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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: S/SHRI WASEEM AHMED & T.R. SENTHIL KUMAR
आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद �यायपीठ आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण अहमदाबाद �यायपीठ अहमदाबाद �यायपीठ ‘A’ अहमदाबाद। अहमदाबाद �यायपीठ अहमदाबाद। अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD (Conducted Through Virtual Court) ] ] BEFORE S/SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND T.R. SENTHIL KUMAR, JUDICIAL MEMBER ITA No.1038/Ahd/2018 Assessment Year : 2008-09 Madhya Gujarat Vij Company Ltd. ACIT, Cir.2(1)(2) Sardar Patel Vidyut Bhavan Vs Baroda. Race Course Circle, Baroda PAN : AADCM 7339 H
अपीलाथ�/ (Appellant) �� यथ�/ (Respondent) Assessee by : Shri M.K. Patel, Advocate Revenue by : Shri Vijaykumar Jaiswal, CIT-DR सुनवाई क� तार�ख/Date of Hearing : 15/02/2022 घोषणा क� तार�ख /Date of Pronouncement: 13/04/2022 आदेश/O R D E R PER T.R. SENTHIL KUMAR, JUDICIAL MEMBER: This appeal is filed by the assessee challenging order dated 23.3.2018 passed by the Pr.Commisisoner of Income Tax-2, Vadodara under section 263 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) relating to the assessment year 2008-09.
Assessee has raised the following grounds of appeal:
“1.0 The learned Pr. Commissioner of Income Tax-2, Baroda has erred in law and on facts in holding that the assessment order dated 30- 12-2015 passed under section 147 rws 143(3) of the Income Tax Act, 1961 is erroneous and prejudicial to the interest of revenue and thereby erred in invoking the provisions of section 263 of the I T Act.
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2.0 The learned Pr. Commissioner of Income Tax-2, Baroda has erred in law and on facts in holding that the additions of Rs. 7,09,12,384/- made to the total income under normal provisions on account of Capital Grants, Subsidies and Consumers' Contribution were also required to be made to the Book Profits computed under section 115JB of the I T Act as made in other years. The learned Commissioner of Income Tax-2, Baroda has thereby directed the Assessing Officer to make such additions to the Book Profits.
2.1 The learned Pr. Commissioner of Income Tax-2, Baroda ought to have appreciated that the additions to the Book Profits were made for the first time in the Asst. Year 2013-14. For the Asst. Years 2010- 11 and 2012-13, notices under section 148 of the Act were issued for re-opening of the assessment to make such additions. However, the Hon'ble Gujarat High Court has quashed the proceedings vide its Order dated 7-03-2018.
2.2 The learned Pr. Commissioner of Income Tax-2, Baroda further ought to have appreciated that the additions made in the Asst. Year 2013-14 and 2014-15 to the Book Profits have also been deleted by the appellate authorities.
2.3 The appellant had brought the fact to the learned Commissioner's notice vide its letter dated 19-03-2018 which has also been reproduced in the impugned order. 3.0 The learned Commissioner of Income Tax-2, Baroda erred in law and on facts has set aside the assessment order passed on 30- 12-2015 under section 147 rws 143(3) of the IT Act.”
Brief facts of the case is that the assessee company is wholly owned subsidiary of Gujarat Urja Vikas Niam Ltd (previous known as Gujarat Electricity Board). The assessee-company is engaged in the business of distribution of electricity. The assessee filed its return of income on 30.9.2008 declaring NIL income and set off of current year’s loss of Rs.(-)Rs.12,85,67,801/-. Assessment under section 143(3) was completed on 30.12.2010 determining total loss at (-) Rs.5,06,04,324/- (under normal provision) and book profit under section 115JB was determined at Rs.2,77,73,370/-. Subsequently, assessment was reopened under section 147 and notice under section 148 of the Act was issued to the assessee on
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18.3.2015. In response thereto, the assessee filed a revised return on 29.4.2009. Ultimately, re-assessment was completed by making addition on account of prior period expenses of Rs.16,02,98,000/-. Thereafter the ld.Pr.CIT-2 sought to revise the assessment order by invoking revisionary power under section 263 of the Act. Accordingly, the ld.Pr.CIT-I issued a show cause notice dated 13.3.2018 proposing as to why an order under section 263 should not be passed. The contents of the show cause notice read as under:
“Sub: Show cause notice u/s.263 of the Income Tax Act in the case of Madhya Gujarat Vij Co. Ltd. A.Y.008-09 (PAN : AADCM 7439 H)
Please refer to the assessment order passed in your case us/.147/143(3) for AY 2008-09.
