Case Law Details
Adani Wilmar Limited Vs PCIT (ITAT Ahmedabad)
ITAT Ahmedabad held that invocation of revisionary jurisdiction under section 263 of the Income Tax Act not justified as view taken by PCIT was second view and the same is not permissible u/s. 263.
Facts- The return of income for AY 2018-19 was filed on 26.11.2018 declaring total income of Rs.7,29,10,574/-. Assessment order u/s.143(3) r.w.s 144B of the Income-tax Act, 1961 was passed on 07.06.2021 at the assessed income of Rs.569,46,59,915/-. The Assessing Officer has made addition of Rs.7,32,417/-on account of disallowance u/s.14A of the Act. The Ld.PCIT has observed that the assessee has declared Guarantee income of Rs.99,72,600/- in note 28, as “other income”. However, the assessee claimed such income as notional income and reduced the same from total income. The Ld.PCIT therefore issued notice u/s.263 of the Act. Invocation of jurisdiction u/s. 263 is contested vide the present appeal.
Conclusion- Held that the aspect of Guarantee income as mentioned in note 28 has been enquired by the Assessing Officer during the assessment proceedings and after taking the cognizance of the same, the same was allowed by the Assessing Officer. The Observation of the Ld.PCIT that the same was not examined properly is not justifiable on the part of the Ld.PCIT. The Notional Guarantee Income charged from joint venture of the investment and hence investment cost has been increased by the said amount cannot be treated as actual income incurred by the assessee. The Ld.PCIT while invoking the provision of section 263 of the Act has totally ignored the aspect that the Assessing Officer has verify the same and in fact Notional Guarantee Income has not resulted into any loss of the Revenue. Thus, in the present case the Assessing Officer has not passed the assessment order which will result into prejudicial to the interest of the Revenue or erroneous to the interest of Revenue. Thus, the view taken by the Ld.PCIT is in fact a second view which is not permissible as per the section 263 of the Act which is revisionary provision. Hence, the appeal of the assessee is allowed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The captioned appeal has been filed at the instance of the assessee against the order dated 29.02.2024 passed by the Learned Principle Commissioner of Income Tax, Ahmedabad ( in short “Ld.PCIT”) arising in the matter of assessment order passed under s. 263 of the Income Tax Act, 1961 (here-in-after referred to as “the Act”) relevant to the Assessment Year 2018-19.
2. The assessee has raised the following grounds of appeal:
In law and in the facts and circumstances of the Appellant’s case, impugned order u/s. 263 of the Act passed by PCIT-1, Ahmedabad is bad in law and deserves to be quashed.
2. In law and in the facts and circumstances of the Appellant’s case, the PCIT-1, Ahmedabad has erred in setting aside the assessment order dated 07.06.2021 passed by the Assessing Officer without considering the fact that the Assessing officer during the course of Assessment proceedings has already gone through issue regarding notional guarantee commission of Rs. 99,72,600/- and after satisfying himself with respect to the details submitted by the appellant company, the Ld. Assessing officer has passed the order under section 143(3) of the Act.
3. In law and in the facts and circumstances of the Appellant’s case, the PCIT-1, Ahmedabad has erred in arriving at a conclusion without any basis whatsoever to the effect that the assessment order passed u/s 143(3) of the Act by the Assessing Officer was erroneous as well as prejudicial to the interest of the revenue.
4. In law and in facts and circumstances of the Appellant’s case, the PCIT-1, Ahmedabad has failed to appreciate that the twin conditions for assuming jurisdiction u/s.263 of the Act are not satisfied in the case of appellant company as issue which has been relied upon for passing the order u/s.263 does not show any error or prejudice to the interest of the revenue.
5. The appellant craves to add, later, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.
3. The return of income for AY 2018-19 was filed on 26.11.2018 declaring total income of Rs.7,29,10,574/-. Assessment order u/s.143(3) r.w.s 144B of the Income-tax Act, 1961 was passed on 07.06.2021 at the assessed income of Rs.569,46,59,915/-. The Assessing Officer has made addition of Rs.7,32,417/-on account of disallowance u/s.14A of the Act. The Ld.PCIT has observed that the assessee has declared Guarantee income of Rs.99,72,600/- in note 28, as “other income”. However, the assessee claimed such income as notional income and reduced the same from total income. The Ld.PCIT therefore issued notice u/s.263 of the Act. The assessee replied the same notice and after taking cognizance of the same, the Ld.PCIT directed the Assessing Officer to pass a fresh Assessment order after duly examining the issue observes therein.
