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Income Tax Appellate Tribunal, “A” BENCH: KOLKATA
Before: Shri Rajesh Kumar & Shri Sonjoy Sarma]
आयकर अपील�य अ�धकरण, कोलकाता पीठ ‘ए’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH: KOLKATA [Before Shri Rajesh Kumar, Accountant Member & Shri Sonjoy Sarma, Judicial Member] �ी राजेश कुमार लेखा सद�य एवं �ी संजय शमा� �या�यक सद�य के सम� I.T.(SS)A. Nos. 19 to 25/Kol/2019 Assessment Years : 2009-10 to 2015-16 M/s Hindusthan Engineering & Vs. ACIT, Central, Range-1, Kolkata Industries Ltd. (PAN: AAACH 8505 Q) Appellant / (अपीलाथ�) Respondent / (� यथ�)
I.T.A. No. 201/Kol/2021 Assessment Year : 2016-17 M/s Hindusthan Engineering & Vs. PCIT, Central -1, Kolkata Industries Ltd. (PAN: AAACH 8505 Q) Appellant / (अपीलाथ�) Respondent / (� यथ�)
18.10.2022 Date of Hearing / सुनवाई क# �त%थ Date of Pronouncement / 20.12.2022 आदेश उ(घोषणा क# �त%थ For the Appellant / Shri Siddharth Jhajharia, FCA �नधा�.रती क# ओर से For the Respondent / Shri Amal Sudhir Kamat, CIT राज�व क# ओर से
ORDER / आदेश Per Rajesh Kumar, AM: These appeals preferred by the assessee in IT(SS)A Nos. 19 to 25/Kol/2019 are against the separate orders of Ld. Principal Commissioner of Income Tax, Central-1,
2 IT(SS)A Nos. 19 to 25/Kol/2019 ITA No. 201/Kol/2021 AYs: 2009-10 to 2016-17 Hindusthan Engineering & Industries Ltd. Kolkata (hereinafter referred to as the Ld. PCIT] even dated 25.03.2019 passed u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as the Act) for the Assessment years 2009-10 to 2015-16 respectively and the appeal preferred by the assessee in ITA No. 201/Kol/2021 is against the order of Ld. Principal Commissioner of Income Tax, Central-1, Kolkata (hereinafter referred to as the Ld. PCIT] dated 24.03.2021 passed u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as the Act)for the Assessment year 2016-17. 2. Though the Registry has pointed out that the appeal in ITA No. 201/Kol/2021 for AY AY 2016-17 is barred by limitation , however, in view of the decision of the Hon’ble Supreme Court in Miscellaneous Application No. 665 of 2021 in SMW(C ) No. 3 of 2020, the period of filing appeal during the COVID-19 pandemic is to be excluded for the purpose of counting the limitation period. In view of this, the appeal is treated as filed within the limitation period. 3. First we shall take up in IT(SS)A Nos. 19 to 21/Kol/2019 for AY 2009-10 to 2011-12 as the issue involved in all the appeals is common and therefore these appeals are decided and disposed off together. For the sake of convenience we shall first take ITA No. 19/Kol/2019 A.Y.2009-10.
The issue raised in ground nos. 1 and 2 is a legal issue and is against the invalid jurisdiction exercised by the Ld. PCIT u/s 263 of the Act thereby setting aside the assessment framed u/s 143(3) read with 153A of the Act in which the AO has not made any addition because there was no incriminating evidences found during the course of search.
Facts in brief are that a search action was conducted on the assessee on 23.12.2014 and its various group concerns. Consequent to the search action, notice u/s 153A of the Act was issued on 13.05.2016 which was duly served upon the assessee and was also complied by the assessee by filing return of income on 23.06.2016 declaring total income of Rs. 12,00,01,934/-. Thereafter the AO issued various
3 IT(SS)A Nos. 19 to 25/Kol/2019 ITA No. 201/Kol/2021 AYs: 2009-10 to 2016-17 Hindusthan Engineering & Industries Ltd. statutory notices to the assessee which were duly attended to by the assesse and assessment was finally completed vide order dated 31.12.2016 passed u/s 153A read with 143(3) of the Act. Upon perusal of the said assessment the Ld. PCIT observed that the AO has allowed the claim of deduction u/s 35(2AB) of the Act without verifying the conditions as provided under the Act. As such the assessment was framed without making any verification which should have been made by the AO. Similarly the ld. PCIT observed that AO has also accepted the claim of unabsorbed depreciation as well as weighted deduction u/s 35(2AB) of the Act and thereby allowing excess relief to the assessee and therefore the said failure on the part of the AO to make necessary enquiry or verification rendered the assessment order so framed as erroneous and prejudicial to the interest of the revenue. Accordingly a show cause notice was issued u/s 263 of the Act dated 11.02.2019 as to why the assessment order dated 31.12.2016 passed u/s 153A read with 143(3) of the Act should not be revised, for the reasons that the claim of deduction u/s 35(2AB) of the Act was not examined by the AO with respect to satisfaction of conditions as provided under the Act and the Ld. PCIT accordingly set aside the assessment vide excess brought unabsorbed depreciation.
