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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRIAMARJIT SINGH & SHRI ANIKESH BANERJEE
Instant appeal of the assessee is preferred against the order of theLearned Principal Commissioner of Income-tax, Mumbai-6 (for brevity, ‘Ld.PCIT’) passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’), for Assessment Year 2018-19, date of order21.03.2024.The impugned order was emanated from the order of the National e-Assessment Centre, Delhi, (in short, ‘the A.O.’) passed under section 143(3)read with section 144B of the Act, date of order19/04/2021.
“Ground no. 1 to 5 - Validity of proceedings initiated under section 263 of the Act. On the facts and in the circumstances of the case and in law, direction given by the Learned PCIT to revise the order dated 19 April 2023 passed under section 143(3) of the Act r.w.s. 144B of the Act is erroneous, illegal and bad in law on the following grounds:
The Learned PCIT erred in holding the assessment order dated 19 April 2023 passed under section 143(3) r.w.s 144B of the Act by the National Faceless Assessment Centre for captioned AY, as erroneous and prejudicial to the interest of the revenue treating the same as passed without any enquiry as per Explanation 2 to Section 263 of the Act.
The Learned PCIT erred in not appreciating the fact that due enquiry was made by the Learned Assessing Officer ('Learned AO') and there was due application of the mind by AO, and hence, the action of the Learned PCIT to assume jurisdiction under section 263 of the Act is bad in law.
The Learned PCIT erred in not appreciating the fact that Explanation 2 to section 263 of the Act, could be applied only when there was lack of enquiry or no enquiry made by the AO. Explanation 2 to section 263 of the Act, cannot be applied when there was inadequate enquiry made by the AO.
4. The Learned PCIT erred in not appreciating the fact that when two views are possible on a given issue and Learned AO has adopted one possible view, the order passed by AO cannot be said to be erroneous and prejudicial to the interest of revenue within meaning of section 263 of the Act and any attempt made by the Learned PCIT to revise the assessment order would be without jurisdiction.
5. The Learned PCIT has not undertaken any independent enquiry nor has he provided his decision on the merits of the case. Ground no. 6 to 8 - Export incentive amounting to Rs. 3,35,17.335 not offered to tax. On the facts and in the circumstances of the case and in law, the learned PCIT has:
3 /Mum/2024 Huhtamaki India Limited 6. Erred in not appreciating the fact as per the Ind-AS Accounting provisions, any government grant (relating to assets) is recognised in the books as an asset to be depreciated/ amortized over the useful life of the asset and correspondingly, the benefit accruing to the assessee is to be presented as deferred income which isrecognised in the profit and loss account on a systematic and rational basis.
7. Erred in not appreciating the fact that Assessee has reduced the notional income from the profit with corresponding disallowance of depreciation of same amount forming part of Book Depreciation.
8. Erred in not appreciating the fact that Export Promotion Capital Goods ('EPCG') Income of Rs. 3,35,17,3357- is notional in nature and the same is not taxable under the Act.
Ground no. 9 to 10 - Depreciation claimed/ on Block of assets in excess amounting to Rs. 1.24.69.269
On the facts and in the circumstances of the case and in law, the learned PCIT has:
9. Erred in not appreciating the fact that excess depreciation amounting to Rs. 1,24,69,269 is the claim of balance additional depreciation @10% in respect of plant and machinery put to use for less than 180 days during the previous financial year (i.e. FY 2016-17).
Erred in not appreciating the fact that disclosure of said additional depreciation has also been correctly disclosed in the return of income filed for AY 2018-19 as well as AY 2017-18.
Ground no. 11 to 13 - Capital loss on disposal of current investment amounting to Rs. 7.19,082 not reduced from income from business and profession:
On the facts and in the circumstances of the case and in law, the learned AO has:
erred in not appreciating the fact that the Assessee has discharged the tax liability in AY 2019-20 in respect of the short-term capital loss which was not reduced from the computation of income from business and profession for AY 2018-19.
erred in not appreciating the fact that the Assessee has discharged the tax liability in AY 2019-20 in respect of the short-term capital loss which was not reduced from the computation of income from business and profession for AY 2018-19.
Erred in not appreciating the fact that the above only results in timing difference as the tax has been duly discharged in subsequent AY. Without prejudice to the above, in case the same is held as not allowable in AY 2018-19, then Appellant requests that the short-term capital loss be allowed to be carried forward and set-off against income capital gains in the subsequent AY i.e. AY 2019-20.
Ground no. 14- Non-levy of interest under section 234D amounting to Rs. 1,56.035 on refund
On the facts and in the circumstances of the case and in law, the learned AO has erred in levying interest under section 234D amounting to Rs. 1,56,035 on refund granted to the Assessee vide the intimation issued under section 143(1) of the Act. The above grounds of objections are distinct and separate and without prejudice to each other. The appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal
, at any time before or at, the time of appeal, so as to enable the Hon'ble Tribunal to decide the appeal in accordance with the law.”
3. The brief facts of the case are that the assessment was completed under section 143(3) of the Act. The Ld.PCIT, by invoking section 263, issued a notice and has treated the assessment order as erroneous and prejudicial to the interest of the revenue on following issues:-
S.No. Description Amount 1 Export Promotion Capital Goods (EPCG), which 3,35,17,335/- had been reduced in the computation of income
5 /Mum/2024 Huhtamaki India Limited in contravention to provisions of section 28 2 Excess allowance of ‘Other Expenses’ being net 3,42,36,417/- loss on disposal of current investment, which ought to have been added back as capital expenditure 3 Excess allowance of depreciation on Plant & 1,24,69,269/- Machinery (Block-I) 4 Short levy of interest u/s 234D 1,56,035/- After the hearing from assessee in proceeding u/s 263 of the Act, the ld. PCIT has treated the impugned assessment order as erroneous and prejudicial to the interest of revenueand set aside the assessment order. Being aggrieved on the revision order passed under section 263 of the Act, the assessee filed an appeal before us.