It is observed that while addition has been made under regular provision towards grants, subsidies and consumer’s contribution under normal provision in order u/s.143(3)/147 of the Act similar addition has not been made while computing book profits u/s.115JB towards grants, subsidies and consumers’ contribution, in the order u/s.147/143(3) even though such addition has been u/s.115JB also in other years. This addition u/s.115JB has not been made in the order u/s.147/143(3) even though as per the third proviso to section 147, the may assess of reassess such income, which is chargeable to tax and has escaped assessment.
In this regard, it is observed that in your P&L account, you have claimed depreciation on related assets following the straight line method, but the corresponding deferred income is not credit on the same basis, but at a lower rate and this mismatch and inconsistency in accounting treatment is not in accordance with the requirement of section 115JB(2) and accounting principles. It appears that you have not prepared your statement of profit and loss in accordance with section 115JB(2), and failed to comply with the provisions of Companies Act and appropriate Accounting Standard, and failed to furnish complete information regarding the assets relating to grants, subsidies and consumers’ contribution. It therefore, appears that book profits was not computed in accordance with section 115JB(2), and hence, addition to book profit u/s.115JB(2) is required to be made, as the addition was already made under regular provisions, to deferred income credited to the P&L account, on the same basis as followed by you in debiting depreciation on related assets.
It therefore, appears that assessment order u/s.147/143(3) is erroneous in so far as I is prejudicial to the interests of the revenue, in terms of section 263. This view is supported by the decisions of he Hon’ble High Court and ITAT in Veekaylal Investment Co P.Ltd., (2001) 249 ITR 597 (Mum.), Goetze India Ltd., (2014) 361 ITR 505 (Del), Summer Builders P.Ltd., (2012) 19 taxmann.com 43(Mum.) and Bilakhia Holdings P.Ltd., (2014) 49 taxmann.com 91 (Ahd.) You are gien an opportunity to show cause why an order u/s.263 be not passed and a similar addition made while computing book profits u/s.115JB towards, grants subsidies and consumers’ contribution, as has already been
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made under regular provision. You reply should be submitted in this office on 19.3.18 at 11:30 AM and you may also appear personally or through an authorized representative. In case, no reply is received on this date, a decision will be taken on the basis of material available on record without providing any further opportunity to you. 4. The assessee filed his reply dated 19.3.2018. Relevant part of the reply reads as follows: “…. At the outset it is submitted that the impugned notice under section 263 of the Act is void ab initio inasmuch as the same is issued without verification of the records. This is because till the time the latest assessment order for the year under consideration was passed under section 143(43) rws 147 on 30-12-2015, in none of the assessment years in the company’s case the additions on account of capital grants subsidies and consumer contributions were made. Such additions have been made for the first time only in the Asstt.Year 2013-14 and 2014-15 for which years the assessment orders have been passed on 21-11-2016 and 26-12- 2016 respectively. Thus, the very base viz, the order under section 143(3) rws 147 being the order sought to revised and/or cancelled treating it as erroneous and prejudicial to the interest of revenue, does not contain the error as observed in the above referred notice as on the date of passing of such order no such additions were ever made.
This apart, even in the Asst.Years where such additions have been made to the book profit the company has preferred appeals before the appellate authorities. Further, the Commissioner of Income Tax (Appeals) has deleted the additions on account of capital grants, subsidies and consumer contribution made to the book profits under section 115JB of the Act in case of all the Associate Concerns of the company.
Hence, there is no error in the assessment order passed under section 143(3)/147 of the IT Act and the same is not prejudicial to the interest of revenue in any manner. We would therefore request your honour to kindly quash the notice issued under section 263(1) of the Act to drop the proceedings initiated under the said section at the earliest and oblige.”
