Advocate Akhilesh Kumar Sah
When all the requisite details were already on record with supporting evidences and the same were duly examined by the AO, the order of the AO was not erroneous and prejudice to the interest of the Revenue.
In Pricewater House Coopers Sp.z.o.o. (c/o Pricewater House Coopers Pvt. Ltd.) vs. CIT (IT&TP), Kolkata [I.T.A No. 62/Kol/2016 AY: 2011-12, decided on 01.08.2018], the assessee agitated the validity of invoking revisionary jurisdiction by the CIT under section 263 of the Income Tax Act, 1961 (for short ‘the Act’) by raising several grounds.
Facts & Decision in brief:
The brief facts of the above case were that the assessee being a foreign company engaged in rendering consultancy services and assessed in the status of a non-resident had filed its original return of income for the A.Y. 2011-12 on 29.9.2011 declaring total income of Rs 23,37,862/- under section 115A of the Act claiming refund of Rs 2,40,800/- and claimed certain receipts as non-taxable to the tune of Rs 24,01,487/- (equivalent to 158094 Poland Currency).
The assessee thereafter filed a revised return for the A.Y. 2011-12 on 29.9.2012 declaring taxable income of Rs 1,04,96,654/- under section 115A of the Act paying self assessment tax of Rs 5,815/- (paid on 28.9.12) and claimed certain receipts as non-taxable to the tune of Rs 24,82,739/- (equivalent to 39813 Euros). The assessee pleaded that the only difference between the original return and the revised return in respect of non-taxable invoices were with regard to change in foreign currency and the consequential exchange rate. In the original return, the invoices raised by the assessee were reflected in Poland currency and receipts to the tune of Rs 24,01,487/- were arrived at by applying the relevant exchange rate. But in the revised return, the same invoices from the very same parties were reflected in Euro currency and receipts to the tune of Rs 24,82,739/- were arrived at by applying the relevant exchange rate. With regard to the change in the taxable income between the original and revised return, the assessee stated that though the component of taxable services had been increased in the revised return, the same was also duly subjected to deduction of tax at source and there was a minor discrepancy in calculation of surcharge and cess thereon due to income being crossed over Rs 1 crore and accordingly the assessee had to pay self assessment tax thereon to the tune of Rs 5.815/- which was duly paid by the assessee on 28.9.2012 and revised return filed on 29.9.2012.
The order of the AO dated 10.3.2014 was sought to be revised by the CIT under section 263 of the Act by treating same as erroneous in as much as it is prejudicial to the interest of the revenue on the ground that the revised return of income was not taken cognizance by the AO while completing the assessment and accordingly no enquiry was conducted by the AO with regard to the income declared and exemption claimed thereon. The CIT concluded that there was complete lack of enquiry and non-application of mind on the part of the AO while framing the assessee by not verifying the revised return and the contents thereon. Hence the order passed by the AO was treated as erroneous in as much as it is prejudicial to the interest of the revenue and order under section 263 of the Act was passed by the CIT on 30.10.2015. Aggrieved by the same, the assessee filed an appeal before ITAT, Kolkata.
The learned Members of the ITAT, Kolkata observed that it could be seen that the services were rendered to the same parties and invoices were raised to the same parties with the same dates between the original and the revised return of income filed by the assessee as far as non-taxable services are concerned. However, the currency in which the invoices were raised in the original return was in Poland Currency and in the revised return was Euro Currency. This had led to minor difference in value of Rs 81,253/- (24,82,739 -24,01,486). With regard to taxable services, though the income is increased in the revised return, the same had been fully subjected to deduction of tax at source and assessee had also made good the deficit in tax by paying self assessment tax of Rs 5,815/- on 28.9.2012 before filing the revised return. The learned Members found that the assessee had duly disclosed under which section, the exemption is claimed in respect of non-taxable services portion in the return of income itself. Later the hard copy of the revised return was also filed by the assessee together with the note for claiming exemption. Moreover, the assessee had also brought all these facts before the CIT in response to show cause notice issued under section 263 of the Act vide separate written submissions dated 15.10.2015. Even though there was an error in the order of the AO by under assessing the income by not considering the additional income offered in the revised return, there could not be any prejudice to the interest of the revenue in this regard as there was no change in tax liability. The assessee had filed all the requisite details called for by the AO vide letter dated 3.3.2014 filed before the AO on 5.3.2014. The AO after considering all the contents of this letter and on verification of the same had come to a conclusion of not making any additions to the returned income. Though the order sheet entries does not contemplate calling of specific details by the AO from the assessee prior to 5.3.2014, it cannot be brushed aside that the assessee would not come forward to file details before the AO that were not called for by the AO. No assessee would do the same. It could be safely concluded that the letter dated 3.3.2014 filed on 5.3.2014 was filed by the assessee before the AO pursuant to specific details called for by the AO. The entire details of taxable and non-taxable services together with the copy of revised return, copy of invoices and agreements entered into thereon were submitted before the AO. It clearly tantamounts to proper enquiry made by the AO. Moreover, the details submitted by the assessee vide letter dated 3.3.2014 did not call for any further enquiry as the entire income was duly disclosed by the assessee in the revised return properly. In this regard, the reliance placed by the CIT on the decision of Hon’ble Delhi High Court in the case of Gee Vee Enterprises vs. Addl. CIT reported in 99 ITR 375 (Del) would actually support the case of the assessee and not the revenue in the facts and circumstances of the case of the assessee. There was no incorrect assumption of facts and wrong application of law neither on the part of the AO nor has been pointed out by the CIT in his section 263 order. Hence it could be safely concluded that though not considering the revised return while completing the assessment on 10.3.2014 would make the order of the AO erroneous, it does not cause any prejudice to the interest of the revenue as all the requisite details were already on record with supporting evidences and the same were duly examined by the AO. Hence it is not the case of lack of enquiry on the part of the AO on the list of taxable and non-taxable services disclosed by the assessee. The learned Members of the ITAT, Kolkata held that that the twin conditions precedent for invoking revisionary jurisdiction under section 263 of the Act is conspicuously absent in the instant case and accordingly by placing reliance on the decision of the Hon’ble Supreme Court in the case of Malabar Industrial Company Ltd vs. CIT reported in 243 ITR 83 (SC), revisionary jurisdiction under section 263 of the Act cannot be invoked by the CIT. The learned Members of the ITAT, Kolkata also took into consideration the Hon’ble Jurisdictional High Court decision in CIT vs J.L.Morrison (India) Ltd reported in 366 ITR 593 (Cal). The revision order passed by the CIT under section 263 of the Act was quashed and set aside.