4. The Ld.AR submitted that the assessee has filed detailed reply along with the requisite documents before the Assessing Officer and the Notional corporate guarantee income of Rs.99,72,600/- was also verified by the Assessing Officer vide notice dated 01.02.2020. The assessee has provided ledger account of the notional corporate guarantee in which detailed explanation was given by the assessee. The Ld.AR submitted that the said income is not actually received, however, it was disclosed as required in the Indian Accountant Standard and in fact the notional income cannot be offered to tax and therefore the Assessing Officer has rightly taken a cogent view of accepting the assessee’s return of income wherein the assessee had rightly reduced it by computing the income from business and profession. The Ld.AR submitted that the Ld.PCIT has taken different view which is not permissible as per the section 263 of the Act. The Assessment order is not erroneous or prejudicial to the interest of Revenue and therefore the Ld.PCIT was not right in invoking the provision of section 263 of the Act. The Ld.AR also relied upon the following judicial precedents.
a. Hon’ble Gujarat High Court in the case of CIT v/s. Arvind Jewellers 259 ITR 502.
b. Hon’ble SC in the case of Malabar Industrial Company Ltd. Vs. CIT 243 ITR 83.
c. Hon’ble Supreme Court decision in the case of CIT vs G M Mittal Stainless Steel Pvt. Ltd. 263 ITR 255.
d. Hon’ble High Court in the case of CIT vs. Sunbeam Auto Ltd. 332 ITR 167.
e. Decision of Hon’ble S.C in the case of CIT vs/ Greenworld Corporation, 314 ITR 81(SC).
f. Hon’ble Gujarat High Court in the case of PCIT vs. Minal Doshi [2020] 121 com 30
g. Hon’ble Gujarat High Court in the case PCIT vs Asian Box Corporation [2023] 156 com 76.
h. Hon’ble High Court in the case of CIT vs. Dhaneswar Rath Institute of Engineering & Medical Sciences (2023) 147 com 469.
i. Hon’ble Apex court of India in the case of PCIT vs Shreeji Prints (P.) Ltd. [2021] 130 com 294.
j. Hon’ble Gujarat High Court in case of PCIT vs Kansara Popatlal Tribuvan Metal (P) Ltd. [2023] 156 co. 433.
5. The Ld.DR relied upon the order of the Ld. PCIT and further mentioned that the Assessing Officer has not taken the cognizance of the fact that the Assessing Officer should have made addition in respect of the Guarantee income which was declared by the assessee. The Ld.DR submitted that the Ld. PCIT has rightly held that the Assessing Officer failed to make addition in accordance with the provisions of the Act and this has resulted into loss of Revenue. The Ld.DR relied upon the order passed u/s.263 of the Act by the Ld. PCIT.
6. We have heard the parties and perused the relevant materials available on record. It is pertinent to note that the aspect of Guarantee income as mentioned in note 28 has been enquired by the Assessing Officer during the assessment proceedings and after taking the cognizance of the same, the same was allowed by the Assessing Officer. The Observation of the Ld.PCIT that the same was not examined properly is not justifiable on the part of the Ld.PCIT. The Notional Guarantee Income charged from joint venture of the investment and hence investment cost has been increased by the said amount cannot be treated as actual income incurred by the assessee. The Ld.PCIT while invoking the provision of section 263 of the Act has totally ignored the aspect that the Assessing Officer has verify the same and in fact Notional Guarantee Income has not resulted into any loss of the Revenue as contemplated by Ld.PCIT in para 7.1 of the order passed u/s.263 of the Act. Thus, in the present case the Assessing Officer has not passed the assessment order which will result into prejudicial to the interest of the Revenue or erroneous to the interest of Revenue. Thus, the view taken by the Ld.PCIT is in fact a second view which is not permissible as per the section 263 of the Act which is revisionary provision. Hence, the appeal of the assessee is allowed.
7. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the Open Court on 25th September, 2024 at Ahmedabad.
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