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Income Tax Appellate Tribunal, “C” BENCH, PUNE
Before: SHRI R.S.SYAL, VP & SHRI PARTHA SARATHI CHAUDHURY, JM
आदेश / ORDER PER PARTHA SARATHI CHAUDHURY, JM:
These two appeals preferred by the assessee emanates from the orders of the Ld. Commissioner of Income Tax/Assistant Commissioner of Income Tax, Pune dated 29.03.2019 & 10.02.2020 for the assessment year 2013-14 passed u/s.263 & 143(3)/263 read with Section 144C (13) and 153(3) of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟) as per the grounds of appeal on record.
In ITA No.736/PUN/2019 for the assessment year 2013-14, the assessee has raised following grounds:
“1:0 Re. Validity of order u/s.263:
1.1. The Commissioner of Income-tax (International Tax/Transfer pricing) (hereinafter referred to as the 'CIT') has erred in holding that the order dated 20 May 2016 passed by the Assessing Officer u/s.143(3) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') was erroneous and prejudicial to the interest of revenue and in setting aside the same by invoking the powers u/s. 263 of the Act. 1.2. The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject the order passed by the Assessing Officer was not erroneous and hence the setting aside of the same by the CIT u/s. 263 of the Act is erroneous and bad in law. 1.3. The Appellant submits that the impugned order passed u/s. 263 of the Act by the CIT be struck down. Without prejudice to the aforesaid:
2:0 Re- Taxability of the amount received by the Appellant from its Indian Subsidiary :- 2.1. The CIT has erred in holding that the amounts received by the Appellant during the year under consideration from its Indian subsidiary under the Service Agreement is taxable in India as "Royalty" /"Fees for
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Technical Services" under the Act and "Royalty" /"Fees for Included Services" under the Double Taxation Avoidance Agreement between India and USA. 2 :2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, the amount received by it during the year under consideration under the Service Agreement does not fall within the purview of the term "Royalty'? "Fees for Included Services" under the Double Taxation A voidance Agreement between India and USA and is therefore not taxable in India and the stand taken by the CIT in this regard is incorrect, erroneous and misconceived. 2:3 The Appellant submits that the action of the CIT in directing the Assessing Officer to re-examine the taxability of the amount received by it during the year under consideration under the Service Agreement is bad in law and hence the same ought to be struck down. 3:0 Re : General: 3.1 The appellant craves leave to add, alter, amend, substitute and /or modify in any manner whatsoever all or any of the foregoing grounds of appeal at or before the hearing of the appeal.”
The Ld. Counsel for the assessee opening his argument submitted that this is a case of revisionary jurisdiction u/s.263 of the Act passed by the Ld. Commissioner of Income Tax and the entire proceedings were initiated at the behest of the Assessing Officer and demonstrating the same, the Ld. Counsel referred to the draft assessment order dated 03.07.2019 in ITA No. 376/PUN/2020 for the assessment year 2013-14 wherein at Para 2, it is stated as under :
“2. The Office of the ACIT (IT), Circle 1(2) Kolkata sent a proposal for revision u/s.263 of the I.T Act on 06.02.2017. The case was transferred to this charge on 10.09.2018 and the case records was received in this office on 24.09.2018. A formal proposal for revision u/s.263 was sent by JCIT (IT) Pune range to the CIT (IT & TP)- Pune on 30.01.2019, and subsequently, the Commissioner of Income Tax (IT & TP) Pune vide order u/s.263 of the Act dated 29.03.2019 concluded that the order of the Assessing Officer dated 20.05.2016 was an erroneous order which is prejudicial to the interest of revenue and accordingly, set aside the order with direction to analyse all the documents, conduct enquiries on various issues, do verification of facts and conduct necessary investigation, apply the law, examine the various contracts, expenditure incurred by assessee., if any in India to ascertain the actual quantity and extent of services provided by assessee benefit to the recipients (NWIL) by these services etc. and pass a fresh assessment order and re compute the Assessee’s income after perusing g legal provisions, making further enquiries as directed and after giving due opportunity to the assessee and perusing the necessary evidence.”
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That further, the Ld. Counsel also brought to our notice a letter dated 06.02.2017 by ACIT (IT) Circle-1(2), Kolkata where he has written a letter to CIT (IT/TP), Kolkata which is annexed as follows:
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The JCIT, Range IT, Pune had thereafter, written a letter to CIT(IT/TP) Pune dated 30.01.2019 proposing for revisionary jurisdiction u/s.263 of the Act in the case of the assessee for the assessment year 2013-14 and the said letter is annexed as follows:
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The Ld. Counsel for the assessee vehemently submitted that the legal framework as regards the provisions of section 263 of the Act does not permit that the Assessing Officer would recommend the case for assumption of revisionary jurisdiction u/s.263 of the Act by the Commissioner of Income Tax. That it is always the Commissioner of Income Tax u/s.263 of the Act who may call for and examine the record of any proceedings under this Act and if he considers that any order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment.