After considering the reply of the assessee, and after analyzing a large number of decisions on the issue, the ld.Pr.CIT finally concluded that order of the AO was erroneous and prejudicial to the interest of the Revenue to that extent. He set aside the reassessment order, and directed the AO to frame assessment afresh after proper enquiries/ verification. Dissatisfied with the revision order of the ld.Pr.CIT, the assessee is now before the Tribunal.
The assessee has also filed additional grounds of appeal as follows:
ITA No.1038/Ahd/2018 5 “1.0 The order passed by the learned Commissioner of Income Tax (Appeals) under section 263 of the Income Tax Act, 1961 is time barred and hence, void ab initio, and be quashed.”
The ld.counsel, Mr.M.K.Patel appearing for the assessee submitted that regular assessment order under section 143(3) was passed on 30.12.2010 determining total loss at Rs.5,06,04,324/- (under normal provision) and book profit under section 115JB was determined at Rs.2,77,73,370/- by disallowing excess depreciation on Govt. Grants Subsidies, Contributions and three more disallowances. Thereafter, assessment was reopened for the same assessment year 2008-09 on the ground that prior period expenses wrongly claimed during this year. After hearing the assessee, re- assessment order under section 147 read with section 143(3) was passed on 30.12.2015 and disallowed “prior period expenditure” of Rs.16,02,98,000/- and determined the total income at Rs.10,96,93,680/-. Thereafter, Pr.CIT issued show cause notice under section 263 on 13.3.2018.
The ld.AR further pleaded that the show cause notice issued under section 263 is relating to the re-assessment order made on 30.12.2015 wherein the issue of government grants, subsidies and contribution are not subject matter of additions/disallowances but these are dealt only in the original assessment order dated 30.12.2010. Thus, the show cause notice issued by Pr.CIT under section 263(2) is barred by limitation. Therefore, the revision order passed by the Pr.CIT is liable to quashed on the point of limitation, for which he relied upon judgment of Hon’ble Supreme Court in the case of CIT Vs. Alagendran Finance Ltd., 162 taxmann.com 465 (SC) and judgment of jurisdictional High Court in the case of Gujarat Forging P.Ltd. in ITR No.42 of 1996, and ITAT, Delhi Benches in the
ITA No.1038/Ahd/2018 6 case of Jindal Steel & Power Ltd., in ITA No.4607/Del/2019 dated 14.5.2020.
Per contra, the ld.DR submitted that the revision order was passed well within the period of limitation, and the Pr.CIT has clearly stated that MAT computation under section 115JB has not been properly calculated in the reassessment order which definitely is an erroneous order and prejudicial to the interest of Revenue passed by the AO, which is correctly revised by the Pr.CIT invoking his power under section 263 of the Act, and pleaded that the revision order passed under section 263 is to be upheld.
We have given our thoughtful consideration and we would like to address additional grounds raised by the assessee as the same goes to the maintainability of the impugned revision order passed u/s.263. The assessee filed its return of income for the Asst.Year 2008-09 on 30.9.2008 declaring NIL income and claiming current year’s loss of Rs.12,85,67,801/-. Regular assessment under section 143(3) was made on 10.12.2010 reducing the loss at Rs.5,06,04,324/- under normal provision and book profit under section 115JB was determined at Rs.2,77,73,370/- by disallowing the additional depreciation claimed in the return of income. It is, thereafter 148-notice was issued for the excess claim of “prior period expenditure” of Rs.16,02,98,000/-. Reassessment resulted in a taxable income of Rs.10,96,93,680/- by order dated 30.12.2015. Now present impugned show cause notice dated 13.3.2018 was issued by Pr.CIT on the ground that book profit under section 115JB towards grants, subsidies and consumer contributions were not being properly calculated by the AO in the original assessment proceedings. No doubt the excess claim of depreciation on grants,
ITA No.1038/Ahd/2018 7 subsidies and consumer contributions were subject matter of proceedings only in the original assessment passed under section 143(3) which is dated 30.12.2010. In the reassessment proceedings the issue is related to “prior period expenses” claimed by the assessee which was in the re-assessment order dated 30.12.2015. Therefore the present impugned order dated 22.03.2018 passed under section 263 is clearly time barred as per section 263(2) of the Act. This issue has been settled by Hon’ble Supreme Court in the case of CIT Vs. Alagendran Finance Ltd., (2007) 162 taxman 465 (SC) wherein it has held as under:
“15. We, therefore, are clearly of the opinion that keeping in view the facts and circumstances of this case and, in particular, having regard to the fact that the Commissioner of Income-tax exercising its revisional jurisdiction reopened the order of assessment only in relation to lease equalization fund which being not the subject of the reassessment proceedings, the period of limitation provided for under sub-section (2) of section 263 of the Act would begin to run from the date of the order of assessment and not from the order of reassessment. The revisional jurisdiction having, thus, been invoked by the Commissioner of Income-tax beyond the period of limitation, it was wholly without jurisdiction rendering the entire proceeding a nullity.
