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Income Tax Appellate Tribunal, KOLKATA BENCH “C”, KOLKATA
Before: SHRI SONJOY SARMA, HON’BLE & SHRI GIRISH AGRAWAL, HON’BLE
O R D E R
PER SONJOY SARMA, JM:
This appeal filed by the assessee for the assessment year 2014-15 is directed against the order dated 30.10.2018 passed u/s 263 of the I.T. Act by the ld. PCIT-2, Kolkata which arising from the assessment order dated 30.10.2018 passed by the ACIT, Circle-12(2), Kolkata framed u/s 143(3) r.w.s. 92CA & 144C of the Income-tax Act, 1961. The grounds raised
by the assessee are as follows:
1. Order bad in law and on facts 1.1 That on the facts and in the circumstances of the case and in law, the order passed by the Ld. CIT under section 263 of the Act is illegal, invalid and not sustainable in law.
1.2 That on the facts and in the circumstances of the case and in law, the Ld. CIT grossly erred in passing the order under section 263 of the Act, thereby setting aside the assessment order under section 143(3) r.w.s. 144C of the Act dated 30 October 2018 passed by the Assessing Officer (AO) on specific issues holding that the order was erroneous and prejudicial to the interest of the Revenue, when such order was neither erroneous nor prejudicial.
M/s. Philips India Limited A.Y. 2014-15 1.3 That on the facts and circumstances of the case and in law, the order passed by the Ld. PCIT is bad in law as the same has been passed without considering the written submission filed by the Appellant.
2. Disallowance of net prior period expense
2.1 That on the facts and in the circumstances of the case, the Ld. PCIT has erred in holding that prior period expense amounting to Rs. 1,55,87,810 ought to be disallowed without considering the fact that the Appellant had already disallowed the said net prior period expense in its income-tax computation while filing its return of income for the year under consideration.
2.2 That on the facts and in the circumstances of the case, the Ld. PCIT has erred in holding that prior period expense amounting to Rs. 1,55,87,810 ought to be disallowed without considering that the same would result in taxation of the same amount twice.
2.3 That on the facts and in the circumstances of the case, the Ld. PCIT erred in not considering the submissions filed by the Appellant wherein the Appellant had clearly mentioned the fact that the Company had suo-moto disallowed the net prior period expense amounting to Rs. 1,55,87,810 while filing its return of income for the year under consideration.
At the time of hearing, the registry has informed that the present appeal is time barred by 25 days. The assessee has prayed for condonation of delay, the reasons for such delay are placed on record. In the condonation application, the assessee submitted that the appeal of the assessee could not be filed due to imposition of Covid restriction and as such there was a delay of 25 days in filing the instant appeal. We after perusing the condonation petition as well as material available on record find merit and reasonable cause and in the interest of justice condoned the such delay and admit the appeal for adjudication.
Brief facts of the case are that the assessee is a company filed its return of income for the assessment year 2014-15 on 28.11.2014 declaring total income of Rs. 332,65,58,690/- and order u/s 143(3) of the Act was passed on 30.10.2018 by which total income of assessee assessed at Rs. 692,98,56,550/-. Subsequently, ld. PCIT called assessment record and invoke the jurisdiction, the revisionary power provided u/s 263 of the Act. He observed that there was a prior period expense which is not allowable as M/s. Philips India Limited A.Y. 2014-15 per section 37(1) of the Act. Since return of income was filed by the assessee on 28.11.2014 at an income of Rs. 332,65,58,690/- and it was assessed on 30.10.2018 at Rs. 692,98,56,550/-. While exercising the revisionary proceeding, the ld. PCIT observed that there was a net debit of expenditure of Rs. 1,55,87,810/- (Rs. 17,05,43,876/- minus Rs. 15,49,56,066/-) related to the prior period 2012-13 to the P & L A/c. The net debit of expenditure of Rs. 1,55,87,810/- was required to be disallowed and added to the business income of the assessee. However, no disallowance on account of prior period expenditure was done either by the assessee in computation of income or by the department in the order of assessment framed u/s 143(3) r.w.s. 92CA and 144C and in the rectification order u/s 154 also. Therefore, ld. PCIT had taken a view that there was underassessment of income Rs. 1,55,87,810/- and he issued show cause notice u/s 263 of the Act to the assessee and in response to such notice, the assessee submitted its reply vide 22.03.2021 to assessee failed to satisfy the ld. PCIT while filing such submission before him. Therefore, ld. PCIT accordingly held that impugned assessment order dated 30.10.2018 framed u/s 143(3) of the Act is erroneous and prejudicial to the interest of revenue and directed the ld. AO to pass fresh assessment order in light of the observations made in the impugned order.
Aggrieved by the above order, assessee is preferred the instant appeal before this Tribunal raising the two grounds of appeal, out of which one is general in nature and remaining ground is challenging the invocation of jurisdiction u/s 263 of the Act by ld. PCIT and by which the ld. PCIT setting aside the assessment order and observed that the prior period expense amounting to Rs. 1,55,87,810/- ought to be disallowed while doing so without considering the fact that the company has suo-moto disallowed the net prior period expense amounting to Rs. 1,55,87,810/- while filing its return of income for the year under consideration and to substantiate its claim, ld. AR placed before us a Paper Book containing almost 18 pages and brought to our notice that at page no 7 wherein the assessee had suo-moto disallowed the prior period expense amounting to Rs. 1,55,87,810/- while filing its return of income. Therefore, the order passed by the ld. PCIT required to be set aside and the original assessment order passed u/s 143(3) vide order dated 30.10.2018 required to be sustained.
M/s. Philips India Limited A.Y. 2014-15
On the other hand, ld. DR relied on the order passed by the ld. PCIT, we after hearing the rival submission and perusing the material available on record. We find that prior period expenses amounting to Rs. 1,55,87,810/- had suo-moto disallowed by the assessee while filing its return of income for the assessment year in question and to substantiate its claim, the ld. AR produced before us sufficient evidence to prove the fact. Thus the observation made by ld. PCIT is not correct and accordingly order passed u/s 143(3) by the ld. Assessing Officer is not erroneous and prejudicial to the interest of the revenue. We, therefore, hold that revisionary jurisdiction has not been validly exercised by the ld. PCIT. Accordingly, we quash the revisionary proceedings initiated u/s 263 of the Act and allow the appeal of the assessee.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 22.09.2022.