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Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI N.K. PRADHAN
ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the Revenue. The relevant assessment year is 2011-12. The appeal is directed against the order passed by the Commissioner of Income Tax (Appeals)-16, Mumbai [in short ‘CIT(A)’] and arises out of the assessment completed u/s 143(3) r.w.s. 263 of the Income Tax Act 1961, (the ‘Act’).
Briefly stated, the facts of the case are that the assessee filed its return of income for the assessment year (AY) 2011-12 on 30.09.2011 declaring total income at Rs. Nil. Assessment u/s 143(3) was completed by the Assessing Officer (AO) on 26.02.2014 determining the income at Rs. Nil under the normal provisions and Rs.19,80,289/- u/s 115JB of the Act. The income was assessed at Rs.1,46,98,050/-, but the same was reduced to Nil
M/s Future Ideas Company Ltd. after set off of brought forward losses. Against the assessment order passed by the AO, the assessee filed an appeal before the CIT(A), who granted relief amounting to Rs.24,79,503/-. Thereafter, the Pr. CIT-9, Mumbai passed an order u/s 263 dated 24.09.2016, directing the AO to pass a fresh assessment order as per law, after conducting proper inquiries/investigations. Following the direction of the Pr. CIT-9, the AO arrived at total income of Rs. Nil as per the normal provisions and Rs.2,44,98,158/- u/s 115JB of the Act.
Aggrieved by the order u/s 143(3) r.w.s. 263 dated 24.09.2016 passed by the AO, the assessee filed an appeal before the Ld. CIT(A). We find that vide order dated 27.03.2019, the Ld. CIT(A) allowed the appeal on the ground that the ITAT has set aside/quashed the order u/s 263 passed by the Pr. CIT-9 and therefore, the subsequent assessment order passed by the AO does not survive.
Before us, the Ld. Departmental Representative (DR) relies on the order of the AO. On the other hand, the Ld. counsel for the assessee relies on the order of the Ld. CIT(A).
5. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below.
In the instant case, the order u/s 263 passed by the Pr. CIT has been set aside/quashed by the ITAT ‘F’ Bench, Mumbai (ITA No. 3062/Mum/2016) for the impugned assessment year vide order dated 12.04.2017 and we produce below the concluding paragraphs :
“4.4.5 For the purpose of revision under section 263 of the Act, what is relevant is to decide whether the view adopted by the AO in the order of assessment, while considering the issue of disallowance under section 14A r.w. rule 8D of the Rules, was a possible view, notwithstanding the fact that the learned CIT entertains a M/s Future Ideas Company Ltd. different view/opinion on the same set of facts. In the case on hand, as spelt out earlier in this order, and which we again reiterate, that the learned CIT has not controverted the factual aspects of the AO’s finding that no disallowance of interest on loans debited by the assessee is called for thereon (ostensibly under rule 8D(2)(ii) of the Rules) since almost the entire investment was made strategically in group concerns for the purposes of the assessee’s business, but proceeded beyond the show cause notice he issued to the assessee by directing inquiry to be carried out under section 57(ii) of the Act also alongwith the disallowance to be made under rule 8D(2)(ii) of the Rules. We also find that the learned CIT/learned D.R. for Revenue have also not controverted the judicial pronouncements cited by the assessee in support of its various contentions, on jurisdiction as well as on merits. In this factual and legal matrix of the case as laid out above, we are of the opinion that, since it is clear to us that inquiry in respect of the requirement of disallowance of interest under section 14A r.w. rule 8D of the Rules was conducted by the AO in the assessment proceedings, as is evident from the order of assessment for A.Y. 2011-12, and he took a possible view that no disallowance was called for on interest, ostensibly in respect of rule 8D(2)(ii) of the Rules and that disallowance was called for under rule 8D(2)(iii) of the Rules; the mere fact that the CIT is not in agreement with the view adopted by the AO, would not render the order of assessment erroneous and prejudicial to the interest of Revenue. In coming to this view, we draw support from, inter alia, the decisions of the Hon'ble Courts in the case of Malabar Industrial Co. Ltd. (243 ITR 83) (SC), CIT vs. Max India Ltd. (295 ITR 282) (SC) and Design and Automation Engineers (Bombay) P. Ltd. (323 ITR 632) (Bom). In this factual and legal matrix of the case and considering the aforesaid judicial pronouncements, we are of the view that since the AO has come to a finding and taken a possible view in the matter after application of mind, the conditions precedent for the learned CIT for invoking jurisdiction under section 263 of the Act did not exist and therefore the learned CIT exceeded his jurisdiction under section 263 of the Act. In this view of the matter, we hold that the impugned order of the learned CIT is unsustainable in law and accordingly set aside/quash the order of the learned CIT passed under section 263 of the Act on 14.03.2016 for A.Y. 2011-12. We hold and direct accordingly.
M/s Future Ideas Company Ltd.
In the result, the assessee’s appeal for A.Y. 2011-12 is allowed.”
As the Tribunal has set aside/quashed the order u/s 263 dated 14.03.2016 passed by the Pr. CIT-9, Mumbai , we agree with the order of the Ld. CIT(A) that the consequential assessment order u/s 143(3) r.w.s. 263 dated 24.09.2016 does not survive.
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open Court on 03/09/2020.