M/S GMR CORPORATION LIMITED ,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-3(1)(2), BANGALORE

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH : BANGALORE

BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER

ITA No. 2022/Bang/2018 Assessment Year : 2011-12

M/s. GMR Power Corporation Ltd., The Deputy Commissioner 25/1, Skip House, Museum of Income Tax, vs. Road, Circle – 3 (1) (2), Bangalore – 560 025. Bangalore. PAN: AAACG6037G APPELLANT RESPONDENT Appellant by : Smt. Srinandini Das, Addl. CIT (DR) Respondent by : Shri Sunil Jain, CA Date of hearing : 14.11.2018 Date of Pronouncement : 07.12.2018 O R D E R Per Shri A.K. Garodia, Accountant Member This appeal is filed by the assessee and the same is directed against the order of ld. CIT(A)-3, Bangalore dated 16.05.2018 for Assessment Year 2011-12. 2. The grounds raised by the assessee are as under. “Ground I: Computation of long term capital loss 1. On the facts and in the circumstances of the case and in law, the learned CIT(Appeals) has erred in holding that claims made during the course of assessment proceedings other than by filing revised return of income cannot be allowed. 2. The learned CIT(Appeals) failed to appreciate that the details relating to computation of long-term capital loss on sale of Government Securities at Rs.3,85,05,000/- as against correct amount of loss of Rs.14,27,10,063/-are available on record during the course of assessment proceedings. While computing the long-term capital loss, cost of acquisition of Government Securities of Rs.21,65,30,000/- has been considered instead of considering the amount of indexed cost of acquisition of Rs.32,07,35,063/-. The CIT(Appeals) ought to have directed theAssessing Officer to allow long-term capital loss at Rs.14,27,10.063/-since it is a mistake apparent from record and all the details are available on record. 3. The learned CIT (Appeals) failed to appreciate that the Assessing Officer is duty bound to allow all legitimate allowances / deductions though not claimed or mistakenly considered in the return of income 4. The learned CIT (Appeals) failed to appreciate that the CIT (Appeals) can admit an additional ground / claim made before him

ITA No. 2022/Bang/2018 Page 2 of 11 which was even not raised before the Assessing Officer. Ground II: The Appellant craves leave to add, alter and /or amend all or any of the foregoing grounds of appeal.” 3. Brief facts of the present case are that the assessment was completed by the AO u/s. 143(3) as per the assessment order dated 03.03.2014 and he assessed the income at Rs. 28,99,24,691/- which is the same being the income declared by the assessee in the revised return of income filed on 14.12.2012. Thereafter, the assessee filed a rectification petition before the AO u/s. 154 on 14.04.2014 contending that in the order u/s. 143(3), the long term capital loss was allowed at Rs. 3,85,05,000/- as against eligible amount of loss of Rs. 14,27,10,063/-. It was also submitted in the said application u/s. 154 that the assessee company during the course of assessment proceedings has submitted a letter dated 05.08.2013 requesting to allow the long term capital loss to be carried forward at Rs. 14,27,10,063/-. Before us, it was submitted that the said letter dated 14.04.2014 submitted by assessee before the AO u/s. 154 is available on pages 107 to 110 of paper book and earlier letter dated 05.08.2013 filed before the AO in course of assessment proceedings is available on pages 84 to 106 of paper book. As per the order passed by the AO u/s. 154 on 27.09.2017, the AO held that there is no mistake apparent from the records which could be rectified u/s. 154 because the loss determined by the AO as per the assessment order is the same as claimed in the original and revised return of income. Thereafter, the assessee preferred an appeal before ld. CIT(A) against this order passed by the AO u/s. 154. But ld. CIT(A) has decided the issue against the assessee and now the assessee is in further appeal before us. Before us the ld. AR of assessee submitted that as per para no. 3 of the CBDT Circular No. 14(XL-35) dated 11.04.1955 available on pages 1 to 3 of paper book, the assessee’s claim for rectification should have been allowed by the AO. He also placed reliance on the following judicial pronouncements. A. National Thermal Power Corporation Ltd. Vs. CIT (229 ITR 383)(SC) B. Xerox India Ltd. Vs. DCIT in ITA No. 1580/Del/2010, copy available on pages 79 to 85 of paper book.

