed to appreciate that the Assessing Officer did consider the specific nine points raised under Section 263 of the Act, therefore, there was nothing which could be termed as erroneous consideration on the part of the Assessing Officer, as the Assessing Officer is not required to make roving enquiry into each and every issue concerned, item-wise while accepting the returns of the assessee. On perusal of records, we notice that the order of the Commissioner passed under Section 263 of the Act is a detailed

ITA.196/13 5 order discussing each of the nine points raised by the revisional authority. Tribunal, after referring to decision of Bombay High Court in the case of Grasim Industries Ltd. v. CIT (321 ITR 92), analysed what exactly would mean prejudice to the interest of revenue and how an authority exercising powers under Section 263 of the Act has to proceed in the matter. Ultimately, following the decision of Apex Court in Malabar Industrial Co. Ltd. v. CIT [(2000)243 ITR 83], Tribunal also confirmed the opinion of the Commissioner that there was no application of mind while considering the assessment under Section 143(3) of the Act, therefore, it is not only erroneous, but also prejudicial to the interest of revenue. Opining that the procedure adopted definitely would have implication on the tax computation which ultimately causes prejudice to the revenue, Tribunal confirmed the orders of the Commissioner under Section 263 of the Act. 5. Having regard to reasoning of the Tribunal, we affirm the opinion of Tribunal that the fresh consideration of the matter by the assessing authority in the light of observations of revisional authority has to be made afresh untrammelled by any of the observations made by the authorities concerned.

ITA.196/13 6 We find no good ground to interfere with the opinion of the authorities concerned. Hence, the appeal is dismissed. MANJULA CHELLUR, CHIEF JUSTICE A.M.SHAFFIQUE, JUDGE vgs17.10

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