Case Law Details
L&T Infra Debt Fund Limited Vs CIT (Exemption) (ITAT Mumbai)
In the instant case, we notice that the AO did not examine the exemption claimed u/s 10(47) of the Act, meaning thereby, the assessment order has been passed by the AO without application of mind. The exemption so allowed without examining the claim would be prejudicial to the interests of revenue. Accordingly, both the conditions prescribed in sec. 263 of the Act have been satisfied in the instant case and impugned revision order passed by Ld CIT(E) does not call for any interference.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The assessee has filed this appeal challenging the order dated 22.3.2021 passed by the learned CIT(Exemption), Mumbai and it relates to A.Y. 2016-17. The assessee is challenging the revision order passed by the learned CIT(Exemption).
2. The Assessee is a non-banking financial institution. It filed its return of income for the year under consideration declaring NIL income, after claiming exemption of the entire income under section 10(47) of the I.T. Act. Under the provisions of section 10(47) of the Act, following type of income is fully exempted:-
“any income of an infrastructure debt fund, set up in accordance with the guidelines as may be prescribed, which is notified by the Central Government in the Official Gazette for the purpose of this clause.”
The Assessing Officer accepted the return of income filed by the assessee, meaning thereby, the AO allowed the exemption claimed u/s 10(47) of the Act.
3. The learned CIT(E) noticed that the assessee can claim exemption u/s 10(47) of the Act only if it is notified for the purposes of sec.10(47) of the Act. He also noticed that the assessee was notified u/s 10(47) of the Act w.e.f. A.Y. 2018-19 only. Accordingly, the Ld CIT(E) took the view that the assessee would not be eligible to claim exemption u/s 10(47) of the Act in AY 2016-17, since it was notified only from AY 2018-19. He further noticed that the Assessing Officer has granted exemption u/s 10(47) of the Act to the assessee without examining this important aspect. Accordingly, the learned CIT(E) took the view that the assessment order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue. Accordingly he initiated revision proceedings under section 263 of the Act. After hearing the assessee, learned CIT(E) set aside the assessment order dated 18.12.2018 and directed the Assessing Officer to undertake assessment proceedings denovo. Aggrieved, the assessee has filed this appeal before us.
4. Learned AR submitted that the CBDT has not prescribed any procedure for getting the assessee notified under section 10(47) of the Act and hence notification issued by the CBDT w.e.f. A.Y. 2018-19 should be deemed to apply retrospectively for earlier years including A.Y. 2016-17 also. In this regard learned AR also placed reliance on the decision rendered by Hon’ble Supreme Court in the case of Union of India Vs. Ashish Agarwal (138 com 64), wherein Hon’ble Supreme Court has held that the notice issued under section 148 of the Act shall be deemed to have been issued under section 148A of the Act.
5. On the contrary, learned DR submitted that the facts would remain that the Assessing Officer has not examined the issue of exemption claimed under section 10(47) of the Act in the assessment proceedings. It is also the fact that the CBDT has notified the assessee for the purposes of sec. 10(47) of the Act only with effect from A.Y. 2018-19. Since the Assessing Officer has failed to examine all these aspects, the learned DR contended that the learned CIT(E) was justified in initiating impugned revision proceedings.
6. We have heard the parties and perused the record. It is not the case of the assessee that the Assessing Officer has examined the eligibility of the assessee to claim for exemption under section 10(47) of the Act and has taken a possible view of the matter. The scope of revision proceedings initiated under section 263 of the Act was considered by Hon’ble Bombay High Court, in the case of Grasim Industries Ltd. V CIT (321 ITR 92) by taking into account the law laid down by the Hon’ble Supreme Court. The relevant observations are extracted below:
“Section 263 of the Income-tax Act, 1961 empowers the Commissioner to call for and examine the record of any proceedings under the 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, to pass an order upon hearing the assessee and after an enquiry as is necessary, enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. The key words that are used by section 263 are that the order must be considered by the Commissioner to be “erroneous in so far as it is prejudicial to the interests of the Revenue”. This provision has been interpreted by the Supreme Court in several judgments to which it is now necessary to turn. In Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83, the Supreme Court held that
the provision “cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer” and “it is only when an order is erroneous that the section will be attracted”. The Supreme Court held that an incorrect assumption of fact or an incorrect application of law, will satisfy the requirement of the order being erroneous. An order passed in violation of the principles of natural justice or without application of mind, would be an order falling in that category. The expression “prejudicial to the interests of the Revenue”, the Supreme Court held, it is of wide import and is not confined to a loss of tax. What is prejudicial to the interest of the Revenue is explained in the judgment of the Supreme Court (headnote) :
“The phrase ‘prejudicial to the interests of the Revenue’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law.”
The principle which has been laid down in Malabar Industrial Co. Ltd. [2000] 243 ITR 83 (SC) has been followed and explained in a subsequent judgment of the Supreme Court in CIT v. Max India Ltd. [2007] 295 ITR 282.”
The consideration of the Commissioner as to whether an order is erroneous in so far it is prejudicial to the interests of Revenue must be based on materials on record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to start fishing and roving enquiries in matters or orders which are already concluded. The Hon’ble Supreme Court has held in the case of Malabar Industrial Co. (supra) that an order passed by the assessing officer without application of mind would render the order erroneous.
7. In the instant case, we notice that the AO did not examine the exemption claimed u/s 10(47) of the Act, meaning thereby, the assessment order has been passed by the AO without application of mind. The exemption so allowed without examining the claim would be prejudicial to the interests of revenue. Accordingly, both the conditions prescribed in sec. 263 of the Act have been satisfied in the instant case.
8. The Ld A.R has raised certain contentions before us. In our view, those contentions relate to the merits of the issue. We notice that the learned PCIT has directed the Assessing Officer to redo the assessment denovo. The relevant direction given by Ld CIT(E) is extracted below:-
“7. In view of the facts and circumstances and legal precedence as narrated above, and by virtue of powers veed after proper examination of all the relevant issues, and after giving the assessee reasonable opportunity of being heard.”sted in the undersigned vide provisions of Section 263 of the I T Act, 1961, the assessment order dated 18/12/2018 is set aside with a direction to AO to undertake assessment proceedings de novo. The assessment proceedings shall be complet
9. In view of the foregoing discussions, we are of the view that impugned revision order passed by Ld CIT(E) does not call for any interference.
10. In the result, appeal filed by the assessee is dismissed. Order pronounced in the open court on 29.09.2022.