ITA No. 2022/Bang/2018 Page 3 of 11 C. Rakesh Singh Vs. ACIT (26 taxmann.com 240) (Bangalore Tribunal), copy available on pages 14 to 22 of paper book. D. Sri Lakhan Sing Vs. ACIT in ITA No. 1025/Bang/2011dated 24.08.2012, copy available on pages 23 to 37 of paper book. 4. Learned DR of the revenue supported the orders of the lower authorities. 5. We have considered the rival submissions. First of all, we have to decide this aspect as to whether the claim made by the assessee before the AO in its petition u/s. 154 is allowable u/s. 154 of IT Act or not. For this purpose, we reproduce the provisions of section 154 of IT Act. The same are as under. “154. (1) With a view to rectifying any mistake apparent from the record an income-tax authority referred to in section 116 may,— (a) amend any order passed by it under the provisions of this Act ; (b) amend any intimation or deemed intimation under sub-section (1) of section 143; (c) amend any intimation under sub-section (1) of section 200A; (d) amend any intimation under sub-section (1) of section 206CB. (1A) Where any matter has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub-section (1), the authority passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order under that sub-section in relation to any matter other than the matter which has been so considered and decided. (2) Subject to the other provisions of this section, the authority concerned— (a) may make an amendment under sub-section (1) of its own motion, and (b) shall make such amendment for rectifying any such mistake which has been brought to its notice by the assessee or by the deductor or by the collector, and where the authority concerned is the Commissioner (Appeals), by the Assessing Officer also. (3) An amendment, which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee or the deductor or the collector, shall not be made under this section unless the authority concerned has given notice to the assessee or the deductor or the collector of its intention so to do and has allowed the assessee or the deductor or the collector a reasonable opportunity of being heard. (4) Where an amendment is made under this section, an order shall be passed in writing by the income-tax authority concerned.

ITA No. 2022/Bang/2018 Page 4 of 11 (5) Where any such amendment has the effect of reducing the assessment or otherwise reducing the liability of the assessee or the deductor or the collector, the Assessing Officer shall make any refund which may be due to such assessee or the deductor or the collector. (6) Where any such amendment has the effect of enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee or the deductor or the collector, the Assessing Officer shall serve on the assessee or the deductor or the collector, as the case may be a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be issued under section 156 and the provisions of this Act shall apply accordingly. (7) Save as otherwise provided in section 155 or sub-section (4) of section 186 no amendment under this section shall be made after the expiry of four years from the end of the financial year in which the order sought to be amended was passed. (8) Without prejudice to the provisions of sub-section (7), where an application for amendment under this section is made by the assessee or by the deductor or by the collector on or after the 1st day of June, 2001 to an income-tax authority referred to in sub-section (1), the authority shall pass an order, within a period of six months from the end of the month in which the application is received by it,— (a) making the amendment; or (b) refusing to allow the claim.” 6. From the above provisions of section 154, it is seen that only those mistakes which are apparent from records can be rectified under the provisions of section 154. Hence, we have to examine this as to whether the assessee’s claim for rectification is for apparent mistake or not. In the present case, it is noted by the AO on page no. 2 of the order passed by him u/s. 154 of IT Act that the assessee company vide its application for rectification has stated that the assessee company considered only the actual cost of acquisition instead of indexed cost of acquisition and determined the Long Term Capital Loss at Rs. 3,85,05,000/- instead of Rs. 14,27,10,063/-. In our considered opinion, this may be a mistake against which the appeal can be filed by the assessee by filing an appeal before CIT(A) against the assessment order but such mistake is not an apparent mistake which can be rectified by the AO u/s. 154 of IT Act. In the light of these facts, now we examine the applicability of various judicial pronouncements on which reliance is placed by ld. AR of assessee.