The Ld. Counsel for the assessee submitted that the instant year is an unabated assessment year on the date of search as no proceedings were pending as on the date of search. Moreover, during the course of search no incriminating material was found with respect to claim of deduction u/s 35(2AB) of the Act and also as regards the excess unabsorbed depreciation. Therefore the AO has no jurisdiction to make any addition without any incriminating material found and seized during the course of search in an unabated assessment. The Ld. A.R. therefore submitted that the assessment framed by the AO is neither erroneous nor prejudicial to the interest of the revenue and consequently the revisionary jurisdiction exercised by the Ld. PCIT u/s 263 of the Act is invalid and nullity as there was no incriminating material found and seized during the year with respect to the claim of deduction u/s 35(2AB) of the Act and excess claim of brought forward depreciation. In defense of his argument, the Ld.
4 IT(SS)A Nos. 19 to 25/Kol/2019 ITA No. 201/Kol/2021 AYs: 2009-10 to 2016-17 Hindusthan Engineering & Industries Ltd. A.R relied on the series of decisions namely CIT vs. Kabul Chawla reported in [2016] 380 ITR 573 (Del-HC), CIT vs. Commissioner of Income-tax-II, Thanev.Continental Warehousing Corporation (Nhava Sheva) Ltd. reported in [2015] 374 ITR 645 (Bom- HC). The ld AR therefore prayed that the revisionary order passed u/s 263 of the Act may kindly be quashed.
7.The ld DR, on the other hand, relied heavily on the order of ld. PCIT and submitted that the assessee is not be prejudiced by the revisionary proceedings as the assesse would be allowed fair hearing by the AO in the set aside proceedings. When a query was put to the ld. DR on the incriminating materials found during search, he relied on the order of ld. PCIT.
We have heard the rival parties and perused the material on record including the assessment order and revisionary order passed u/s 263 of the Act. Undisputedly the instant year is an unabated assessment year and there was no incriminating documents/ materials found during search with respect to claim of deduction u/s 35(2AB) of the Act and also in respect of excess allowance of unabsorbed depreciation. It is also a settled and undisputed position as on date that in an unabated year the addition can only be made on the basis of incriminating material. Therefore having regards to the legal position, the AO framed the assessment u/s 143(3) r.w.s. 153A of the Act without making any addition in respect of claim u/s 35(2AB) of the Act or with regard to the unabsorbed depreciation in consonance with provisions of the Act as interpreted by various judicial forums discussed hereunder. The case of the assessee is squarely covered by the decision of Hon’ble Bombay High Court in the case of CIT vs. Commissioner of Income-tax-II, Thanev.Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra) and the decision of Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla (supra) wherein it has been held that in case of unabated assessment year on the date of search the addition can
5 IT(SS)A Nos. 19 to 25/Kol/2019 ITA No. 201/Kol/2021 AYs: 2009-10 to 2016-17 Hindusthan Engineering & Industries Ltd. only be made on the basis of search material and not otherwise. Therefore the order passed by the AO u/s 143(3) r.w.s. 153A of the Act is neither erroneous nor prejudicial to the interest of the revenue and therefore jurisdiction invoked by the ld. PCIT as not in consonance with the provisions of section 263 of the Act. Before exercise of jurisdiction u/s263 of the Act the AO has to satisfy the twin conditions as provided in section 263 of the Act .i.e. the order purported to be revised has to erroneous as well as prejudicial to the interest of the revenue and even if first conditions is satisfied or vice versa , the jurisdiction is not available to the ld PCIT as has been held by the Hon’ble Apex Court in the case of Malabar Industrial Co. Ltd. vs. CIT reported in [2000] 243 ITR 83 (SC).Accordingly, we quash the order passed u/s 263 of the Act by the Ld. PCIT. The appeal of the assessee is allowed on legal issue.
The issue raised in the various grounds of appeal in IT(SS)A Nos. 20 & 21/Kol/2019 for AY 2010-11 & 2011-12 by the assessee are similar to ones as decided by us in IT(SS)A Nos. 19/Kol/2019 for AY 2009-10. Accordingly our finding in IT(SS)A Nos. 19/Kol/2019 would mutatis mutandis apply so these appeals of the assessee and accordingly these appeals are allowed.
Now we shall adjudicate in IT(SS)A Nos. 22 to 25/Kol/2019 for AY 2012-13 to 2015-16.
In all the appeals the assessee has challenged the revisionary jurisdiction exercised by ld. PCIT u/s 263 of the Act on the ground that the revisionary powers were invoked without valid jurisdiction and therefore the order passed u/s 263 of the Act is nullity and bad in law.
Facts qua these appeals are same as discussed hereinabove in para 5 of the said order and are not being repeated. The Ld. PCIT upon perusal of the assessment record came to the conclusion that the assessment framed u/s 143(3) / 153A of the Act dated
6 IT(SS)A Nos. 19 to 25/Kol/2019 ITA No. 201/Kol/2021 AYs: 2009-10 to 2016-17 Hindusthan Engineering & Industries Ltd. 31.12.2016 is erroneous and prejudicial to the interest of the revenue for the reason that the provisions for gratuity Rs. 12,67,38,890/- were allowed in excess beside allowing the claim of deduction u/s 35(2AB) of the Act without doing any verification which rendered the assessment so framed as erroneous and prejudicial to the interest of the revenue. The issue of 35(2AB) is common in all the years whereas the provision for gratuity was only involved as stated in AY 2012-13. Finally the ld. PCIT revised the assessment by directing the AO be pass afresh order after making the enquiries with respect to the issues stated by giving a reasonable opportunity of hearing to the assessee.
