Case Law Details
The exercise of jurisdiction by the Commissioner of Income Tax under the provisions of Section 263 has been a matter of controversy. Especially when it comes to denying the deduction which has been allowed by the Assessing Officer during the course of regular assessment, Commissioner exercises such jurisdiction and proposes to revise such order claiming it to be erroneous and prejudicial to the interest of the revenue.
One such case which has been decided by the Delhi Income Tax Appellate Tribunal, in the matter of M/s. Pratibha SMS Jv v/s Pr. Commissioner of Income 21. In this case regular assessment for AY 2011-12 and AY 2012-13 was completed after allowing deduction under section 80-IA. Assessing Officer during the course of regular assessment proceedings had enquired specifically about the claim of deduction under section 80-IA by assessee. Thereafter, Commissioner of Income Tax issued Show – Cause Notice u/s 263 wherein it proposed to withdraw the claim of deduction u/s 80-IA by stating as under :
“ It is found that you were not eligible for deduction u/s 80-IA during the year under consideration as you were working merely as government contractor on a works-contract with HUDA and no developmental activities as specified in the section of the ACT, was carried on by you. SO the same is liable to be disallowed and added to your income”
Thereafter, assessee in response to the said show-cause notice replied to the Hon. Commissioner of income Tax that in order to invoke powers under section 263, both the conditions should be satisfied that order must not only be prejudicial to the interest of the revenue but also be erroneous and in this case, assessee was eligible was claiming deduction as it satisfied all the provisions of section 80-IA and therefore order is not erroneous. Reliance was also placed on the decisions in case of M/s. Om Metal Infra projects Limited (Jodhpur ITAT) and ARSS Infrastructure Pvt. Ltd. (Cuttack ITAT).
However, none of the submissions found favour with the Hon. Commissioner and order was passed by the commissioner stating that as per Explanation 13 to section 80-IA, assessee was ineligible for claiming the deduction as assessee was working merely as a works contractor as there was no financial stake of assessee as assessee was regularly paid by the authority who awarded the contract. Also, assessee was not real developer of the project and the real developer was Haryana Urban development Authority who had awarded the contract to assessee Joint venture. Further, it was stated by the Commissioner that decisions in case of M/s. Om Metal Infra projects and ARSS Infrastructure is of no use since these decisions were rendered for years before amendment was introduced in year 2009, and thus decision was rendered for the years before amendment, whereas in case of assessee the issue is for AY 2011-12 and AY 2012-13 both of which are after the amendment.
It concluded as under:
“Considering the facts of the case and……………………………………………………………. as not only the order has been passed in utmost haste and in cryptic manner but the Assessing Officer has also allowed the benefit of Section 80-IA (4) of the act, erroneously, without considering whether conditions thereof are fulfilled, resulting in non-application of correct provisions of law, though the said issue was the most crucial issue for concerned scrutiny assessment. Therefore order passed the by Assessing officer u/s 143(3) is hereby cancelled and the officer is hereby directed to make fresh assessment after considering the correct and factual legal position in this regard, as suggested in this order.”
Thereafter, assessee preferred an appeal before Hon. ITAT wherein order passed by the Commissioner u/s 263 was challenged.
Before the Hon. ITAT the order of Commissioner was challenged on various counts which are as under:
a) Both the conditions should be satisfied under section 263 : It was before Hon. ITAT that while passing order u/s 263, both the conditions has to be satisfied, the order must not only be prejudicial to the interest of the revenue but must also be erroneous in nature.
Reliance was placed on the decision in case of:
i) Malabar Industrial CO. Ltd v/s Commissioner of Income Tax (243 ITR 83).
ii) CIT v/s Max India Limited (295 ITR 282).
b) Reason not mentioned in Show-cause: In the show-cause notice, Commissioner proposed to revise the order by stating that assessee was working merely as government contractor and not as developer. However, while passing the order u/s 263 it stated that order was passed in haste and in cryptic manner which was not the case of the Commissioner while issuing show-cause notice. An order cannot be set-aside by the Commissioner by giving one reason in the notice and deciding the matter on another reason and such action of Commissioner was not in accordance with the provisions of the law.
Reliance was placed on the decision in case of:
i) Vesuvius India Limited v/s Commissioner of Income Tax (23 taxmann.com 425
ii) Genesis Colors Pvt. Ltd. v/s Commissioner of Income Tax (42 taxmann.com 552)
iii) Synergy Entrepreneur Solutions Private Limited v/s DCIT (ITA No. 3076/Mum/2010)
c) Not a Case of No-Enquiry by Assessing Officer: It was also submitted that during the course of regular assessment proceedings, Assessing officer had specifically raised query on deduction claimed by the assessee. Assessee in response to show-cause notice justified its claim of deduction, after which it was allowed by the AO.
Reliance was placed on decision in case of:
i) CIT v/s Fine Jewellery India Limited (ITA no. 296/2013 (Bom HC)
ii) Ramesh Modi v/s Commissioner of Income Tax (184 Taxman 77)
iii) DIT v/s Jyoti Foundation (38 taxmann.com 180)
iv) Narain Singla v/s Commissioner of Income Tax (62 taxmann.com 255)
v) Shree Salasar Overseas Pvt. Ltd. v/s Commissioner of Income Tax (27 taxmann.com 129)
d) Mere Set-aside of order is not allowed: While passing the order under section 263, Commissioner cannot merely cancel the order passed u/s 143(3) and set-aside before the Assessing Officer to decide as per law. It is duty of Commissioner to himself make the enquiries and cancel the order. This duty of commissioner cannot be delegated to assessing officer.
Reliance was placed on the decision in case of:
i) CIT v/s Gabriel India limited (71 Taxmann 585)
ii) Globus Infocom Ltd. v/s CIT ( 50 taxmann.com 100)
Hon. Tribunal while passing the order has gone through the Notices issued by the Assessing officer during the course of regular assessment proceedings u/s 143(3). Further it has also gone through the submissions made by the assessee in response to such queries. Further, ITAT also has taken note of the fact that after going through the notices and submissions, assessing Officer had stated in the assessment order that assessee was eligible for claiming the deduction u/s 80-IA. Thus, tribunal came to conclusion that it is not the case of no enquiry as alleged by the Commissioner of Income Tax, as Assessing officer has enquired about the claim made by the assessee and even discussed the same in the Assessment order passed u/s 143(3).
Apart from the above, Hon. ITAT further held that Commissioner must give reason to justify the exercise of revisional power. Also, Commissioner is not permitted as per provisions of law to substitute his judgment for the judgment of the Assessing Officer unless the same is not in accordance with the law.
Apart from the above on the merits as well Hon. ITAT relied on the judgment of Mumbai ITAT in case of M/s. Patel Engineering Ltd. (84 TTJ 646) wherein for the work of similar nature assessee was treated as developer and not a works contractor. Thus, ITAT held that even on merits of the case claim of the assessee is not erroneous and thereby order of the commissioner is liable to be quashed and Original order of assessing Officer is restored.
Thus, after this judgment it is clear that, if all the conditions are satisfied for claiming the deduction by the assessee then the same cannot be denied to the assessee by the Commissioner of Income Tax by revisionary proceedings u/s 263 by relying on Explanation introduced in the Section 80-IA.
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