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Before: Shri V. Durga Rao & Shri G. Manjunatha
आयकर अपीलीय अिधकरण, ’सी’ �ायपीठ, चे�ई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI �ी वी दुगा� राव �ाियक सद� एवं �ी जी. मंजुनाथा, लेखा सद� के सम� Before Shri V. Durga Rao, Judicial Member & Shri G. Manjunatha, Accountant Member आयकर अपील सं./I.T.A. Nos. 61 & 62/Chny/2021 िनधा�रण वष�/Assessment Years:2013-14 & 2014-15 M/s. ABT Limited, The Principal Commissioner of 180, Race Course Road, Vs. Income Tax (Central), Coimbatore 641 018. Chennai-2, Chennai. [PAN:AABCA8398K] (अपीलाथ�/Appellant) (��थ�/Respondent) अपीलाथ� की ओर से / Appellant by : Shri N. Arjun Raj, C.A. ��थ� की ओर से/Respondent by : Shri M. Rajan, CIT सुनवाई की तारीख/ Date of hearing : 01.08.2022 घोषणा की तारीख /Date of Pronouncement : 24.08.2022 आदेश /O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: Both the appeals filed by the assessee are directed against different orders of the ld. Principal Commissioner of Income Tax (Central), Chennai-2, Chennai, dated 04.03.2021 and 05.03.2021 relevant to the assessment years 2013-14 and 2014-15 respectively challenging the revision orders passed under section 263 of the Income Tax Act, 1961 [“Act” in short].
Facts are, in brief, that the assessee filed its original return of
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income on 30.09.2013 for the assessment year 2013-14 declaring total income of ₹.13,68,88,710/- under normal provisions and book profit of ₹.5,76,55,857/- under section 115JB of the Act. The return of income was processed under section 143(1) of the Act. Subsequently, the case was selected for scrutiny through CASS and notice under section 143(2) of the Act dated 04.09.2014 was issued and served on the assessee. After verification of the details filed by the assessee, the assessment was completed under section 143(3) of the Act dated 08.02.2016 by assessing total income of the assessee under normal provisions at ₹.16,37,88,681/- after making disallowance of claim of revenue expenditure after allowing depreciation @ 10% treating the expenditure as capital.
Thereafter, a search action under section 132 of the Act was conducted in the case of M/s. ABT Limited on 23.03.2017 at the corporate office at 180, Race Course Road, Coimbatore. M/s. ABT Ltd. and M/s. ABT Madras P. Ltd. are the related entities of Sakthi Group of companies. Consequent to the search, the assessment under section 153A r.w.s. 143(3) of the Act dated 28.12.2018 has been completed by assessing the income of the assessee at ₹.13,68,88,710/-, which was returned in response to the notice under section 153A of the Act.
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Against the assessment order passed by the Assessing Officer under section 143(3) of the Act dated 22.02.2016, the case has been subsequently taken up for revision proceedings under section 263 of the Act on the ground that the assessment order is erroneous and prejudicial to the interest of Revenue on account of short disallowance under section 14A of the Act amounting to ₹.3,01,70,930/-. On perusal of the computation statement, the ld. PCIT has noted that the assessee has disallowed a sum of ₹.94,078/- towards deemed expenses on exempted income. From the balance sheet of the assessee as on 31.03.2013, the ld. PCIT has observed that the average of value of investment from which the income does not or shall not form part of the total income amounts to ₹.68,46,42,475/-. Further the assessee has incurred finance cost of ₹.31,92,41,003/- during the year. The assessee also had total asset for ₹.814,27,46,778/-. Thus, the correct amount of disallowance under section 14A read with Rule 8D of the Income Tax Rules, 1962 was worked out to be ₹.3,02,65,008/-. The amount already disallowed under section 14A in computation statement was ₹.94,078/-. Hence, there is a short disallowance under section 14A of the Act amounts to ₹.3,01,70,930/-, which was not considered in the original assessment
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order under section 143(3) of the Act dated 22.02.2016. Therefore, the ld. PCIT proposed for revision of assessment under section 263 of the Act.
After considering the written submissions of the assessee, the ld. PCIT has held that the assessment order passed under section 143(3) dated 22.02.2016 and subsequent assessment order pursuant to search proceedings passed under section 143(3) r.w.s 153A of the Act dated 28.12.2018 for the assessment year 2013-14 are erroneous and prejudicial to the interest of the Revenue and set aside the same under section 263 of the Act with a direction to restrict the disallowance under section 14A to the dividend income (exempt portion) and to make the order denovo taking into consideration of the recent decision of CBDT circulars/instructions in this regard after conducting necessary enquiries as deemed fit by affording due opportunity to the assessee.