ITA No. 2022/Bang/2018 Page 5 of 11 7. First of all, the ld. AR of assessee has relied on the CBDT Circular No. 14(XL-35) dated 11.04.1955 and in particular our attention was drawn to para 3 of this CBDT Circular and hence, we reproduce the same. “3. Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the Officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the Department for it would inspire confidence in him that he may be sure of getting a square deal from the Department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessees on whom it is imposed by law, officers should :— (a) draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other; (b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs.” 8. From the above Para reproduced from the CBDT Circular, it is seen that this para of this Circular is not in respect of rectification u/s. 154 and hence, in our considered opinion, this Para of CBDT Circular is not relevant in the present case. 9. Reliance has been placed by ld. AR of assessee on the judgement of Hon’ble Apex Court rendered in the case of National Thermal Power Corporation Ltd. Vs. CIT (supra). As per this judgement, it was held by Hon’ble Apex Court that in a case where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. In that case, the proceedings were not initiated u/s. 154 of IT Act and for this reason alone, we have no hesitation in holding that this judgment has no applicability in the present case. Moreover in that case, only the legal issue was in dispute whereas in the present case, the issue in dispute is factual as to whether the computation of long term capital loss is on the basis of original cost or indexed cost and for this reason also, this judgment of Hon’ble Apex Court is not applicable in the present case.

ITA No. 2022/Bang/2018 Page 6 of 11 10. The second judgment relied upon before us is the Tribunal order of Delhi Bench of the Tribunal rendered in the case of Xerox India Ltd. Vs. DCIT (supra). In this case also, the issue in dispute was not in respect of any claim made u/s. 154 which has not been allowed by the AO. In that case, the issue before the Tribunal was in respect of assessment proceedings and not in respect of rectification of assessment proceedings and therefore, in the present case, this Tribunal order is also not applicable. 11. The next decision cited before us is the decision of Bangalore Bench of the Tribunal rendered in the case of Rakesh Singh Vs. ACIT (supra). In this case, it was held that although revised return cannot be filed by the assessee if the original return of income was not filed in time but still the assessee can make an additional claim before the appellate authority i.e. CIT(A) and he is duty bound to consider the same. Hence, this is clear that in that case also, the proceedings were not initiated u/s. 154 whereas in the present case, the proceedings are initiated u/s. 154 and therefore, in our considered opinion, this Tribunal order is also not applicable in the present case although if the assessee has filed the appeal in course of assessment proceedings completed by the AO u/s. 143(3) then in such proceedings, the assessee can file an additional ground before the appellate authority. 12. The next Tribunal order on which reliance has been placed before us is the Tribunal order rendered in the case of Sri Lakhan Sing Vs. ACIT (supra). In that case, the assessee filed revised return of income on 28.07.2009 after claiming depreciation on the car amounting to Rs. 3,86,934/- but this claim of depreciation was not made in the original return filed by the assessee. Under these facts, the AO completed the assessment proceedings vide order dated 31.12.2009 by accepting the income declared in the original return filed on 29.02.2008 and the assessee’s plea to consider the revised return and the revised balance sheet was not accepted by the AO as per the reasons mentioned in para 3 of the assessment order in that case. Against this assessment order, the assessee filed an appeal before CIT(A) and when CIT(A) decided the issue against the assessee, the assessee filed appeal before the Tribunal. Hence it is seen that in that case also, the issue in dispute was not in respect of section 154 proceedings and therefore, in