The Ld. A.R. challenged the revisionary jurisdiction exercised by the Ld. PCIT u/s 263 of the Act on three counts. First that the proceedings u/s 263 of the Act has to initiated by the Ld. PCIT on the basis of his examination of assessment records upon which he is of the belief that the order passed by the ld AO is erroneous for the reason that the same is either contrary to the facts on records i.e the AO has passed the order on wrong appreciation of facts or the order is not in accordance with the provisions of the Act. The Ld. PCIT has also to records a satisfaction that the wrong order has caused prejudice to the revenue. However the ld AR argued nothing of this sort has happened and revisionary proceedings were invoked at the instance of the AO as the AO has moved the proposal and the ld. PCIT has acted on the said proposal which has been mentioned the revisionary by the ld PCIT and therefore the jurisdiction exercised is invalid. In defense of his arguments the ld counsel relied on the following decisions:
i) Pr. CIT vs. Sinhotia Metals & Minerals Pvt. Ltd. (IA GA No. 11/2019- ITAT/104/2019)(HC)
ii) Manish Chirania vs. PCIT , 15 Kol (Kolkata ITAT) (ITA No. 1161/Kol/2019 dated 8.11.2019)(Kol ITAT)
iii)M/s Rupayan Udyog vs. CIT (Kolkata ITAT) (ITA No. 1073/Kol/2012 dated 28.11.2018)-
7 IT(SS)A Nos. 19 to 25/Kol/2019 ITA No. 201/Kol/2021 AYs: 2009-10 to 2016-17 Hindusthan Engineering & Industries Ltd. iv)West Bengal National University of Juridical Services vs. CIT(E) (ITA No. 1853/Kol/2018 dated 22.10.2020) (Kolkata ITAT).
Secondly the ld AR submitted that the assessment was framed u/s 143(3) read with 153A of the Act with the prior approval of Additional CIT u/s 153D of the Act which was the statutory requirement under the Act. The ld. AR contended that the Ld. PCIT exercised the jurisdiction u/s 263 of the Act and passed the consequent order u/s 263 of the Act without cancelling or revising the order u/s 153D of the Act which is wrong and contrary to the various judicial pronouncements which were cited in defense of his second proposition namely:
i) Nilkantha Dealcom Pvt. Ltd. vs. PCIT, Kol (Kolkata ITAT) (ITA No. 1853/Kol/2018 dated 22/10/2020) ii) Surendra L, Hiranandai vs. Pr. CIT, Mumbai (Mum-ITAT) (ITA No. 3226/M/2017 dated 14.02.2018
The ld AR contended that lastly the Ld. PCIT has not recorded his own substantive and independent satisfaction and in fact it is a case of borrowed satisfaction as the revisionary jurisdiction was exercised on the basis of audit objection. The Ld. A.R therefore prayed that the revisionary jurisdiction exercised by the Ld. PCIT is invalid and therefore the order passed u/s 263 is bad and may kindly be quashed.
The Ld. D.R on the other hand relied on the order of Ld. PCIT and submitted that ld. PCIT has only directed the AO to frame the assessment afresh after affording a reasonable opportunity of hearing to the assessee and therefore no prejudice has been caused to the assessee by the said set aside/revising of assessment and therefore the appeal of the assessee may kindly be dismissed on this issue. The Ld. D.R. also filed written submissions which are extracted as under:
“In this connection, I am reiterating my oral arguments that Section 263 applies to any order passed by the AO during any proceeding under this Act. It is submitted that approval granted by the Addl. CIT to the AO u/s 153D is not a separate order passed under the Act. Section 153D reads as under:
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“No order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner in respect of each assessment year referred to in clause (b) of [sub-section (1) of] section 153A or the assessment year referred to in clause (b) of sub-section (1) of section 153B, except with the prior approval of the Joint Commissioner.” It is evident from the above that there is no concept of any order to be passed by the Joint / Addl. Commissioner u/s.153D while granting approval for the search assessment. This being the clear provisions of the Statute, any approval u/s.!53D would not be subject matter of any 263 proceedings. As orally argued by me before the Hon'ble Bench, this is for the simple reason that the approval u/s.153D does not constitute a separate order. It is also not out of place to mention that the provisions of section 263 would be applicable only to orders passed by the Assessing Officer as explicitly mentioned in the section itself. Section 2(7A) defines an Assessing Officer and the words Additional Commissioner / Joint Commissioner mentioned in this subsection would only be AOs, if they are directed under clause (b) of sub-section 4 to section 120 to exercise powers and functions conferred on an AO. It is submitted that in case of this search assessment no such power as envisaged in section 2(7A) has been conferred on the Joint / Additional Commissioner, Central Range-1, who has granted the approval u/s,153D. It naturally follows that the-Addl. CIT, Central Range-1, who has granted approval u/s.153D, is not an AO for the purposes of section 263. For this reason also, the approval granted by the Joint / Additional Commissioner of Income Tax u/s.l53D in this case is out of the purview of section 263. 15. We have heard the rival submissions and perusing the material on record including the impugned order. We would like to adjudicate the appeal of the assessee on second proposition wherein the assessee has challenged the order passed u/s 263 by the Ld. PCIT without cancelling or revising the order passed u/s 153D of the Act without which the Ld. PCIT has no jurisdiction to revise the order passed u/s 143(3) read with 153A of the Act. Undisputedly in all the cases the order passed u/s 143(3) read with 153A of the Act with the prior approval of the Addl. CIT u/s 153D of the Act and this is also undisputed that the approval was granted by the Addl. CIT u/s 153D of the Act which was not cancelled or revoked before exercising jurisdiction u/s 263 of the Act. We have perused the provisions of the Act vis-à-vis the judicial pronouncements as relied by the assessee hereinabove and find that the issue of assessee is squarely covered by the decision of Co-ordinate Bench of Kolkata Tribunal in the case of Nilkantha Dealcom Pvt. Ltd. (supra) wherein it has held as under:
We first take up the legal argument that, order u/s 153A/143(3) of the Act, cannot be revised without cancelling the order of statutory approval given by the JCIT u/s 153D of the Act.
