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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’, NEW DELHI
Before: SH. AMIT SHUKLA & SH. O.P. KANT
Appellant by Sh. V. Raja Kumar, Adv. Respondent by Ms. Rachna Singh, CIT(DR) Date of hearing 11.09.2018 Date of pronouncement 23.10.2018 ORDER PER O.P. KANT, A.M.: This appeal by the assessee is directed against order dated 12/03/2015 passed by the Ld. Commissioner of Income-tax (Central), Gurgaon [in short ‘the Ld. CIT’] for assessment year 2005-06 setting aside the assessment order passed by the Assessing Officer being erroneous and prejudicial to the interest of the Revenue. The grounds of the appeal raised by the assessee are reproduced as under:
That the order of the learned Commissioner of Income Tax (Central), Gurgaon is bad both on law and facts.
2. That the learned Commissioner of Income Tax (Central), Gurgaon erred in arbitrarily initiating the impugned proceedings under section 263 of the Income Tax Act, 196.
3. That the learned Commissioner of Income Tax (Central), Gurgaon had no jurisdiction, whatsoever, to initiate the impugned proceedings under section 263 of the Act and/ or to passed the impugned order 12/03/2015. 4. That without prejudice to the above, the learned Commissioner of Income Tax failed to appreciate that the conditions precedent for initiation of the impugned proceedings u/s 263 of the Act, were neither present nor satisfied. 5. That the learned Commissioner of Income Tax erred in arbitrarily alleging and/ or holding that the assessment order dated 28/02/2013 passed by the Deputy Commissioner of Income Tax, Central Circle - I, Faridabad u/s 153 A of the Income Tax Act was erroneous in law and prejudicial to the interest of the revenue within the meaning of section 263 of the Income Tax Act. 6. That the proceedings u/s 263 of the Act were wrongly initiated incomplete disregards of the fact that the impugned order, alleged to be erroneous and prejudicial to the interest of the revenue, is passed with prior approval of Additional CIT (Central), as is statutorily required to be so obtained as per the provisions of the Section 153D of the Act 7. That the appellant craves leave and prays that the relief claimed above or any other relief, to which the appellant is entitled, may ]
Briefly stated facts of the case are that subsequent to the search action under section 132 of the Income-tax Act, 1961 (in short ‘the Act), the assessment under section 153A read with section 143(3) of the Act was completed on 28/02/2013. The Ld. Commissioner of Income-tax (In short the ‘CIT’) called for and examined the assessment record. He formed the opinion that the order dated 28/02/2013 passed by Assessing Officer was Revenue and accordingly, he issued notice under section 263 of the Act. In response, the assessee objected the proceedings under section 263 of the Act on the ground that the CIT was not empowered to revise the assessment order which was passed by the Assessing Officer with prior approval of the Additional Commissioner of Income Tax. This contention of the assessee was rejected by the Ld. CIT and he found that the Assessing Officer did not carry out enquiry on the two issues. The first issue being of disallowance of interest proportionate to the borrowed fund not utilized for the purpose of business. The second issue, being not examination of various conditions of section 10B of the Act while allowing the said deduction. The Ld. CIT after taking into consideration submission of the assessee, passed the impugned order under section 263 of the Act setting aside the order passed by the Assessing Officer and directed him to pass a de novo assessment order. 2.1 Aggrieved, the assessee is in appeal before the Tribunal raising the grounds as reproduced above.
Before us, the Ld. counsel of the assessee addressing the grounds raised, submitted that the order passed by the CIT was beyond the limitation period provided in the Act and, therefore, it is a null and void order. The Ld. counsel submitted a chart of chronological events which is reproduced as under: Chronology of Events 28.12.2007 Assessment Order passed u/s 143(3) 1. 16.06.2009 CIT(A) dismisses appeal of Company 2. 3. 27.10.2009 ITAT confirms CIT(A)’s order 4. 31.03.2010 Limitation for the purpose of section 263 supervened 5. 12.04.2010 Assessee subjected to search action u/s 132 16.07.2010 MA Order stated to be passed by ITAT 6. 7. 04.02.2011 Proceedings u/s 153A( 1) (a) initiated 28.02.2013 Assessment u/s 153A( 1) (b) concluded 8. 9. 17.01.2014 Show cause u/s 263 issued 10. 12.03.2015 Order u/s 263 passed. Interest and Section 10B deduction not subject matter of Section 153A( 1) (b) order
In view of above, the Ld. counsel submitted that the original assessment under section 143(3) of the Act was passed on 28/12/2007 and, therefore, limitation for the purpose of section 263 expired on 31/03/2010 and thus the present order passed by the Ld. CIT is beyond limitation period.