The ld. Counsel for the assessee has submitted that the revision order passed by the ld. PCIT under section 263 of the Act is beyond prescribed time limit provided under sub-section (2) of section 263 of the Act, without appreciating the fact that the issue of disallowance under section 14A of the Act was not subject matter of verification during the reassessment proceedings passed in pursuant to the search action under section 143(3) r.w.s. 153A of the Act. By referring to the provisions of
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section 263 of the Act, the ld. Counsel for the assessee has submitted that as per provisions any order can be revised within two years from the end of financial year in which original assessment order was passed. In this case, original assessment order was passed on 22.02.2016 by considering all the materials brought on record as required by the Assessing Officer. Further, the said issue was neither subject matter of reassessment nor was examined by the Assessing Officer and hence, question of revision of assessment order passed under section 143(3) r.w.s 153A of the Act, dated 04.03.2021 does not arise. Therefore, if original assessment order dated 22.02.2016 is considered, then revision order passed by ld. PCIT dated 04.03.2021 is clearly barred by limitation and liable to be quashed. By filing copy of the decision of the Coordinate Benches of the Tribunal order dated 17.09.2021 in the case of Seyad Shariat Finance Ltd. v. PCIT in I.T.A. No. 979/Chny/2020, the ld. Counsel for the assessee has prayed for quashing the revision order passed under section 263 of the Act for both the assessment years under appeal.
On the other hand, the ld. DR has submitted that the ld. PCIT has discussed the issue in light of provisions of section 153A of the Act and held that once search action took place, then assessment for six assessment years immediately preceding assessment year in which
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search took place gets reopened and Assessing Officer shall have power to assess/reassess the total income including undisclosed income, if any found as a result of search and thus, once search took place, original assessment order passed under section 143(3) of the Act gets wiped out. Therefore, it was submitted that that there is no merit in the arguments of the ld. Counsel for the assessee that revision proceedings is beyond limitation. It was further submission that as per Explanation 2 to section 263 of the Act, an order shall be deemed to be erroneous, if it has been passed without making inquiries/verification which should have been made. Since, the Assessing Officer has not examined the issue of disallowance under section 14A of the Act, the assessment order passed by the Assessing Officer becomes erroneous and prejudicial to the interests of the Revenue. Therefore, the ld. PCIT has set aside assessment order passed by the Assessing Officer and directed the Assessing Officer to restrict the disallowance under section 14A to the dividend income (exempt portion) in accordance with law and strongly supported the order of the ld. PCIT.
We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. The case of the assessee is that the revision order passed by the ld. PCIT under section
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263 of the Act is beyond prescribed time limit provided under sub-section (2) of section 263 of the Act as the issue of disallowance under section 14A of the Act was not subject matter of verification during the reassessment proceedings passed in pursuant to the search action under section 143(3) r.w.s. 153A of the Act. The main bone of contention of the ld. DR is that once a search has taken place under section 132 of the Act, the original assessment gets wiped out and the Assessing Officer shall have powers to assess or re-assess the total income including the income that has escaped assessment, if any. Thus, the new assessment order passed under section 143(3) r.w.s. 153A/153C of the Act shall persist and if such assessment order is considered, the revision order passed by the ld. PCIT is well within two years from the end of relevant financial year.
Similar issue was subject matter in appeal before the Tribunal in the case of Seyad Shariat Finance Ltd. v. PCIT (supra), wherein, by referring to the decision of the Hon’ble Kerala high Court in the case of M/s. Skyline Builders v. CIT (2019) 105 taxmann.com 207 as well as the decision of the Hon’ble Jurisdictional High Court in the case of Indira Industries v. PCIT (2018) 95 taxmann.com 103 (Mad) in which the judgement of the Hon’ble Supreme Court in the case of CIT v.
