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Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH, KOLKATA
Before: Shri P.M. Jagtap & Shri S.S. Viswanethra Ravi
Per Shri P.M. Jagtap :- These four appeals filed by the assessee are directed against a common order of the ld. Commissioner of Income Tax, Kolkata-3, Kolkata dated 30.03.2015 passed under Section 263 of the Income Tax Act, 1961 for assessment years 2007-08, 2008-09, 2009-10 and 2010-11.
The relevant facts of the case giving rise to these appeals are as follow:-
The assessee is a Company, which is engaged in the business of operating ships for carriage of goods. The return of income for A.Y. 2007- to 784/KOL./2015 Assessment years: 2007-2008 to 2010-2011 Page 2 of 11 08 was filed by it on 31.10.2007 declaring total income of Rs.10,10,27,870/-. In the assessment completed originally under section 143(3) vide an order dated 30.11.2009, the total income of the assessee was determined by the Assessing Officer at Rs.11,11,92,560/- under the normal provisions of the Act. The book profit under section 115JB, however, was not computed by the Assessing Officer in the said assessment order in order to ascertain the minimum alternate tax payable by the assessee. The issue relating to treatment of profit/ gain earned by the assessee-company on sale of ships/vessels also was not considered by the Assessing Officer. After having noticed these errors in the order of the Assessing Officer passed under section 143(3), which were prejudicial to the interest of the revenue, the ld. CIT exercised his powers under section 263 and set aside the order passed by the Assessing Officer under section 143(3) with a direction to the Assessing Officer to pass a fresh assessment order after taking into consideration both the errors pointed out by him. Accordingly, a fresh assessment was completed by the Assessing Officer under section 143(3) read with section 263 of the Act vide an order dated 08.12.2011, wherein he computed the book profit of the assessee under section 115JB at Rs.14,240.98 lakhs and since the MAT credit payable thereon at Rs.1,424.098 lakhs calculated at 10% of the book profit was more than the tax of Rs.333.57 lakhs payable under the normal provisions of the Act, the assessee was taxed on the basis of book profit under section 115JB by the Assessing Officer. He also allowed the MAT credit of Rs.1,090.528 lakhs (Rs.1,424.098 lakhs minus Rs.333.570 lakhs) to be carried forward under section 115JAA(5) of the Act vide an order dated 08.12.2011 passed under section 143(3) read with section 263 of the Act.
Against the order passed by the Assessing Officer under section 143(3) read with section 263 of the Act, an appeal was preferred by the assessee before the ld. CIT(Appeals) and while disposing of the same, the ld. CIT(Appeals) directed the Assessing Officer to include surcharge as to 784/KOL./2015 Assessment years: 2007-2008 to 2010-2011 Page 3 of 11 well as education cess while computing the amount of MAT credit to be carried forward. Accordingly, an order under section 143(3) read with sections 263 and 251 dated 29.11.2012 was passed by the Assessing Officer giving effect to the order of the ld. CIT determining the MAT credit to be carried forward at Rs.12,23,56,380/- instead of Rs.10,90,52,800/-.
The assessment records in the case of the assessee thereafter came to be examined by the ld. CIT. According to him, the MAT credit under section 115JAA was available only when tax was actually paid under section 115JB and since the assessee had not actually paid tax under section 115JB, there was an error in the order of the Assessing Officer in allowing the MAT credit to be carried forward in the case of the assessee for A.Y. 2007-08. Since such MAT credit allowed to be carried forward in A.Y. 2007-08 was adjusted by the Assessing Officer in the assessments completed for immediately succeeding three years, i.e. A.Y. 2008-09, 2009-10, 2010-11 vide orders dated 27.02.2013, 27.12.2013 and 28.03.2013, he was of the opinion that the same were also erroneous as well as prejudicial to the interest of the revenue. He accordingly issued show-cause notices under section 263 requiring the assessee to show- cause as to why the assessments for all the four years under consideration should not be revised by treating the same as erroneous as well as prejudicial to the interest of the revenue. In reply, the following explanation was offered by the assessee in writing:-
"The order U/s 263/143(3) dated 08-2-2011 for the AY 2007-08 correctly states MAT Credit of Rs.1090.528 lacs allowable to be carried forward u/s 15JAA of the Act. However, by that time the assessment had already been completed for the following assessment year i.e AY 08.09, 09-10,10-1f determining tax payable under the normal provisions of the Act. The assessee had already paid tax in excess of the amount which it would have been liable to pay, had the MAT Credit of AY 2007-08 was set off against the normal tax payable. Accordingly, even if the amount of MAT tax payable pursuant to the order dated 8.12.2011 was paid for the Assessment year 2007·08, the assessee would have to 784/KOL./2015 Assessment years: 2007-2008 to 2010-2011 Page 4 of 11 been entitled to a refund for the following assessment years. Thus, the orders passed by the Assessing Officer, envisaging the adjustment of such MAT Credit against the normal tax paid for the AY 08-09, 09-10 and 2010-11 cannot be said to be prejudicial to the interest of Revenue.