ITA No. 2022/Bang/2018 Page 7 of 11 our considered opinion, this Tribunal order is not rendering any help to assessee in the present case. Although the assessee can raise additional ground before the appellate authority in course of assessment proceedings completed by the AO u/s. 143 (3) if any appeal is filed by the assessee in those proceedings but the assessee’s claim is not allowable in section 154 proceedings. 13. The next judgment cited before us is the judgement of Hon’ble Madhya Pradesh High Court rendered in the case of CIT Vs. K N Oil Industries as reported in [1983] 12 Taxman 189 (MP). In this case, it was noted that the assessee did not claim relief u/s. 35B in the return of income but in course of proceedings u/s. 154 initiated by the AO for rectifying the rebate u/s. 80J, the assessee made this claim before the AO. He did not find favour from the AO but the Tribunal held that it was open to the ITO to examine jurisdiction u/s. 154 if it was apparent from the records of the assessment that there was mistake in not granting relief u/s. 35B although the said relief was not claimed in the return of income. Against this Tribunal order, the revenue filed an appeal before Hon’ble Madhya Pradesh High Court and under these facts, it was held by Hon’ble Madhya Pradesh High Court that if it is apparent from the records that the assessee was entitled to relief admissible under Section 35B of the I.T. Act then such relief can be granted to assessee by an order under Section 154 of the I.T. Act by rectifying the assessment even though relief under that section had not been claimed by the assessee in the original assessment proceedings. In the present case, this is not the case that long term capital loss was not claimed by the assessee in the original return filed by him and such claim is made for the first time in the proceedings u/s. 154 of IT Act. In the present case, the long term capital loss was claimed and allowed by the AO in the assessment proceedings and now in the proceedings u/s 154,the assessee has made a higher claim regarding long term capital loss. Hence in our considered opinion, this is not a question of law but question of fact and therefore, it is not rectifiable and hence, it is not an apparent mistake which could be rectified u/s. 154 and this judgement of Hon’ble Madhya Pradesh High Court has no applicability in the facts of present case.

ITA No. 2022/Bang/2018 Page 8 of 11 14. The next decision on which reliance has been placed by ld. AR of assessee is the Tribunal order of Jaipur Bench of the Tribunal rendered in the case of Lustre Tiles Ld. Vs. Addl. CIT as reported in 108 ITD 35. Para no. 5 of this Tribunal order is stated to be relevant because it contains the facts and the basis of decision and therefore, we reproduce Para 5 from this Tribunal order. “5. We have considered the arguments advanced by the parties in view of orders of lower authorities, material available on record as well as the decisions relied on by the Id. A/R. It is not in dispute that the assessee was not entitled to claim deduction under Section 43B of the IT Act of Rs. 53 lacs on account of interest payment which was due to the financial institutions and under the scheme of BIFR. It was paid through converting into shares issued to them @ Rs. 10/- each. It has also not been denied by the lower authorities that application under Section 154 to allow the aforesaid claim was moved before the AO well within the prescribed time limitation of 4 years. Now the question before us is as to whether there was any mistake in the assessment order in not allowing the aforesaid claim of the assessee for which it was very much entitled to, within the meaning of provisions laid down under Section 154 of the Act. The lower authorities have rejected the application under Section 154 of the Act moved by the assessee for allowing the deduction under Section 43B of the Act of payment of interest of Rs. 53 lacs by it to the financial institutions by way of converting the same into issuance of shares to them, on the basis that no such claim was made out by the assessee in its return of income nor on subsequent occasion of passing of an order under Section 154 of the Act by the AO any objection in this regard was raised, hence there is no mistake apparent in the order to allow the application under Section 154 of the Act. There is no dispute on facts that under some sanctioned scheme of BIFR, copy of which has been placed at page Nos. 46 to 53 of the paper book, that company had resolved that a sum of Rs. 53 lacs out of the outstanding funded interest of Rs. 106 lacs due and payable to the financial institutions was converted into equity of the company, by passing a resolution by the Board of Directors of the assessee company on 29th December, 1994, copy whereof has been placed at page 40 of the paper book. The lower authorities have also not denied this contention of the assessee that by way of Note in Schedule-1 it has been clearly mentioned in the Balance Sheet that Rs. 53 lacs being interest on the term loan has been converted into equity shares of equal value, nor the department has denied the existence of reply dated 12.10.96 of the assessee in response to the query raised in the notice under Section 143(2) placed at pages 5-8 of the paper book, wherein in para 12 it has been replied that no expenditure was incurred for increase in share capital or share application money as there was no public issue of the company's shares and that major increase of Rs. 53 lacs representing conversion of funded interest due to IDBI, IFCI and