Meaning thereby, the entire process of examination of records of assessment whether it is erroneous or prejudicial to the interest of the revenue, this examination and verification has to be done by the Commissioner of Income Tax. This view has been accepted by the Pune Bench of the Tribunal in the case of Alfa Laval Lund AB Vs. CIT (IT/TP), Pune in ITA No.1287/PUN/2017 for the assessment year 2012-13 dated 02.11.2021 wherein the Tribunal on the similar set of facts and circumstances held and observed as follows:
“3. We have heard both the sides through Virtual Court and gone through the relevant material on record. It can be seen from para 4 of the ld. CIT‟s order that: “A proposal for revision u/s 263 of the IT Act, 1961 was received from DCIT(IT)-1, Pune through the Jt.CIT(IT), Pune vide letter No. Pn/Jt.CIT(IT)/263/2016-17/61 dated 23.05.2016”. It is thus manifest that the edifice of the revision in the extant case has been laid on the bedrock of receipt of the proposal from the AO. At this stage, it would be worthwhile to have a glance at sub-section (1) of section 263 of the Act, which runs as under:-
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“The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he, may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.” 4. Sub-section (1) of section 263 of the Act is an enabling provision which confers jurisdiction on the CIT to revise an assessment order which he considers erroneous and prejudicial to the interests of revenue. The process of revision u/s 263 of the Act initiates only when the CIT calls for and examines the record of any proceeding under this Act and considers that any order passed by the AO is erroneous and prejudicial to the interests of the revenue. The twin conditions of – (i) the CIT calling for and examining the record; succeeded by (ii) his considering the assessment order as erroneous etc. – are sine qua non for the exercise of power under this section. The use of the word `and’ between the expression `call for and examine the record ….‟ and the expression `if he considers that any order … is erroneous …‟ abundantly demonstrates that both these conditions must be cumulatively fulfilled by the CIT and in the same order, that is, the first followed by the second. In other words, the kicking in point for invoking jurisdiction u/s 263 is calling for and examining the record of any proceedings under the Act by the CIT leading him to consider the assessment order erroneous etc. A communication from the AO is not `the record of any proceedings under this Act’. To put it simply, the consideration that the assessment order is erroneous and prejudicial to the interests of the revenue should flow from and be the consequence of his examination of the record of proceedings. If such a consideration is not preceded by the examination of record of the proceedings under the Act, the condition for revision does not get magnetized. 5. It is trite that a power which vests exclusively in one authority, can‟t be invoked or cause to be invoked by another, either directly or indirectly. Section 263 of the Act confers power on the CIT to revise an assessment order, subject to certain conditions. Instantly, we are confronted with a situation in which the revision was initiated on the basis of the AO sending a proposal to the CIT and not on the CIT suo motu calling for and examining the record of the assessment proceedings and thereafter considering the assessment order erroneous and prejudicial to the interests of the revenue. The AO recommending a revision to the CIT has no statutory sanction and is a course of action unknown to the law. If AO, after passing an assessment order, finds something amiss in it to the detriment of the Revenue, he has ample power to either reassess the earlier assessment in terms of section 147 or carry out rectification u/s 154 of the Act. He can’t usurp the power of the CIT and recommend a revision. No overlapping of powers of the authorities under the Act can be permitted. As the revision proceedings in this case have triggered with the AO sending a proposal to the ld. CIT and then the latter passing the order u/s 263 of the Act on the basis of such a proposal, we hold that it became a case of jurisdiction deficit resulting into vitiating the impugned order. Without going into the merits of the case, we quash the impugned order on this legal issue itself.
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In the result, the appeal is allowed.”
Respectfully, following the same parity of reasoning of the order of the Tribunal referred herein above, when the revision proceedings have been triggered only on basis of proposal being sent by the Assessing Officer to the Ld. Commissioner of Income Tax and the latter passing the order u/s.263 on basis of such proposal, it certainly under the circumstances becomes a case of jurisdiction deficit resulting into vitiating the order. Without going into the merits of the case, we quash the impugned order on this legal ground itself. We allow the grounds of appeal raised by the assessee.
In the result, appeal of the assessee in ITA No.736/PUN/2019 is allowed.
ITA No.376/PUN/2020 A.Y.2013-14
The Ld. Counsel for the assessee submitted that this appeal is consequential to the order passed u/s.263 of the Act. Since the appeal relating to the order passed u/s. 263 of the Act has been decided in favour of the assessee wherein the order u/s.263 is itself quashed, the order passed u/s.143(3) becomes infructuous and therefore, dismissed as such.
In the result, appeal of the assessee in ITA No.376/PUN/2020 for the assessment year 2013-14 is dismissed being infructuous.
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In the combined result, appeal of the assessee in ITA No.736/PUN/2019 is allowed and appeal of the assessee in ITA No.376/PUN/2020 is dismissed.
Order pronounced on 06th day of December, 2021.
Sd/- Sd/- R.S.SYAL PARTHA SARATHI CHAUDHURY VICE PRESIDENT JUDICIAL MEMBER पुणे / Pune; ददनांक / Dated : 06th December, 2021. SB आदेश की प्रधतधलधप अग्रेधषत / Copy of the Order forwarded to : अपीलाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. 3. The CIT(IT/TP), Pune. 4. The JCIT, Range-IT, Pune धवभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, “सी” बेंच, 5. पुणे / DR, ITAT, “C” Bench, Pune. गार्ा फ़ाइल / Guard File. 6.
आदेशानुसार / BY ORDER, // True Copy // धनजी सधचव / Private Secretary आयकर अपीलीय अधधकरण, पुणे / ITAT, Pune.
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Date 1 Draft dictated on 01.12.2021 Sr.PS/PS 2 Draft placed before author 06.12.2021 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr.PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order