9 IT(SS)A Nos. 19 to 25/Kol/2019 ITA No. 201/Kol/2021 AYs: 2009-10 to 2016-17 Hindusthan Engineering & Industries Ltd.
On this same issue, the Hyderabad Bench of the ITAT in the case of Shri Ch. Krishna Murthy vs. Asstt. Commissioner of Income Tax Hyderabad reported in 2013 (3) TMI 359 – ITAT Hyderabad, has held as follows:-
“23. At this stage, one has to remember, the settled position of law is, for invoking jurisdiction u/s 263 of the Act, two conditions have to be satisfied cumulatively. Firstly, order must be erroneous and secondly it must be prejudicial to the interests of revenue. In absence Ch. Krishna Murt hy of any one of the two conditions, the power conferred u/s 263 cannot be exercised. On a perusal of the assessment order as a whole, specifically, para 17, it is very much evident that Assessing Officer was conscious about the fact that Barium Division was having outstanding liability of the advance given by Chrome Division at the time of demerger. He was also aware of the fact that outstanding liability was converted as advance given to assessee against which shares of newly formed company i.e. VBCPL were allotted to assessee and his associates. Therefore, it is clear from the assessment order that Assessing Officer has examined the issue of conversion of the outstanding liability of Barium Division to advance in the name of assessee through journal entries as well as allotment of shares against such advance to assessee and his family members. Furthermore, from para 2.3 of impugned order of learned CIT, it becomes clear that Assessing Officer while forwarding the draft assessment order for approval, after considering appraisal report has proposed to treat the conversion of outstanding liability of Barium Division as advance to assessee in the books of VCPL as deemed dividend u/s 2(22)(e). However, while according his approval in terms with section 153D, Addl. CIT, who is range head directed Assessing Officer not to make addition u/s 2(22)(e). The reasoning of the Addl. CIT is, advance created in the name of assessee was only through book entry and no payment was made and secondly, there was no accumulated profits of the company, which is a prerequisite for invoking provisions of section 2(22)(e). Therefore, from the aforesaid discussion, it becomes clear that not only Assessing Officer has examined the issue, but, he has also passed the order in consequence to the directions of his higher authority in terms with section 153D of the Act. ITAT, Pune Bench in case of Akil Gulamali Somji Vs. ITO in ITA Nos. 455 to 458/PN/2010 dt. 30/03/2012 while holding the conditions imposed u/s 153D to be of mandatory nature, referred to clause 9 of Manual of Office Procedure, Volume II (Technical) February 2003 issued by Directorate of Income-tax on Ch. Krishna Murthy behalf of CBDT, which reads as under:
"9. Approval for assessment : An assessment order under Chapter XIV-B can be passed only with the previous approval of the range JCIT/ADDL.CIT. (For the period from 30-6-1995 to 31-1 2-1996 the approving authority was the CIT.) The Assessing Officer should submit the draft assessment order for such approval well in time. The submission of the draft order must be docketed in the order-sheet and a copy of the draft order and covering letter filed in the relevant miscellaneous records folder. Due opportunity of being heard should be given to the assessee by the supervisory officer giving approval to the proposed block assessment, at least one month before the time barring date. Finally once such approval is granted, it must be in writing and filed in the relevant folder indicated above after making a due entry in the order- sheet. The assessment order can be passed only after the receipt of such approval. The fact that such approval has been obtained should also be mentioned in the body of the assessment order itself."
Thus, from the aforesaid facts it becomes clear, the Assessing Officer while exercising power u/s 153A has to pass the assessment order as per the approval granted by addl. CIT u/s 153D. In these circumstances, Assessing Officer having examined the issue and applied his mind to the facts and having passed the order in terms with the directions of the Range Head as per the statutory provisions contained u/s 153D, the assessment order cannot be held to be erroneous. In fact ld. CIT has blamed the range head for the directions given by him while approving the draft assessment order. Therefore, if at all, there is any error, it is in the order of the range head and not in the assessment order. Without revising the directions of addl. CIT, assessment order could not be revised.
