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Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH, KOLKATA
Before: SRI RAJESH KUMAR & SRI ANIKESH BANERJEE
order
: March 11th, 2024 ORDER
Per Anikesh Banerjee, Judicial Member:
The instant appeal of the assessee was filed against the order of the Pr. Commissioner of Income-tax-2, Kolkata [in brevity ld. ‘Pr. CIT’] dated 30.03.2021 passed u/s 263 of the Income Tax Act, 1961 (in brevity the ‘Act’) for assessment year 2015-16. The impugned order was emanated from the order of the ld. ACIT, Circle-12(2), Kolkata (in brevity the ‘AO’) passed u/s 143(3) of the Act dated 29.11.2017.
The assessee has file the appeal with a delay of 37 days. Assessee filed a condonation petition and explained that the delay was duly covered by the order of the Hon'ble Supreme Court in the case of Suo Motu writ petition (c) no.
I.T.A. No.: 202/KOL/2021 Assessment Year: 2015-16 Sarvottam Caps Pvt. Ltd. 3 of 2020 date of order 10/01/2022. The assessee prayed for condonation of delay of 37 days. Ld. D/R had not made any objection against the condonation and the assessee’s submission. So, the delay of 37 days is duly condoned and the matter is taken for adjudication.
3. When the matter was called for hearing, none was present on behalf of the assessee. On perusal of the record, we find that the matter was fixed in several dates on Dated 15.02.2022, 06.04.2022, 26.05.2022 and the ld. A/R requested for fixation of the appeal on 25.08.2022. On dated 25.08.2022 none was present. Further 19.09.2022, 02.11.2022, 18.01.2023, 01.03.2023. Further both the representatives have appeared on dated 05.09.2023. Next dates were fixed on dated 20.09.2023, 06.12.2023, 21.12.2023 and finally the date was fixed on 05.03.2024. Considering the gravity of the case we have proceed to dispose the appeal on ex parte qua for assessee after hearing the ld. D/R.
4. The assessee has taken the following grounds of appeal: “1. FOR THAT on the facts and circumstances of the case and in law, the order passed by Ld. Principal Commissioner of Income Tax (PCIT) - 2 u/s 263 of the Income-tax Act, 1961 (‘the Act’) dated 31.03.2021 setting aside the assessment framed u/s 143(3) of the Act holding the same as erroneous and prejudicial to the interest of the revenue, is unlawful, without jurisdiction, and ab-initio void.
2. FOR THAT on the facts and circumstances of the case and in law, the PCIT erred in exercising jurisdiction u/s 263 by setting aside the assessment order even though the issue involved had been discussed and scrutinized by the Assessing Officer in detail while framing the assessment u/s 143(3) of the Act and after due consideration of the appellant’s explanation, cited decisions and legal position arrived at his independent opinion which cannot be termed as erroneous.
3. FOR THAT when the Assessing Officer has after due examination of Books of Accounts produced and in exercise of his powers passed Assessment Order, the PCIT cannot exercise power u/s 263 of the Act just because he does not feel satisfied with the conclusion reached by the Assessing Officer.
4. FOR THAT the Assessing Officer is not required to give detail reason in respect of each and every items dealt in the Assessment Order when he had called for explanation regarding the issue and dealt with the issue and I.T.A. No.: 202/KOL/2021 Assessment Year: 2015-16 Sarvottam Caps Pvt. Ltd. adopted one of the possible view and the assessment order passed by the Assessing Officer could not be branded as prejudicial to the revenue.
5. FOR THAT without prejudice to the above in any case Provision for bad and doubtful debts of Rs. 1,86,29,997/-being ascertained liability of the company should not be included in the computation of book profits u/s 115JB as directed by the Ld. PCIT-2 Kolkata vide his order u/s 263 dated 31.03.2021 in view of the Hon Hole Apex Court decision in the case of Commissioner of Income-Tax (LTU) vs ACC Ltd [2020] 113 taxmann.com 168 (SC).
6. FOR THAT direction of Ld. PCIT-2^Kolkata u/s 263 dated 31.03.2021 to include 14A Disallowance of Rs.77,08,984/- in computation of book profits u/s 115JB is void ab initio inasmuch as such disallowance u/s 14A is already included in computation of Book Profit u/s 115JB in original Assessment Order u/s 143(3) dated 29.11.2017.
7. FOR THAT in any case 14A Disallowance being a notional disallowance could not be added to book profits of the appellant u/s 115JB in view of the Hon’ble High Court decision in the case of Sobha Developers Ltd. vs Deputy Commissioner of Income Tax, LTU, Bangalore [2021] 125 taxmann.com 72 (Karnataka).”
The brief fact of the case is that the assessment was completed u/s 143(3) of the Act. The assessee debited the provision for bad and doubtful debts amounting to Rs. 1,86,29,997/- and the disallowance amounting to Rs. 77,08,984/- u/s 14A of the Act. During computation of the book profit u/s 115JB of the Act both the amounts are not added with the book profit. Accordingly, during calculation of the MAT credit u/s 115JA of the Act the ld. AO had allowed more credit to the assessee which was amounted to Rs. 83,84,295/-. The ld. Pr. CIT by invoking sec 263 called the assessment order erroneous for wrong calculation of Section 115JB of the Act and prejudicial to the interest of revenue. the ld. Pr. CIT by invoking Section 263 of the Act, issued the notice. None was present on behalf of the assessee. The order U/s 263 was passed by setting aside the assessment order. Being aggrieved the assessee filed appeal before us.
