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Case Law Details

Case Name : Reliance Industries Ltd. Vs PCIT (ITAT Mumbai)
Appeal Number : I.T.A. No. 578/Mum/2021
Date of Judgement/Order : 01/09/2021
Related Assessment Year : 2011-12
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Reliance Industries Ltd. Vs PCIT (ITAT Mumbai)

Upon perusal of assessment order under consideration, it is quite evident that an order was passed by Ld. AO u/s 143(3) r.w.s. 147 of the Act. One of the reasons to reopen the case was the allegation of Ld. AO that income from assets given on lease, though offered to tax under normal provisions, was not routed through Profit & Loss Account which has led to short-computation of Book Profits under MAT provisions. However, the assessee well explained the fact that the accounting treatment given by the assessee was in accordance with mandatory AS-19 which mandate the assessee to reflect investment in asset under finance lease as ‘Lease Receivable’ in Balance Sheet on asset side under the head ‘Loans & Advances’. Whenever, the installment was received, the principal component was to be reduced from that head and the same was not to be routed through profit & Loss Account. This practice was being followed consistently over various years. Therefore, since the income was not to be routed through Profit & Loss Account, the same was not added back to the Book Profits under MAT provisions as per the decision of Hon’ble Supreme Court in Apollo Tyres Ltd (255 ITR 273) as affirmed in the case of Malayala Manorama Co. Ltd (300 ITR 251). Upon perusal of assessment order, it could be seen that the case was reopened for various specific reasons, one of which was the fact that income from lease assets was not added in Book Profits. However, no such adjustment has finally been made in the assessment order. Pertinently, Ld.AO, in para-7, observed that on the remaining issues, the submissions made by the assessee are considered and accepted on the basis of merit of the issues and stand taken by the department in earlier years. Therefore, it could very well be said that Ld.AO duly applied his mind to the issue under consideration and took a possible view in the matter which is not contrary to law. Therefore, the observation of Ld. Pr. CIT that Ld. AO did not applied his mind to the issue, is without much substance. Merely because similar adjustment was made in subsequent years, the same would not lead to a conclusion that the orders passed in earlier years would require revision unless it was shown that the order was erroneous as well as prejudicial to the interest of the revenue. In the present case, we find that the issue was duly considered by Ld. AO after considering assessee’s detailed submissions. The view could not be said to be unsustainable view and it was one of the possible view. Therefore, on the given facts and circumstances, we find that the subject matter of proposed revision was already deliberated upon by Ld. AO and a possible was taken in the matter. That view could not be said to be contrary to law, perverse or unsustainable in law, in any manner and the same would be a possible view keeping in mind the assessee’s submissions during reassessment proceedings. This being the case, the assessment order could not be subjected to revision u/s 263 and the action of Ld. Pr.CIT in invoking jurisdiction u/s 263 could not be sustained in the eyes of law. Similar is the view of the Tribunal in assessee’s group concern i.e. M/s Reliance Corporate IT Park Ltd. V/s Pr. CIT (ITA No.2748/Mum/2015 dated 08/03/2017) wherein it has been observed by the coordinate bench that when Ld. AO had applied his mind on the given facts and material on record and took a possible view then such an assessment order could not be cancelled u/s 263 unless it was shown that the view was not tenable either in law or on facts.

This being the case, the assessment order could not be subjected to revision u/s 263, and the action of Ld. Pr. CIT in invoking jurisdiction u/s 263 could not be sustained in the eyes of law.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

1.1 As per the provisions of Section 263 of Income Tax Act, 1961, the revenue authorities namely Pr. Commissioner of Income Tax / Commissioner of Income Tax is vested with the supervisory powers of suo-moto revision of any order passed by the Assessing Officer [AO]. For the said purpose, the appropriate authority may call for and examine the record of any proceedings under the Act and may proceed to revise the same provided two conditions are satisfied-(i) the order of the assessing officer sought to be revised is erroneous; and (ii) it is prejudicial to the interest of the revenue. If one of the condition is absent i.e. if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but it is prejudicial to the revenue – recourse cannot be had to Section 263 of the Act as held by Hon’ble Supreme Court in Malabar Industrial Co. Ltd. V/s CIT [243 ITR 83 10/02/2000] & noted by Hon’ble Delhi High Court in CIT V/s Vikas Polymers [194 Taxman 57 16/08/2010]. The Hon’ble Supreme Court in Malabar Industrial Co. Ltd. V/s CIT (supra) has held that 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 interest 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 interest of the revenue, unless the view taken by the Income-tax Officer is unsustainable in law. The said principal has been reiterated by Hon’ble Court in its subsequent judgment titled as CIT V/s Max India Ltd. (295 ITR 282). Similar principal has been followed by jurisdictional High Court in Grasim Industries Ltd. V/s CIT (321 ITR 92).

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