Furthermore, it is clear from the discussions made by ld. CIT, the reasons on which range head i.e. Addl. CIT disapproved treating the advance as deemed dividend u/s 2(22)(e) is because it is converted as advance in the name of assessee merely through book entries and actually no money was advanced to assessee and secondly the company i.e. VCPL was not having accumulated profits Ch. Krishna Murthy at the time of such payment. Though, learned
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CIT has accepted the fact that in reality no money was advanced by the company to assessee, but, according to him, by virtue of such a transaction assessee and his family members have become owner of shares worth Rs. 4 crores in the newly formed company. According to him, in these circumstances, journal entries passed in the books of account by converting the outstanding liability of the newly formed company as advance given to assessee will attract provisions of section 2(22)(e). In this context, he has relied upon a decision of the ITAT Chennai Bench and another decision of Hon'ble Madras High Court in case of T. Sundaram Chettiar and Another Vs. CIT, 49 ITR 287. From the aforesaid discussions of learned CIT, it is apparent and obvious that the issue whether the advance can be treated as deemed dividend u/s 2(22)(e) at the hands of assessee is a debatable issue on which more than one view are possible. Therefore, when the view taken by Addl. CIT and Assessing Officer can be considered as one of the possible views, assessment order cannot be treated as erroneous, even though there may be some prejudice caused to revenue. One more aspect, which needs to be taken note of is learned CIT while revising assessment order and directing Assessing Officer to treat the amount of Rs. 4,27,36,648 as deemed dividend at the hands of assessee has totally failed to examine whether M/s VCPL at the time of alleged payment was having accumulated profits or not. When learned CIT is aware of the fact that Addl. CIT while disapproving the addition proposed to be made u/s 2(22)(e) has observed that M/s VCPL did not have accumulated profits, which is one of the conditions for invoking section 2(22)(e), it was incumbent upon him to examine that aspect before directing for addition of Rs. 4,27,36,648 u/s 2(22)(e). ITAT Lucknow Bench in case of Mehtab Alam Vs. ACIT, ITA No. 288 to 294/LKW/14 dated 18/11/2014 while setting aside the order passed u/s 263 of the Act, amongst other decisions also took note of a decision of the Hon'ble Allabahad High Court in case of CIT Vs. Dr. Ashok Kumar wherein it was held that when Assessing Officer Ch. Krishna Murthy was fully alive about the facts of the case and the order passed by him was approved by Addl. CIT, then, ld. CIT cannot be justified in interfering in the approval given by Addl. CIT for framing assessment order and there will be no case for setting aside the assessment order. Therefore, considered in the aforesaid perspective when it is a fact on record that both the addl. CIT while granting approval u/s 153D as well as Assessing Officer in course of assessment proceeding have examined the issue of deemed dividend u/s 2(22)(e) of the Act at the hands of assessee in relation to the advance shown in his name in the books of M/s VCPL and the view taken by Assessing Officer as well as addl. CIT can be considered as one of the possible views, assessment order cannot be treated as erroneous. More so, when assessment order has been passed in terms with section 153D of the Act and ld. CIT has not revised the directions of addl. CIT. In these circumstances, as one of the conditions of section 263 is not satisfied, the impugned order passed u/s 263 is not valid. Accordingly, we set aside the impugned order of learned CIT and restored the assessment order passed.
As we have held the revision order to be invalid for the reasons stated above, the other issues raised by assessee in the grounds of appeal relating to the absence of incriminating material, etc. are not required to be gone into. For the very same reason, additional ground is also not required to be adjudicated.”
The Mumbai ‘E’ Bench of the Tribunal in the case of Shri Surendra L. Hiranandani vs. Pr. CIT in ITA Nos. 3226, 3227, 3227, 3228, 3229, 3230, 3231 & 3232/M/2017, order dt. 14/02/2018, order dt. 14/02/2018, held as under:-
“25. We find that assessment order u/s.143 r.w.s.153A of the Act was passed after getting approval of ACIT as per provisions of section 153D of the Act. We find that the order u/s.143A r.w.s. 153 of the Act cannot revise without revising the approval of ACIT. We find that as per the decision of Hon'ble Allahabad High Court in the case of CIT Vs. Dr. Ashok Kumar in I.T. Appeal No.192 of 2000 wherein it is held that the assessment order approved by the 23 ITA No3226-3232.M.17 A.Y.2008-09 to 2014-15 ACIT u/s.153D of the Act cannot subject to revision u/s.263 of the Act. The learned DR could not file any evidence to show that such permission was revised by ACIT in present case, therefore, CIT cannot revise the order passed by AO u/s.153 of the Act. As per section 153A of the Act.