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Alagendran Finance Ltd. 293 ITR 1 (SC) has been considered, the Coordinate Benches of the Tribunal has observed and held as under: “7. We have heard both the parties, perused material available on record and gone through orders of the authorities below. The provisions of section 263 of the Income Tax Act, 1961 empowers Pr.CIT / CIT to revise assessment order passed by the Assessing Officer, if PCIT satisfies that assessment order passed by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of revenue. Sub-section (2) of section 263 prescribes time limit for passing revision order, as per which no order shall be made under sub- section (1) after expiry of two years from the end of financial year in which order sought to be revised was passed. If a combined reading of sub-section (1) and (2) of section 263 of the Act, it is very clear from the provisions of the Act that if the PCIT wants to exercise his powers u/s.263 of the Act, then he should be satisfied himself about assessment order passed by the Assessing Officer and observed that assessment order passed by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of revenue and further, such powers can be exercised within two years from the end of the financial year in which order sought to be revised was passed. 8. In light of above legal position, if you examine present case one has to see whether revisional order passed by the learned PCIT is within the time limit prescribed under the Act or barred by limitation. Admittedly, original assessment order was passed u/s. 143(3) of the Act on 28.03.2016 . In the said order, the Assessing Officer has allowed claim of deduction u/s.80IA of the Income Tax Act, 1961. Further, subsequent assessment order was passed in pursuant to search action u/s. 132 of the Act on 24.12.2019. In the said assessment order, except issue of additions towards unexplained cash credit u/s.68 of the Act, no other issue was discussed by the Assessing Officer including deduction claimed u/s.80IA of the Income Tax Act, 1961. The proposed revision proceedings was taken up to examine issue of deduction claimed u/s.80IA of the Act, and said issue was first time examined in original assessment proceedings u/s.143(3) of the Act on 28.03.2016. It is a well settled principles of law by various courts that PCIT/CIT can exercise his revisional powers on the issue which was subject matter of assessment proceedings whether or not said issue was discussed by the Assessing Officer. In this case, the learned PCIT has taken up revision proceedings on the issue of deduction claimed u/s.80IA of the Act, and said issue was not a subject matter of assessment in pursuant to search action u/s.143(3) r.w.s. 153C of the Income Tax Act, 1961. Once issue was not a subject matter of assessment proceedings pursuant to search, then date of assessment goes back to original assessment passed u/s.143(3) of the Act and if you go by said assessment order, then date shall be reckoned from 28.03.2016. If you go by that date, revision order passed by the PCIT dated 09.12.2020 is clearly beyond two years from the end of financial year in which order sought to be
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revised was passed. This legal position is fortified by the decision of the Hon’ble Kerala High Court in the case of M/s.Skyline Builders Vs. CIT (supra), where under identical set of facts, the Hon’ble High Court held that where no revisional order was passed by CIT at the time of completion of original assessment, limitation period for passing order u/s.263 had to commence from first order of assessment. The Hon’ble Madras High Court in the case of Indira Industries Vs. PCIT (2018) 95 taxmann.com 103 (Mad), had considered an identical issue and held that when a notice u/s.263 raises new issues, which are not subject matter of reassessment proceedings, then two years period contemplated under sub-section (2) of section 263 would begin to run from date of original assessment. The Hon’ble Madras High Court while considering the issue had followed decision of the Hon'ble Supreme Court in the case of CIT Vs.Alagendran Finance Ltd. (293 ITR 1) (SC), where a similar view had been taken by the Hon'ble Supreme Court. As regards case law relied upon by the learned DR in the case of M/s.Canara Housing Development Co. Ltd. Vs. DCIT (supra) and other case law, we find that those case laws rendered under different set of facts and has no application to the facts 11 ITA No. 979/Chny/2020 of the present case and hence, case laws relied upon by the learned DR are not considered. 9. In this view of the matter and considering facts and circumstance of the case and also by following ratio of various case laws discussed herein above, we are of the considered view that revision order passed by the learned PCIT dated 09.12.2020 is barred by limitation because, said order was passed after expiry of two years from the end of financial year in which order sought to be revised was passed. Hence, we quash revision order passed by the learned PCIT u/s.263 of the Income Tax Act, 1961. 10. In the result, appeal filed by the assessee is allowed.” 10. The ld. DR could not controvert the above decision of the Coordinate Bench of the Tribunal in the case of Seyad Shariat Finance Ltd. v. PCIT (supra). Therefore, respectfully following the above decision of the Tribunal, we hold that the revision order passed by the ld. PCIT dated 04.03.2021 is clearly barred by limitation for the reason tjhat the said order was passed after expiry of two years from the end of financial year in which the assessment order sought to be revised was passed.
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Accordingly, the revision order passed under section 263 of the Act is quashed for the assessment year 2013-14.
So far as assessment year 2014-15 is concerned, since facts are similar to that of the assessment year 2013-14, the revision order passed under section 263 of the Act dated 05.03.2021 for the assessment year 2014-15 also stands quashed.
In the result, both the appeals filed by the assessee are allowed. Order pronounced on the 24th August, 2022 in Chennai.
Sd/- Sd/- (G. MANJUNATHA) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, 24.08.2022 Vm/- आदेश की �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant, 2.��थ�/ Respondent, 3. आयकर आयु� (अपील)/CIT(A), 4. आयकर आयु�/CIT, 5. िवभागीय �ितिनिध/DR & 6. गाड� फाईल/GF.