The Tribunal and the High Court, therefore, in our opinion, were correct in passing the impugned judgment. The appeal, therefore, being devoid of any merit is dismissed with costs. Counsel's fee assessed at Rs. 25,000.”
Further, jurisdictional High Court in the case of CIT Vs. Gujarat Forging P.Ltd., in Tax Reference No.42 of 1996 dated 2.7.2008 following Supreme Court judgment in the case of Alagendran Finance Ltd. (supra) held that revision proceedings initiated under section 263 is beyond period of limitation and quashed the same. In view of the above binding judgment, we have no hesitation in holding that Revision proceedings initiated under section 263 by the Pr.CIT is beyond period of limitation, since the issue of computation of book profit under section 115JB towards
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grants, subsidies, consumer contributions are not subject matter of re-assessment proceedings and but arising from original assessment proceedings vide order dated 3.12.2010 which is clearly is time barred. Thus, the additional ground raised by the assessee are allowed
Further, the ld.counsel for the assessee, Mr.M.K.Patel also brought to our notice that the proposed additions to be made in MAT computation by the Pr.CIT is already covered in favour of the assessee by orders passed by CIT(A)-2, Vadodara relating to the Asst.Years 2013-14 in the case of Uttar Gujarat Vij Company Ltd. wherein it is held as follows:
“4.2.1. The second part of Ground No. 2 pertains to addition of Rs.39,84,10,100/- as mentioned above to the book profit u/s. 1153B. In this regard, the Ld. Authorized Representative has relied upon the decision of Hon'ble ITAT, Ahmedabad in the case of ACIT Vs. Gujarat State Energy Generation Ltd. contained in ITA No. 1777/Ahd/2009 (A.Y. 2006-07) which x had been followed by the CIT(A)-1, Vadodara in the case of Gujarat Urja Vikas Ltd. for A.Y. 2012-13 contained in Appeal No. CAB-1/290/14-15 wherein he has held that the addition made on account of capital grants cannot be made to the book profit as it is not covered by any items which are specifically mentioned in Explanation to section 115JB. Accordingly, relying upon the decision of CU(A)-1, Vadodara as also of Hon'ble jurisdictional ITAT, I hold that addition on account of contribution to the capital grants/subsidies etc. cannot be made to the book profit and hence the Assessing Officer is directed to delete the same from book profit, Thus, appellant succeeds on this account.”
For the Asst.Year 2014-15 in the case of Uttar Gujarat Vij Company Ltd. as follows:
“4.1.1 The other part of this ground pertains to the addition of Rs.81,36,52,500/- being 5% of grants and subsidies added to Book Profit u/s.115JB. In this regard, the ld.Authorized Representative has relied upon the decision of CIT(A) in its own case in A.Y.2012-13 wherein it has been held that addition made under normal provisions on account of capital grant/subsidies cannot be made to be Book profit u/s.115JB. Accordingly, the Assessing Officer is directed to delete the same.”
ITA No.1038/Ahd/2018 9 13. Thus, the additions proposed by Pr.CIT is held to be not correct by Appellate authorities and confirmed by Co-ordinate Bench of ITAT. Thus, the order passed by the AO neither an erroneous nor prejudicial to the interest of Revenue and therefore the initiation of 263-proceeings itself is unwarranted in the above case. On this count also, the impugned Revision order dated 22.3.2018 passed by the ld.Pr.CIT is liable to be quashed.
In the result, appeal of the assessee is allowed.
Order pronounced in the Court on 13th April, 2022 at Ahmedabad.
Sd/- Sd/- (WASEEM AHMED) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER