PRAKASH AUTO,ULHASNAGAR vs. CIT 23, MUMBAI

Date of Hearing: 21 /11/2016 Date of Pronouncement: 13/02/2017 ORDER

PER N.K. PRADHAN, AM

filed by the assessee read as under: “i. “On the facts and in the circumstances of the case & in law the learned CIT,

23. Mumbai has erred in holding that the order of the AO u/s 143(3) dated 20.03.2013 was prejudicial to the interest of the revenue. ii. On the facts and in the circumstances of the case & in law the action of the assessing officer of assessing the correct income of the appellant by considering the loss as per the audited statements of account, books of account and the records of the appellant while passing the order u/s 143(3) is not prejudicial to the interest of the revenue as held by the learned CIT, 23, Mumbai. iii. On the facts and in the circumstances of the case & in law the action of the AO of a) allowing deduction of Rs. 3,14,060/- on account of deficiency computed u/s 32(1)(iii) b) not invoking the provisions of the section 2(22)(e) of the act c) not considering notional interest on interest free refundable deposits received from licensees as income of the appellant while passing the order u/s 143(3) are not prejudicial to the interest of the revenue as concluded by the learned CIT,23 Mumbai.”

In response to it, the AR of the assessee filed a written submission before the CIT on 22.03.2013 stating that (i) the assessee had filed a revised computation of income during the assessment proceedings as it was noticed that in the computation of income on the basis of which the return of income was filed had some clerical errors resulting in loss of Rs. 25,45,058/- instead of the correct loss of Rs. 1,00,89,133/-, (ii) during the financial year 2007-08 furniture owned and used in business was sold and the same was duly written off in the books of accounts, (iii) the company had not made any payment of advance or loan to the assessee during the year and the transaction was actually part payment of the amount received in the financial year 2006-07 and therefore the provisions of section 2(22)(e) are not applicable and (iv) without a specific explicit provision of law, no fictional income can ever be sought to be taxed.

The CIT was not convinced with the above explanation of the assessee as (i) the AO has no authority under the Act to accept the revised computation of income filed during the course of assessment, (ii) the AO has not verified the facts regarding the admissibility of set off loss of Rs. 3,14,060/- on sale of furniture against the business income, (iii) the AO has not verified the facts relating to the application of section 2(22)(e) and (iv) the AO has not examined the issue that the notional interest accrued on refundable deposits was liable to be taxed as annual letting value.

In view of the above, the CIT set aside the order dated 28.12.2010 passed by the AO as erroneous and prejudicial to the interest of revenue. He directed the AO to make a fresh assessment in the light of the observations made by him.

6.1 We begin with the decisions relied on by the learned counsel of the assessee. In Pruthvi Brokers & Shareholders (P) Ltd., the Hon’ble High Court held :

“Thus, it is clear that the Supreme Court did not hold anything contrary to what was held in the previous judgements to the effect that even if a claim is not made before the Assessing Officer, it can be made before the appellant authorities. The jurisdiction of the appellate authorities to entertain such a claim has not been negated by the Supreme Court in this judgement. In fact the Supreme Court made it clear that the issue in the case was limited to the power of the assessing authority and that the judgement does not impinge on the power of the Tribunal under section 254.’’ In Bharat Aluminium Co. Ltd., the Hon'ble Delhi High Court has held that the CIT having not found the assessment order erroneous in which the AO allowed the legitimate business expenditure by accepting corrections in the original return made through a letter, he had no power to revise the same.

In M/s. Perlos Telecommunication & Electronic Components India (P) Ltd., the assessee had filed revised computation of income before the AO at the time of assessment proceedings claiming expenditure which were erroneously disallowed u/s 37(7) while filing the return of income . The Tribunal held :

“In our considered opinion, the assessee has not filed any fresh claim. It is not the case where the assessee is claiming additional deduction or exemption. In the Income Tax Act, deductions and exemptions are dealt with in separate chapters of the Act and have different connotation. The assessee is only claiming expenditure which was left out at the time of filing of original return. During assessment proceedings, the Assessing Officer has power to make upward and downward adjustment in the income returned by the assessee. Where the assessee has not claimed certain expenditures clearly evident from records and it comes to the knowledge of Assessing Officer at the time of assessment proceedings, the Assessing Officer should grant relief to the assessee.” 6.2 Now we advert to the decision relied on by the learned DR. In Goetze (India) Ltd, the assessment year in question was 1995-96. The return was filed on 30.11.1995 by the assessee for the assessment year in question. On 12.01.1998, the assessee sought to claim a deduction by way of a letter before the AO. The deduction was disallowed by the AO on the ground that there was no provision under the Income Tax Act to make amendment in the return of income by modifying an application at the assessment stage without revising the return of income. The asssessee’s appeal before the CIT(A) was allowed. However, the further appeal of the department before the ITAT was allowed. The assessee approached the Hon'ble Supreme Court and submitted that the Tribunal was wrong in upholding the order of the AO. The Hon'ble Supreme Court dismissed the civil appeal filed by the assessee and made it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the ITAT u/s 154 of the Act.

To sum up, it has been held in Goetze (India) Ltd. that the assessee cannot amend a return filed by him before the AO for making a claim for deduction other than by filing a revised return.

6.3 As narrated here-in-above, the difference between the original computation of income and revised one because the rental income of Rs. 22,44,075/- has been considered separately by the assessee in the revised one. In view of the above, the case of the assessee in the instant appeal is distinguishable from the decisions relied on by the learned counsel.

6.4 We have gone through the assessment order passed by the AO u/s 143(3) of the Act and find that he has not verified (i) the claim of deduction made by the assessee of deficiency of Rs. 3,14,060/-, (ii) the implication of provisions of section 2(22)(e) and (iii) the issue of taxability of notional interest.

6.5 In the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 109 Taxman 66 (SC), it has been held by the Hon'ble Supreme Court that were the Assessing Officer had accepted entry in statement of account filed by the assessee, in absence of any supporting material without making any enquiry, exercise of jurisdiction by the Commissioner u/s 263(1) was justified.

6.6 The ratio laid down by the Hon’ble Supreme Court in Goetze (India) Ltd and Malabar Industrial Co. Ltd squarely applies to the instant case. In view of the above we hold that the CIT has rightly passed order u/s 263 in the present case.