The orders referred to in Notice u/s 263 are the final subsisting orders for the relevant Assessment Years subsequent to appeal effect/rectification/scrutiny assessment etc. in fact, order 263/143(3) for the Assessment year 2007-08 pursuant to the direction U/S 263 was passed on 08.12.2011 and for all the following Assessment Years immediately thereafter. The order for the AY 2007-08 passed u/s 263/143(3) dated 8.12.2011, determined tax payable on book profits u/s 115JB of the Act. Thereafter the said order was merged with order u/s 251 dated 29.1.2012, on giving effect of the appeal order of the Commissioner (Appeals).
The orders for the subsequent A.Ys 08-09, 09-10 and 10-11 were passed on 8.12.2011, 29.11.2011 and 13.01.2012 respectively allowing the credit of such MA T tax determined for the AY 2007-08. The MAT tax payable was adjusted in the subsequent Assessment Years against the normal tax paid in excess to the extent credit for such MA T tax was allowable against the normal tax payable. a) Assessment Year 2008-09 The order u/s 154/143(3) dated 8.12.2011 was passed after adjusting the credit of MAT tax for the AY 2007-08. The order was thereafter rectified u/s 154 vide order dated 27.02.2013. b) A.Y. 09-10 The original assessment order u/s 143(3) dated 29.12.2011 was passed raising refund of Rs.4,32,34,500/- after adjusting the credit of MAT tax for the AY 2007-08. Thereafter the order was rectified u/s 154 on 27.02.2013 determining the amount refundable at Rs.99,95,710/-. c) A.Y. 10-11 Order u/s 154/143(1) was passed on 13.01.2012 raising a refund of Rs.2,10,81,550/- after adjusting the credit u/s 5JAA. The assessment u/s.143(3) was subsequently completed on 28.03.2013. to 784/KOL./2015 Assessment years: 2007-2008 to 2010-2011 Page 5 of 11
Further, where there exist two possible views to a given situation, and where the where the Assessing Officer has resorted to a particular view then proceeding u/s 263 of the Act cannot be invoked. A similar view has been held by the Delhi High Court in the case of Commissioner of Income Tax Vs Honda Siel Power Products Ltd[2010] 194 Taxman 175 (Delhi) wherein it was held that "in cases where the Assessing Officer adopts one of the courses permissible, in law, or where two views are possible and the Assessing Officer has taken one of the possible views, the commissioner cannot exercise his powers under section 263 to differ with the view of the Assessing Officer, even if there has been a loss of revenue"
The assessee had already paid the normal tax for the AY's 08-09, 09-10, 10-11. In the given situation there exists two possible views/approaches. Firstly, the assessee could either pay the MAT tax u/s 115JB for the AY 2007-08 and thereafter receive a refund for the subsequent A Y's to the extent the normal tax paid for the subsequent years exceeds the amount as payable after the adjustment of credit of MAT tax paid for AY 2007-08. The other view as is adopted by the assessing officer is to adjust the tax payable u/s 115JB for the AY 2007-08 and the tax refundable for the AY's 08-09, 09-10, 10-1 after taking effect of credit available to the assessee in such subsequent AY's u/s 15JAA. Thus, where there exists two possible views to a given situation, then revisionary assessment proceedings u/s 263 cannot be invoked, and the proceedings u/s 263 may please be dropped”.