The ld. D/R first invited our attention in the revisional order, the relevant paragraphs are inserted as below: “2. The assessment record was called for and examined by the undersigned. The following observations are made in this case; I.T.A. No.: 202/KOL/2021 Assessment Year: 2015-16 Sarvottam Caps Pvt. Ltd. (i) As per Section 115JB of the IT Act, 1961 notwithstanding anything contained in any other provisions of the Act, where in the case of an assessee, being a company, the Income Tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st Day of April, 2012 is less than 18.5% of its book profit, (such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income tax @18.5%). (ii) Under Section 115JAA, the tax credit to be allowed under sub Section 1 shall be the difference of the tax paid for any assessment year under sub section 1 of Section 115JB and the amount of tax payable by the assessee on his total income computed in accordance with the other provisions of this act. (iii) In the instant case, it was noticed that the income of the assessee was assessed at Rs. 9,74,97,956/- after addition by AO for provisions of bad and doubtful debt for Rs. 1,86,29,997/- and Rs. 17,08,984/- for disallowance u/s 14A. Tax on normal provision is computed for Rs. 3,09,74,317/- and in Section 115JB tax on book profit was computed for Rs. 2,25,90,022/- and MAT credit was allowed for Rs. 83,84,295/- (Rs. 3,09,74,317/- - Rs, 2,25,90,022/-). (iv) However, as per explanation below Section 115JB, book profit means the profit was shown in the P&L A/c for the previous year as increased by the amount or amounts set aside to provisions made for meeting liability other than ascertained liabilities. It is noticed that the assessee debited Rs. 1,86,29,997/- towards provision for bad and doubtful debts, being an unascertained liability. But at the time of computation of tax u/s 115JB the said amount was not added to the book profit by the AO resulting in excess allowance of MAT credit. (v) Further Book profit U/s 115JB should be increased by the amount of Rs.77,08,984/- in respect of disallowance U/s 14A. As such, it is evident that the assessment u/s. 143(3) is erroneous in so far as it is prejudicial to the interest of revenue and the provisions of section 263 of the Act are clearly attracted in this case.
Jurisdictional Principal Commissioner of Income Tax is satisfied that it is a case of erroneous assessment insofar as it is prejudicial to the interests of the revenue. Show cause notice u/s.263 of the Act was issued vide this office letters ITBA/COM/F/17/2020-21/1031734206(1) dated 24.03.2021. The assessee was requested to cause an explanation as to why the provisions of section-263 of the Act should not be invoked in this case and the assessment completed by the Assessing Officer should not be revised/modified or set-aside. However, no reply was received.
I.T.A. No.: 202/KOL/2021 Assessment Year: 2015-16 Sarvottam Caps Pvt. Ltd.
I have considered the facts of the case and details available on record. The assessee has failed to completely disclose its true and correct income by non-furnishing of details as required under provisions of I.T. Act, 1961. The A.O. has passed the assessment order without making enquiries or verification which should have been made in the instant case. Clause (a) of Explanation - 2 to Section 263(1) is attracted in this case. Accordingly, it is held that the assessment order is erroneous insofar as it is prejudicial to the interest of the revenue.
5. Hon’ble Delhi High Court in the case of GEE VEE Enterprise vs. Addl. CIT reported in 99 ITR 375, 386 (Del) has held that the CIT may consider the order of the Assessing Officer to be erroneous not only if it contain some apparent error of reasoning or of law or of fact on the face of it but also because the Assessing Officer has failed to make enquiries which are called for in the circumstances of the case and it is an order which simply accepted what the assessee has stated in his return of income on the said issue. It is not necessary for the CIT to make further enquiries before cancelling the assessment order. The Commissioner can regard the order erroneous on the ground that the Assessing Officer should have made further enquiries.”
We heard the submission of ld. D/R, considered the documents available in the record and considered the orders of both the Revenue authorities. The assessment was completed u/s 143(3) of the Act. The assessee debited the provision for bad and doubtful debts amounting to Rs. 1,86,29,997/- and the disallowance amounting to Rs. 77,08,984/- u/s 14A of the Act. During computation of the book profit u/s 115JB of the Act both the amounts are not added with the book profit. Accordingly, during calculation of the MAT credit u/s 115JA of the Act the ld. AO had allowed more credit to the assessee which was amounted to Rs. 83,84,295/-. The assessment order is itself erroneous for wrong calculation of Section 115JB of the Act. As a result, the MAT credit was allowed higher sided. On verification u/s 263 of the Act the ld. Pr. CIT invoked Section 263 of the Act and issued the notice. None was present.
Considering the order of the Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) held that the phrase “Prejudicial to the interest of the Revenue” is of wide import and is not confined to only loss of taxes. If the AO has accepted the claim of the assessee and with a wrong calculation of Section 1115JB of the Act there is a genuine loss of revenue which was prejudicial to the interest of the Revenue. Further, Page 5 of 6