The Ld.AR argued that the revision order is itself erroneous and Ld.PCIT has acted beyond his jurisdiction related to government grant of EPCG amount to Rs.3,35,17,335/- and related to depreciation amounting to Rs.1,24,69,269/-, the issue was explained before the Ld.PCIT. The relevant paragraph is inserted as below:-
The Ld.AR further invited our attention in the assessment order and the notices under section 142 (1) of the Act where the Ld.AO asked the explanation related to receipt of EPCG and the additional depreciation, APB pages 190 to 198.
During the hearing, the ld.AR also invited our attention in assessment order, page 1 which is reproduced as below: - “The reasons for selected scrutiny under the e-Assessment Scheme, 2019”. The relevant paragraph is reproduced as below:-
“1. The case was selected for Complete Scrutiny assessment under the E- assessment Scheme, 2019 on 'the following issues:-
S. No. Issues i. Claim of Any Other Amount Allowable as Deduction in Schedule BP ii. Duty Drawback iii. Refund Claim iv. Deduction on Account of Donation for Scientific Research v. Other Income Reported in Schedule A-OI not Credited to P&L Account vi. Deduction from Total Income under Chapter VI-A”
The ld.AR further argued and also accepted that related to loss of capital gain was duly taken in the P&L Account and claimed other expenses which amounts to Rs.7,19,082/- but the issue is duly accepted by the Ld.AR that an erroneous adjustment was made. In argument section 234D, the issue is duly discussed where the interest was charged amounting to Rs.1,56,035/- in relation to the refunded amount.
The ld.DR vehemently argued and fully relied on the order of the Ld.PCIT. The ld.DR mentioned that no verification was properly made by the Ld.AO and there is an “inadequate enquiry” was done. The ld.DR prayed for upholding of the revisionary order passed under section 263 of the Act.
We heard the rival submission and considered the documents available in the record. The ld.PCIT, by invoking the section 263, asked for verification on certain issues. Out of that, EPCG payment amounting to Rs.3,35,17,335/- was duly discussed by the ld. Assessing Officer during the assessment proceedings and the notice under section 142(1) is covered with the explanation that was sought for EPCG payment and the additional depreciation claim. The Ld.AR placed a copy of the return in APB page 77 where at column No.14 “Additional Depreciation
10 /Mum/2024 Huhtamaki India Limited relating to immediately preceding years on asset put to use for less than 180 days Rs.1,24,69,268/-“ is reflected. The issue was duly explained by the assessee during the assessment proceedings. There is an “inadequate enquiry” but there is no“lack of enquiry”.
We respectfully relied on the order of the coordinate Bench ofITAT, Mumbai Bench in the case of Reliance Payment Solutions Ltd. v. Principal Commissioner of Income-tax-8, [2022] 136 taxmann.com 277 (Mumbai - Trib.).
“9. Clearly, therefore, as long as the action of the Assessing Officer cannot be said to be lacking bonafides, his action in accepting an explanation of the assessee cannot be faulted merely because it could have been lawful to make mere detailed inquiries or because he did not write specific reasons of accepting the explanation. As for learned PCIT's observations regarding accepting the explanation "without appropriate evidence", there is nothing to question the bonfides of the Assessing Officer or to elaborate as to what should have been 'appropriate' evidence. The fact remains that the specific issue raised, in the revision order was specifically looked into, detailed submissions were made and these submissions were duly accepted by the Assessing Officer. Merely because the Assessing Officer did not write specific reasons for accepting the explanation of the assessee cannot be reason enough to invoke powers under section263, and non-mentioning of these reasons do not render the assessment order "erroneous and prejudicial to the interest of the revenue".
The ld. DR has not made any strong objection against the submission of the ld. AR. We respectfully follow the order of the Coordinate Bench in the case of Reliance Payment Solutions Ltd(supra). The issues are duly considered and finally accepted by the ld. AO in assessessment proceeding. In our considered view, on the these grounds the assessment order is not erroneous.
8.1. Related to grounds 11 to 13, the capital loss on disposal of ‘current investment’ amounting to Rs.7,19,082/- was reduced from the income from business and profession in the head of ‘other expenses. During the hearing, the ld.AR also accepted the fact and it itself is an erroneous adjustment which, the Ld.AO has not considered and even there is lack of verification from the end of the Ld.AO during the assessment proceedings.
Considering the above issue, grounds No.11 to 13 of the appeal of the assessee are dismissed.
8.2. Related to ground 14 for levy of interest under section 234D amounting to Rs.1,65,035/- is consequential in nature, which will be calculated after the adjustment of additions.
So,ground No.14 is dismissed.
8.3. Considering the grounds 1 to 5 is against the validity of proceedings initiated under section 263 is duly dismissed as there is no such error on the point of the issuance of notice under section 263. The Ld.AR was also not able to demonstrateabout defect in legality of proceeding u/s 263 of the Act.
Considering the argument of the ld. AR the ground nos. 1 to 5 are dismissed.
Considering the above discussion, groundnos- 1 to 5 are dismissed, groundnos- 6 to 10 are allowed, grounds 11 to13 are dismissed and ground no- 14 is consequential in nature.
12 /Mum/2024 Huhtamaki India Limited 10. In the result, appeal of the assessee bearing ITA No.2668/Mum/2024 is partly allowed. Order pronounced in the open court on 29th day of July, 2024.