ITA No. 2022/Bang/2018 Page 9 of 11 ICICI into equity under the rehabilitation package sanctioned by IDBI/BIFR. The query No. 12 raised in this regard by the department has been placed at page No. 4 of the paper book. In the CBDT Circular No. 669 dated 25.10.93 referred by the Id. A/R, a copy of which has been placed at page No. 15 of the paper book filed on behalf of the assessee on 17.5.2006, under the subject "Interpretation of Section 43B of the Income-tax Act, 1961 clarification - regarding" it has been made clear vide para No. 2 as under: The Board have reconsidered the matter and are of the opinion that where the sums referred to in the first proviso under Section 43B had, in fact, been paid on or before the due dates mentioned therein, but the evidence therefor had been omitted to be furnished along with the return, the Assessing Officers can entertain applications under Section 154 of rectification of the intimations under Section 143(1)(a)or orders under Section 143(3), as the case may be, and decide the same on merits. Undisputedly, the department is bound to follow the Circular of the CBDT. The expression "Record" has to be construed and understood in the context in which it appears and in context of expression apparent from the record in Section 154. 'Record' would mean the record of the entire proceeding of the case including documents and materials produced by the parties and taken on record by the authorities, which were available at the time of passing of the order which is the subject matter of proceeding for rectification. It is admitted by the assessing authority that the assessee company filed its return of income with other statutory reports, accounts etc. The Company has taken loans from financial institutions. In the year 94- 95, the financial institutions converted interest due on loan amounting to Rs. 53 lacs into share capital. This has clearly been shown on the face of Balance sheet by way of a note in Schedule-1, where it was mentioned that Rs. 53 lacs has been converted into 530000 equity shares of Rs. 10 each fully paid up, out of outstanding, funded interest of the financial institutions during the year as per the scheme sanctioned by BIFR, therefore the mistake is apparent from the record. As nowhere in the assessment order the assessing authority has stated that the matter is debatable. When the materials were available in the assessment record for grant of relief, the application under Section 154 was clearly maintainable and relief could not be refused merely on the ground that the assessee had omitted to claim the same originally.” 15. From the above Para reproduced from the Tribunal order, it is seen that in that case, this fact was available in the balance sheet itself that Rs. 53 Lakhs being interest on the term loan has been converted into equity shares with equal value and in course of assessment proceedings against a query of the AO, it was very much submitted by assessee before the AO that major increase of Rs. 53 Lakhs in the said capital was on account of conversion of funded interest due to IDBI, IFCI and ICICI into equity under

ITA No. 2022/Bang/2018 Page 10 of 11 the rehabilitation package sanctioned by IDBI/BIFR. Hence it is seen that this fact was already available on record in that case that the outstanding interest was converted into equity and in this manner, the interest was already paid out in the relevant year and therefore, deduction was allowable u/s. 43B and in view of these facts, it was held by Tribunal in that case that not allowing of such deduction is a mistake apparent from record which is rectifiable u/s. 154 of IT Act. In the present case, there is no such thing available in the assessment folder that the claim of long term capital loss was on a wrong basis by considering only actual cost and not the indexed cost. Hence in the facts of present case, in our considered opinion, this Tribunal order is also not applicable. 16. As per above discussion, we have seen that none of the judgements cited by ld. AR of assessee is applicable in the facts of present case and in our considered opinion, the rectification sought for by the assessee u/s. 154 is not in respect of an apparent mistake which can be rectified u/s. 154. In our considered opinion, if the assessee has filed an appeal in course of assessment proceedings completed by the AO by passing an order u/s. 143(3) on 03.03.2014, in course of that appeal, this issue can be raised by way of additional ground but not in the proceedings u/s. 154 i.e. the present proceedings. 17. In the result, the appeal filed by the assessee is dismissed. Order pronounced in the open court on the date mentioned on the caption page.

Sd/- Sd/- (LALIET KUMAR) (ARUN KUMAR GARODIA) Judicial Member Accountant Member Bangalore, Dated, the 07th December, 2018. /MS/

ITA No. 2022/Bang/2018 Page 11 of 11

Copy to: 1. Appellant 4. CIT(A) 2. Respondent 5. DR, ITAT, Bangalore 3. CIT 6. Guard file By order

Assistant Registrar, Income Tax Appellate Tribunal, Bangalore.