Tribunal in case of Trinity Infra ventures Ltd v. DCIT CC 2(1) in ITA Nos. 584- 589/Hyd/2015 dated 04.12.2015 wherein, the Hon'ble Tribunal has held that the assessment
11 IT(SS)A Nos. 19 to 25/Kol/2019 ITA No. 201/Kol/2021 AYs: 2009-10 to 2016-17 Hindusthan Engineering & Industries Ltd.
order passed u/s 143(3) r.w.s. 153A of the Act cannot be revised without revising the approval of Addl. CIT:
5.4. The Ld. Counsel for the assessee has further submitted that the assessment under section 143(3) read with section 153C was passed after getting approval of Addl. CIT under section 153D of the I.T. Act and therefore such an assessment cannot be revised without revising the directions of the Addl. CIT under section 153D of the I.T. Act. The Ld. Counsel for the assessee, has relied upon the decisions of this Tribunal in the case of Ch. Krishna Murthy vs. ACIT, C.C. 3, Hyderabad in ITA No. 766/Hyd/2012 dated 13.02.2015 and also the decision of Lucknow Bench of ITAT in the case of MehtabAlam 288/Luck/2014 dated 18.11.2014 in support of this contention. He has also placed reliance upon the decision of Hon'ble Allahabad High Court in the case of CIT vs. Dr. Ashok Kumar in I.T. Appeal No. 192 of 2000 wherein it has been held that the assessment order approved by the Addl. CIT under section 153D, cannot be subjected to revision under section 263 of the I.T. Act. In view of the above decision also, we hold that the revision order under section 263 of the I.T. Act is not sustainable. Accordingly, we allow the grounds of the assessee".
Hon'ble Tribunal in case of Dhariwal Industries Ltd v. CIT in ITA Nos. 1108-1113/Pn/2014 dated 23.12.2016 wherein, the Hon'ble Tribunal held as under:
Referring to the decision of the Hyderabad Bench of the Tribunal in the case of M/s. Trinity Infra Ventures Ltd. Vs. DCIT vide ITA Nos. 584 to 589/H/2015 order dated 04-12- 2015 for A.Yrs. 2005- 06 to 2010-11 he submitted that the Tribunal in the said decision, following various decisions including the decision of Hon'ble Allahabad High Court in the case of CIT Vs. Dr. Ashok Kumar vide Income Tax Appeal No.192/2000 order dated 06-08-2012, has held that assessment order approved by the Addl.CIT u/s.153D cannot be subjected to revise u/s.263 of the I.T. Act. 12. We have considered the rival arguments made by both the sides, perused the orders of the AO and the Ld.CIT and the paper book filed on behalf of the assessee. 14. We find merit in the above submission of the Ld. Counsel for the assessee. We find the Lucknow Bench of the Tribunal in the case of MehtabAlam Vs. ACIT vide ITA Nos.288 to 294/Lkw/2014 order dated 18-11-2014 while deciding an identical issue has observed as under. 14.1 We find the Hyderabad Bench of the Tribunal in the case of CH. Krishna Murthy Vs. ACIT vide ITA No.766/Hyd/2012 order dated 13-02-2015 following the decision of the Lucknow Bench of the Tribunal in the case of MehtabAlam (Supra) held that CIT is not justified in assuming jurisdiction u/s.263 when the order has been passed in terms of section 153D of the Act. 14.2 We find the Hyderabad Bench of the Tribunal in the case of M/s. Trinity Infra Ventures Ltd. (Supra) had an occasion to decide an identical issue and it held that the assessment order approved by the Addl.CIT u/s.153D cannot be subject to revision u/s.263 of the I.T. Act. The relevant observation of the Tribunal at Para 5.4 of the order reads as under.
Since in the instant case also the Assessing Officer has passed the order after obtaining necessary approval from Addl.CIT u/s.153D of the I.T. Act, therefore, respectfully following the above-mentioned decisions of the Coordinate Benches of the Tribunal we are of the considered opinion that the CIT has no power to revise the order u/s.263 of the I.T. Act in the instant case since the same has been passed with the approval of the Addl.CIT u/s.153D of the I.T. Act. We respectfully following the decision of ACIT Vs. Dr. Ashok Kumar, ITA 192 of 2000. We find that in the instant case the original approval was granted by Addl. CIT and this assessment order is cannot be revise without approval of Add. CIT. (III) CIT has not conducted any enquiry before directing the Assessing Officer to decide the issues afresh.”
The Pune Bench of the Tribunal in the case of Dhariwal Industries Limited vs. CIT, Central, Pune 2017 (1) TMI 260 – ITAT Pune, held as under:- “13. It is the submission of the Ld. Counsel for the assessee that since the order has been passed by the Assessing Officer after obtaining approval of the Addl. CIT u/s. 153D of the I.T. Act, therefore, the Ld. CIT has no power to exercise his jurisdiction u/s. 263 of the I.T. Act, 1961. It is also his submission that even on merit the Tribunal has decided both the issues in favour of the assessee.14. We find merit in the above submission of the Ld. Counsel for the assessee. We find the Lucknow Bench of the Tribunal in the case of Mehtab Alam v. ACIT vide ITA Nos. 288 to 294/Lkw/2014 order dated 18-11-2014 while deciding an identical issue has observed as under: “31. Besides other judgments were also referred by the assessee in this regard and we have also carefully examined the same and we find that similar views were expressed by various judicial authorities.