The ld. CIT did not find merit in the above submission made by the assessee. According to him, the assessee having admittedly not paid MAT credit under section 115JB for the assessment year 2007-08, it was not entitled to any credit for the same and there was an error in the order of the Assessing Officer passed for A.Y. 2007-08 vide its order dated 29.11.2012 passed under section 143(3) read with section 263 and 251 of the Act to allow the same and also to carry forward the same for the subsequent years. He also held that this error had cascading effect for A.Ys. 2008-09, 2009-10 and 2010-11, wherein the MAT credit wrongly allowed to be carried forward in A.Y. 2007-08 was actually adjusted. He, therefore, held that the assessments made by the Assessing Officer for A.Ys. 2008-09, 2009-10 and 2010-11 were also erroneous as well as to 784/KOL./2015 Assessment years: 2007-2008 to 2010-2011 Page 6 of 11 prejudicial to the interest of the Revenue. Accordingly, the orders of assessments passed by the Assessing Officer for all the four years, i.e. A.Ys. 2007-08, 2008-09, 2009-10 and 2010-11 were set aside by the ld. CIT(Appeals) with a direction to the Assessing Officer to complete the assessments afresh by re-computing the MAT credit for A.Y. 2007-08 and also to consider the effect of such re-computation in the subsequent years, i.e. A.Y. 2008-09, 2009-10 and 2010-11. Aggrieved by the order passed by the ld. CIT under section 263 for all the four years under consideration, the assessee has preferred these appeals before the Tribunal.
The ld. counsel for the assesese at the time of hearing before us raised a preliminary legal issue challenging the validity of the impugned order passed by the ld. CIT under section 263 for A.Y. 2007-08 on the ground that the same is barred by limitation. He submitted that the MAT credit was actually allowed by the Assessing Officer in the order passed under section 143(3) read with section 263 on 08.12.2011 and the same was also allowed to be carried forward by him vide the said order as per the provision of section 115JAA. He submitted that the limited issue involved in the appeal filed by the assessee against the said order of the Assessing Officer was whether credit for MAT is available for surcharge and education cess also and the same was decided by the ld. CIT(Appeals) vide order dated 19.10.2012 in favour of the assessee. He submitted that the Assessing Officer accordingly passed an order under section 143(3) read with section 263 and 251 on 29.11.2012 giving effect to the order of the ld. CIT(Appeals) thereby increasing the MAT credit by the amount of surcharge and education cess. He contended that the ld CIT vide his impugned order passed under section 263 for A.Y. 2007-08, has sought to revise the assessment on the issue of credit for MAT allowed by the Assessing Officer under section 115JAA and since such credit was allowed by the Assessing Officer in the order passed under section 143(3) read with section 263 on 08.12.2011, what he has actually revised by the to 784/KOL./2015 Assessment years: 2007-2008 to 2010-2011 Page 7 of 11 impugned order passed under section 263 for A.Y. 2007-08 is the order passed by the Assessing Officer under section 143(3) read with section 263 on 08.12.2011. He contended that the impugned order under section 263 for A.Y. 2007-08 thus has been passed by the ld. CIT after the expiry of two years from the end of the financial year, in which the order sought to be revised was passed and the same is clearly barred by limitation as provided in sub-section (2) of section 263.
The ld. D.R., on the other hand, strongly supported the impugned order of the ld. CIT passed under section 263 for A.Y. 2007-08. He submitted that the ld. CIT vide his order has actually revised the order passed by the Assessing Officer under section 143(3) read with section 263 and 251 of the Act on 29.11.2012 and since the said order under section 263 is made before the expiry of two years from the end of the financial year in which the order sought to be revised was passed, it is not barred by limitation.
We have considered the rival submissions and also perused the relevant material available on record. It is observed that the ld. CIT by his impugned order passed under section 263 of the Act for A.Y. 2007-08 has revised the assessment made in the case of the assessee for A.Y. 2007-08 on the issue of allowing credit for MAT as per section 115JAA, which, according to him, was wrongly allowed by the Assessing Officer in the absence of any actual payment made by the assessee towards MAT. It is pertinent to note here that the MAT Credit as per the provisions of section 115JAA was actually allowed by the Assessing Officer originally in the assessment completed under section 143(3) read with section 263 passed on 08.12.2011 and in the appeal filed by the assessee against the said order, the limited issue involved was whether the MAT credit allowed by the Assessing Officer should include the amount of surcharge and education cess as well. When the ld. CIT(Appeals) decided the said to 784/KOL./2015 Assessment years: 2007-2008 to 2010-2011 Page 8 of 11 issue in favour of the assesese vide his appellate order dated 19.10.2012, the order dated 29.11.2012 was passed by the Assessing Officer under section 143(3) read with section 263 and 251 giving effect to the appellate order of the ld. CIT dated 19.10.2012 and accordingly the MAT credit originally allowed by him vide order dated 08.12.2011 passed under section 143(3) read with section 263 on 08.12.2011 was only increased by him by the amount of surcharge and education cess. The error, if any, in allowing the MAT Credit as alleged by the ld. CIT in his impugned order passed under section 263 thus was there in the order passed by the Assessing Officer under section 143(3) read with section 263 on 08.12.2011 whereby the MAT Credit was originally allowed by him and not in the order dated 29.11.2012 passed by the Assessing Officer under section 143(3) read with section 263 and 251 whereby the MAT Credit already allowed was only increased by the Assessing Officer by the amount of surcharge and education cess while giving effect to the appellate order of the ld. CIT(Appeals).