Further, the Ld. counsel for the assessee submitted that in view of the decision of Hon’ble Delhi High Court in the case of CIT Vs. Kabul Chawla, 380 ITR 573, in the assessment completed under section 153A of the Act, the jurisdiction of the Assessing Officer was limited to make addition in respect of incriminating materials found only. He further submitted that Ld. CIT in his impugned order has observed that the Assessing Officer has not made any enquiry on two issues. The first issue being disallowance of proportionate interest paid in relation to borrowed funds for funds diverted for non-business purposes. The second issue relates to deduction under section 10B of the Act. The Ld. counsel pointed out that no incriminating material or document was found during the course of the search in relation to the above two issues. He submitted that in view of the decision of the Hon’ble Delhi High Court in the case of Kabul Chawla (supra) no addition could be made in proceeding under section 153A of the Act without any incriminating material, where the assessment proceedings are not abated. In view of the above, the Ld. counsel submitted that there was no error in the order of the Assessing Officer in not making enquiry on above two issues. On the merit of the additions, the Ld. counsel submitted that the Ld. CIT has not pointed out any error or established any prejudice on the issue of disallowance of proportionate interest paid towards borrowed funds. He also submitted that on the issue of deduction under section 10B of the Act, the AO duly examined the apportionment of expenses for eligible and non-eligible unit, and thus it cannot be said that no enquiry was made by the Assessing Officer. Accordingly, he submitted that the order of the Ld. CIT might be set-aside. 6. On the contrary, the Ld. DR on the issue that in view of the decision of the jurisdictional High Court in the case of Kabul Chawla (supra), the proceedings u/s 263 of the Act could not be invoked, submitted that this issue was not raised in the grounds of the appeal and thus should not be allowed to be raised in oral submissions before the Tribunal. She also submitted that the provisions of section 153A of the Act are clear and do not talk of necessity of incriminating material. She further submitted that decision of the Hon’ble Delhi High Court in the case of Kabul Chawla (supra) has not attained finality as the Revenue is in appeal against the said order and, therefore, it was not fair to apply above decision while invoking revisionary powers by the CIT. She also pointed out that there are number of decisions of the other high courts wherein the Assessing Officer is empowered CIT was justified in holding the assessment order passed by the Assessing Officer as erroneous insofar as prejudicial to the interest of the Revenue.
On the issue of allegation of order being beyond the limitation period, the Ld. DR submitted that arguments of the Ld. counsel are on the wrong premise that the order subjected to revision under section 263 was order under section 143(3) dated 28/12/2007. Whereas, the Ld. CIT has revised the order dated 28/02/2015 passed by the Assessing Officer under section 153A. According to her the show cause notice for 263 has been issued on 17/01/2004 and thus it was well within the limits provided under the section of 263 the Act.
We have heard the rival submissions and perused the relevant material on record. As far as contention of the Ld. counsel that order passed by the CIT was barred by limitation, we find that in the chart of chronological events, the Ld. counsel has computed the limitation in respect of order passed under section 143(3) of the Act. But the said order was not subjected to revision. Actually, the CIT proposed to revise the order passed by the Assessing Officer under section 153A dated 28/02/2013. The show cause notice was issued on 17/01/2014 and the order under section 263 has been passed on 12/03/2015. Under section 263(2) of the Act, the time limit for passing order under section 263 has been provided as before expiry of two years from the end of the financial year in which the order sought to be revised was passed. Since the impugned order dated 12/03/2015 passed by the CIT under section 263 of the Act is within the period of two years from the end of the financial year in which the 153A was passed, i.e., 31/03/2015, we do not find any force in the arguments of the Ld. counsel on this issue and accordingly we reject the same.
The another issue is whether the CIT could invoke the provisions of 263 of the Act in view of the decision of the jurisdictional High Court in the case of Kabul Chawla (supra) and thus whether any further verification/enquiry was required to be made by the Assessing Officer in a case where no incriminating material was found during the course of search. On this issue, we do not agree with the arguments made by the Ld. DR. First of all, as far as legal grounds are concerned, the assessee can make any arguments in support thereof and there is no bar to make the argument supporting the ground. Secondly, the Delhi benches of the Tribunal are within the jurisdiction of the Hon’ble Delhi High Court and bound to follow the decision of the Hon’ble High Court unless it is reversed by the Hon’ble Supreme Court. As far as our information, the decision of the Hon’ble Delhi High Court in the case of Kabul Chawla (supra) has not been reversed by the Hon’ble Supreme Court. Thus in view of the above judicial position, the Assessing Officer is not required to make any addition under section 153A of the Act in case of completed assessments, where no incriminating material is found. Since in the instant case originally, the assessment under section 143(3) of the Act was already completed and in the proceedings under section 153A of the Act, there is no mention of any incriminating material particularly on the issues on which the Ld. CIT has held that the Assessing Officer has not made any enquiries. If as per the law laid down by the Hon’ble Delhi High Court, the Assessing Officer is not empowered to make any addition, then he is not required to carry out any enquiry or verification in respect of those issues. In such a scenario, the order passed by the Assessing Officer cannot be held as erroneous insofar as prejudicial to the interest of the Revenue. In view of the aforesaid discussion, we are of the opinion that Ld. CIT has exceeded his jurisdiction provided under section 263 of the Act and accordingly, we set-aside the order passed by the Ld. CIT under section 263 of the Act. Since we have already held that the Ld. CIT was not correct in revising the assessment order in view of the decision of the Hon’ble Delhi High Court in the case of Kabul Chawla (supra), we are not adjudicating to the issue whether any enquiry or verification was made by the Assessing Officer on the above issues during the proceedings under section 153A of the Act. The grounds of the appeal raised by the assessee are accordingly allowed.
In the result, the appeal of the assessee is allowed.
Order is pronounced in the open court on 23rd October, 2018.