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We have also examined the judgment of the Hon’ble jurisdictional High Court in the case of CIT v. Dr. Ashok Kumar (supra) on an issue whether the assessment order was passed with the approval of the Addl. CIT and their Lordships have held that the Assessing Officer was fully alive about the fads of the case and that is why he got necessary approval of the Addl. CIT before completing the assessment orders for all the assessment years and once that is not disputed by the Revenue, then the Id. Commissioner of Income-tax would not be justified in interfering in the approval according by the Addl. CIT for framing the assessment order and than there was no case for setting aside the assessment order for the assessment years in question.” 14.1 We find the Hyderabad Bench of the Tribunal in the case of CH. Krishna Murthy v. ACIT vide ITA No. 766/Hyd/2012 order dated 13-02-2015 following the decision of the Lucknow Bench of the Tribunal in the case of Mehtab Alam (Supra) held that CIT(A) is not justified in assuming jurisdiction u/s. 263 when the order has been passed in terms of section 153D of the Act. 14.2 We find the Hyderabad Bench of the Tribunal in the case of Trinity Infra Ventures Ltd. (Supra) had an occasion to decide an identical issue and it held that the assessment order approved by the Addl. CIT u/s. 153D cannot be subject to revision u/s. 263 of the I.T. Act. The relevant observation of the Tribunal at Para 5.4 of the order reads as under: 5.4. The Ld. Counsel for the assessee has further submitted that the assessment under section 143(3) read with section 153C was passed after getting approval of Addl. CIT under section 153D of the I.T. Act and therefore such an assessment cannot be revised without revising the directions of the Addl. CIT under section 153D of the I.T. Act. The Ld. Counsel for the assessee, has relied upon the decisions of this Tribunal in the case of Ch. Krishna Murthy v. ACIT, C.C. 3, Hyderabad in ITA. No 766/Hyd/2012 dated 13.02.2015 and also the decision of Lucknow Bench of ITAT in the case of Mehtab Alam 288/Luck/2014 dated 18.11.2014 in support of this contention. He has also placed reliance upon the decision of Hon'ble Allahabad High Court in the case of CIT v. Dr. Ashok Kumar in I.T. Appeal No. 192 of 2000 wherein it has been held that the assessment order approved by the Addl. CIT under section 153D, cannot be subjected to revision under section 263 of the I.T. Act. In view of the above decision also, we hold that the revision order under section 263 of the I.T. Act is not sustainable. Accordingly, we allow the grounds of the assessee.” 15. Since in the instant case also the Assessing Officer has passed the order after obtaining necessary approval from Addl. CIT u/s. 153D of the I.T. Act, therefore, respectfully following the above-mentioned decisions of the Coordinate Benches of the Tribunal we are of the considered opinion that the CIT has no power to revise the order u/s. 263 of the I.T. Act in the instant case since the same has been passed with the approval of the Addl. CIT u/s. 153D of the I.T. Act.”
Respectfully following the propositions of law laid down in all these judgments and applying the same to the facts of the case, we have no other alternative but to hold that the revision order passed u/s 263 of the Act by the ld. Pr. CIT is bad in law for the reason that the order of statutory approval passed u/s 153D of the Act, based on which the order u/s 153A r.w.s. 143(3) of the Act, dt. 30/03/2016, was passed, was not revised and is a valid and legal order.
We, therefore respectfully following the decision of Co-ordinate Bench, hold that the revisionary jurisdiction has been invalidly exercised and therefore the order passed 263 of the Act is also invalid and nullity. The appeal of the assessee is allowed.
The issue raised in the various grounds of appeal in IT(SS)A Nos. 23 to 25/Kol/2019 for AY 2013-14 to 2015-16 by the assessee are similar as decided by us in IT(SS)A Nos. 22/Kol/2019 for AY 2012-13. Accordingly our finding in IT(SS)A Nos. 22/Kol/2019 would, mutatis mutandis, apply so these appeals as well. Consequently these appeals of the assessee are allowed.
Now we shall take in ITA No. 201/Kol/2021 for AY 2016-17.
13 IT(SS)A Nos. 19 to 25/Kol/2019 ITA No. 201/Kol/2021 AYs: 2009-10 to 2016-17 Hindusthan Engineering & Industries Ltd. 18. Issue raised in ground no. 1 is against the invalid exercise of jurisdiction by Ld. PCIT thereby setting aside the order passed u/s 143(3) of the Act dated 31.12.2018 without satisfying the conditions laid down u/s 263 of the Act.
Facts in brief are that the assessment was framed u/s 143(3) vide order dated 31.12.2018. The Ld. PCIT on perusal of the said order revised the assessment on the same ground on which it was revised in the earlier years right from 2009-10 to 2015- 16 on the ground of wrongly allowing the claim u/s 35(2AB) of the Act without verifying the conditions as laid down in the Act and treated the order passed as erroneous and prejudicial to the interest of the revenue thereby revising the assessment framed and directing the AO to pass assessment afresh by examining the issues after giving reasonable opportunity of hearing to the assessee.
The Ld. A.R vehemently submitted before us that the order passed by the AO u/s 143(3) dated 31.12.2018 is neither erroneous nor prejudicial to the interest of the revenue. The Ld. A.R. submitted that the assessee has claimed deduction u/s 35(2AB) of the Act in respect of research and development expenses. The Ld. A.R. submitted that once the approval was granted by the prescribed authority as provided u/s 35(2AB) of the Act then the deduction as claimed by the assessee under the impugned section has to be allowed and the AO has no jurisdiction to enquire into the said issue. The Ld. A.R. submitted that prescribed authority as provided u/s 35(2AB) of the Act is the Department of Scientific, Industrial Research, Govt. of India and once the search facility was approved the entire expenditure so incurred has to be allowed as provided u/s 35(2AB) of the Act and is not open to the AO to question the said claim of the assessee. The Ld. A.R. in defense of his arguments relied on the decision of Co- ordinate Benches in the case of Texmaco Rail & Engineering Ltd. vs. PCIT in [2017] 86 taxmann.com 50 (Kolkata-Trib). The Ld. A.R. finally prayed that the order passed by the AO allowing the said claim of the assessee on the basis of approval granted by the Department of Scientific Industrial Research, Govt. of India has correctly been
14 IT(SS)A Nos. 19 to 25/Kol/2019 ITA No. 201/Kol/2021 AYs: 2009-10 to 2016-17 Hindusthan Engineering & Industries Ltd.
allowed and thus the order is neither erroneous nor prejudicial to the interest of the revenue and accordingly, the order of Ld. PCIT may kindly be quashed.
The Ld. D.R on the other hand relied heavily on the order of Ld. PCIT.
After hearing the rival submissions and perusing the material on record, we observe that the assessee has claimed weighted deduction in respect of expenditure on scientific research u/s 35(2AB) of the Act. We note that the approval was granted to the assessee by the Department of Scientific Industrial Research, Govt. of India. Therefore we find force in the arguments of the assessee that once the research facility is approved the AO has no business to question the deduction. If the AO has any reservation on the claim of weighted deduction claimed by the assessee it can be referred to the Department of Scientific Industrial Research, Govt. of India and AO has no jurisdiction to question the same. The case of the assessee is squarely covered by the decision of Co-ordinate Bench of Kolkata in the case of Texmac Rail & Engineering Ltd. (supra) wherein the Tribunal has held as under:
“11. We have given a very careful consideration to the rival submissions. We are of the view that in the facts and circumstances of the present case, the CIT ought not to have exercised jurisdiction u/s.263 of the Act and set aside the order of the AO. It is undisputed that Department of Scientific and Industrial Research (DSIR) granted recognition to the Assessee for the period from. April 1st, 2010 to 31st March, 2019. It has been held in the decision referred to by the learned counsel for the Assessee in the proceedings before the CIT u/s. 263 of the Act and before the Tribunal that deduction Sec.35(2AB) read with rule 6 does not prescribe any time limit within which application for approval in form No.3CM has to be made. Once approval is granted by DSIR the same would apply till it is revoked. The Hon'ble Gujarat High Court and the Hon'ble Delhi High Court in the case of Claris Lifesciences Ltd., and Sadan Vikas (India) Ltd., have taken the view that on a plain and harmonious reading of rule 6(5A) and Form No. 3CM it would be appropriate to come to a conclusion once a research facility is approved, the entire expenditure so incurred on development of R&D facility has to be allowed for weighted deduction as provided by s. 35(2AB). In the light of the aforesaid judicial pronouncements, it cannot be said that the order of the AO was erroneous. Even if it were to be said that the view taken by the Courts and Tribunal are not correct, the said views were a possible view. Once the view taken by the AO is either correct or a possible view then the CIT in exercise of his powers u/s.263 of the Act cannot hold the order of the AO to be erroneous just because he does not agree with the view of the AO. Since the primary condition for exercise of jurisdiction u/s.263 of the Act viz., the order of the AO should be erroneous is absence in the present case, we are of the view that the order u/s.263 of the Act is unsustainable and the same is hereby quashed. The appeal of the Assessee is allowed.”
15 IT(SS)A Nos. 19 to 25/Kol/2019 ITA No. 201/Kol/2021 AYs: 2009-10 to 2016-17 Hindusthan Engineering & Industries Ltd. We therefore respectfully following the decision of Co-ordinate Bench of Kolkata to quash the order passed u/s 263 of the Act by the Ld. PCIT. Accordingly, the appeal of the assessee is allowed.
In the result, all the appeals of the assessee are allowed.
Order is pronounced in the open court on 20th December, 2022
Sd/- Sd/- (Sonjoy Sarma/ संजय शमा�) (Rajesh Kumar/ राजेश कुमार) Judicial Member / �या�यक सद�य Accountant Member / लेखा सद�य Dated: 20th December, 2022 SB, Sr. PS Copy of the order forwarded to: 1. Appellant- Hindusthan Engineering & Industries Ltd, Salarpuria Jajodia & Co., 3rd Floor, 7, Chittaranjan Avenue, Kolkata-700072 2. Respondent – (i) ACIT, Central, Range-1, Kolkata
(ii) PCIT, Central-1, Kolkata 3. DR, Kolkata Benches, Kolkata (sent through e-mail) True Copy By Order
Assistant Registrar ITAT, Kolkata Benches, Kolkata