In the case of CIT –vs.- Alagendran Finance Limited [211 CTR (SC) 69], a similar fact situation was involved, inasmuch as the claim made by the assessee under the head “Lease Equalisation Fund” was accepted by the Assessing Officer in the assessment originally completed under section 143(3) and the said assessment was subsequently reopened only in respect of three items, viz. (1) the expenses claimed for share issue; (2) bad and doubtful debts; and (3) excess depreciation on gas cylinder and good containers. Although the issue relating to assessee's claim in respect of Lease Equalization Fund was not the subject matter of the re- assessment proceedings, the learned Commissioner purported to invoke his revisional jurisdiction in terms of S.263 of the Act and directed the Assessing Officer by an order dated 29th March, 2004 to check and assess the lease rental from lease equalization fund, if any, and to bring to tax the same. In these facts and circumstances of the case, the Hon'ble Supreme Court, after discussing elaborately the legal position on the to 784/KOL./2015 Assessment years: 2007-2008 to 2010-2011 Page 9 of 11 issue of scope of re-assessment proceedings and the doctrine of merger, held that the learned CIT having exercised his revisional jurisdiction to reopen the order of assessment only in relation to Lease Equalization Fund, which was not the subject matter of re-assessment proceedings, the period of limitation provided for in Sub-section (2) of S.263 of the Act would begin to run from the date of order of original assessment and not from the date of order of re-assessment. Accordingly, the order passed by the CIT under S.263 was held to be invalid by the Hon'ble Supreme Court, having been passed beyond the period of limitation as provided in sub-section (2) of S.263 of the Act. To the similar effect is the decision of the Hon'ble Bombay High Court in the case of Ashoka Buildcon Ltd. 239 CTR (Bom.) 318 wherein it was held that where an assessment has been reopened under S.147 in relation to particular grounds or in relation to certain specified ground, and subsequent to the passing of the order of re-assessment, jurisdiction under S.263 is sought to be exercised with reference to the issue which did not form the subject of re-opening of the assessment or order of re-assessment, the period of limitation provided in sub-section (2) of S.263 would commence from the date of the order of assessment and not from the date on which the order reopening the assessment has been passed.
Keeping in view the legal position emanating from the judicial pronouncements discussed above including the decision of the Hon’ble Supreme Court in the case of Alegendran Finance Limited (supra) and having regard to the facts of the case, we are of the view that the period of limitation for A.Y. 2007-08 has to be reckoned from the date of order passed by the Assessing Officer under section 143(3) read with section 263, i.e. 08.12.2011 and not from the date of order passed by the Assessing Officer under section 143(3) read with section 263 and 251, i.e. 29.11.2012 as the issue relating to the MAT credit on which the assessment for A.Y. 2007-08 was sought to be revised by the ld. CIT was decided in principle by the Assessing Officer vide his order dated to 784/KOL./2015 Assessment years: 2007-2008 to 2010-2011 Page 10 of 11 08.12.2011 passed under section 143(3) read with section 263 and since the impugned order under section 263 passed by the ld. CIT for A.Y. 2007-08 on 30.03.2015 was beyond the period of two years from the end of the financial year, in which the order dated 08.12.2011 sought to be revised was passed, the same is barred by limitation as provided in section 263(2) of the Act. The said order passed by the ld. CIT under section 263 for A.Y. 2007-08 is accordingly cancelled treating the same as invalid and the appeal of the assessee for A.Y. 2007-08 is allowed.
As a result of our decision rendered above cancelling the order passed by the ld. CIT under section 263 for A.Y. 2007-08 and restoring the order of the Assessing Officer for that year whereby he allowed the MAT credit to the assessee, the orders passed by the Assessing Officer for the subsequent three years, i.e. A.Ys. 2008-09, 2009-10 and 2010-11 allowing adjustment for such MAT credit cannot be said to have any error as alleged by the ld. CIT called for revision under section 263 and this consequential position is not disputed even by the ld. D.R. We, therefore, set aside the impugned orders passed by the ld. CIT under section 263 for A.Ys. 2008-09, 2009-10 and 2010-11 and restore that of the Assessing Officer.
In the result, all the appeals of the assessee are allowed.
Order pronounced in the open Court on April 6, 2016.