Vodafone Essar Ltd. v. CIT - Taxpublishers.in

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The Tax Publishers2013 TaxPub(DT) 1093 (Chd-Trib) : (2013) 052 (II) ITCL 0446 : (2013) 153 TTJ 0451 : (2013) 085 DTR 0337 : (2013) 023 ITR (Trib) 0147 INCOME TAX ACT, 1961 --Revision under section 263--Erroneous and prejudicial order Lack of relevant enquiry--Though in present case business of assessee was set up in assessment year 1996-97, it claimed deduction under section 80-IA for first time in relevant assessment year 2005-06 as it was incurring losses in initial years. Assessing officer allowed said claim in assessment order simpliciter as made by assessee without any enquiry, whatsoever. Assessee also claimed deduction under section 80-IA in respect of interest income and other income which was also allowed by assessing officer. Commissioner invoked section 263 and disallowed deduction under section 80-IA. *Held:* Rightly so. Assessing officer passed assessment order without making any investigation and without application of mind in allowing deduction under section 80-IA both in respect of profits of business as well as interest and other income earned by assessee. Order of assessment passed by assessing officer was prejudicial as also fulfillment of condition laid down in such sections (2)(23A) and (4iii) of section 80-IA was also not considered and adjudicated upon by assessing officer. Order of assessment was as such erroneous and prejudicial under section 263. The revisionary powers under section 263 can be exercised by the Commissioner. The prerequisite to the said exercise of jurisdiction by the Commissioner is that the order of the assessing officer is erroneous insofar as it is prejudicial to the interest of Revenue. The satisfaction of twin conditions is the precondition for the exercise of jurisdiction under section 263. [Para 25] Section 263 is to be invoked where the order passed by the assessing officer is erroneous and an order passed without application of mind would fall under the category of erroneous order. Though every loss of revenue cannot be treated as prejudicial to the interest of Revenue, however, loss of tax lawfully payable pursuant to an erroneous order passed by the authority has been held to be prejudicial to the interest of Revenue by the Hon'ble Bombay High Court in CIT v. Gabrial India Ltd. 1993 TaxPub(DT) 1357 (Bom-HC) : (1993) 203 ITR 108 (Bom), and several other courts. Where the assessing officer fails to exercise the quasi-judicial power vested in him and passes an order without application of mind and not in accordance with law, and without making proper verification, the conclusion drawn by the assessing officer makes the order erroneous, open to exercise of jurisdiction of Commissioner under section 263, coupled with the fact that such an order had resulted in loss of tax, thus making it an order prejudicial to the interest of revenue. [Para 28] As is apparent from record, no inquiry or investigation was made by the assessing officer while considering the eligibility of claim of deduction under section 80-IA in the hands of the assessee i.e., whether the assessee is eligible for the said deduction under section 80-IA. Various aspects which needed to be addressed by the assessing officer i.e., the fulfillment of the various conditions laid down under section 80-IA including the provisions of sub-sections (2), (2A), (4)(ii) of section 80-IA, were not considered and adjudicated upon by the assessing officer. The Authorised Representative for the assessee argued at length on the merits regarding the issue of allowability of deduction in the hands of the assessee for the relevant year under appeal. However, for the purpose of adjudicating the issue of exercise of power of revision under section 263 by the Commissioner , Tribunal does not deem it necessary to address the issue on merits of claim of deduction under section 80-IA. The assessing officer completed the assessment without looking into the merits of the claim of the assessee in relation to its eligibility of deduction available under section 80-IA. The assessment order passed by the assessing officer is without making any investigation and without application of mind in granting the deduction under section 80-IA, both on the profits of the business and also on the interest income and other income earned by the assessee. The assessing officer having failed to look into the merits of the claim of the assessee and also it being eligible or otherwise to the said claim under section 80-IA, and the assessee having failed to furnish the requisite information pertaining to the deduction claimed under section 80-IA during the assessment proceedings, makes the order of the assessing officer erroneous. The assessee had failed to produce any record or evidence of having produced the requisite information/documents in relation to its claim of deduction under section 80-IA, during the course of assessment proceedings before the assessing officer. [Para 29] assessing officer had failed to make proper investigation into the eligibility of the assessee in relation to claim of deduction under section 80-IA both on the business profits, interest income and other income received during the year. The order passed by the assessing officer is without application of mind, is an erroneous order which has resulted in loss of taxes and hence is prejudicial to the interest of Revenue. The Commissioner, in the facts and circumstances of the case, is empowered to validly exercise his revisionary jurisdiction under section 263. [Para 30] Commissioner while remitting the matter to the file of assessing officer had observed that the assessee was not entitled to the claim of deduction under section 80-IA. This Tribunal uphold the satisfaction recorded by the Commissioner in passing the order under section 263 and dismisses the this Tribunal grounds of appeal raised by the assessee. However, Court modifies the conclusion of the Commissioner recorded in the order passed under section 263, while setting aside the assessment with directions to the assessing officer to decide the issue uninfluenced by the observations of the Commissioner that the assessee is not entitled to the claim of deduction under section 80-IA and also the reliance on the findings in the order passed under section 143(3) relating to assessment year 2006-07 are to be ignored. The assessing officer shall decide the issue de novo in accordance with law, after affording reasonable opportunity of hearing to the assessee. [Para 33] SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 1093 (Chd-Trib) : (2013) 052 (II) ITCL 0446 : (2013) 153 TTJ 0451 : (2013) 085 DTR 0337 : (2013) 023 ITR (Trib) 0147

INCOME TAX ACT, 1961

--Revision under section 263--Erroneous and prejudicial order Lack of relevant enquiry--Though in present case business of assessee was set up in assessment year 1996-97, it claimed deduction under section 80-IA for first time in relevant assessment year 2005-06 as it was incurring losses in initial years. Assessing officer allowed said claim in assessment order simpliciter as made by assessee without any enquiry, whatsoever. Assessee also claimed deduction under section 80-IA in respect of interest income and other income which was also allowed by assessing officer. Commissioner invoked section 263 and disallowed deduction under section 80-IA. Held: Rightly so. Assessing officer passed assessment order without making any investigation and without application of mind in allowing deduction under section 80-IA both in respect of profits of business as well as interest and other income earned by assessee. Order of assessment passed by assessing officer was prejudicial as also fulfillment of condition laid down in such sections (2)(23A) and (4iii) of section 80-IA was also not considered and adjudicated upon by assessing officer. Order of assessment was as such erroneous and prejudicial under section 263.

The revisionary powers under section 263 can be exercised by the Commissioner. The prerequisite to the said exercise of jurisdiction by the Commissioner is that the order of the assessing officer is erroneous insofar as it is prejudicial to the interest of Revenue. The satisfaction of twin conditions is the precondition for the exercise of jurisdiction under section 263. [Para 25] Section 263 is to be invoked where the order passed by the assessing officer is erroneous and an order passed without application of mind would fall under the category of erroneous order. Though every loss of revenue cannot be treated as prejudicial to the interest of Revenue, however, loss of tax lawfully payable pursuant to an erroneous order passed by the authority has been held to be prejudicial to the interest of Revenue by the Hon'ble Bombay High Court in CIT v. Gabrial India Ltd. 1993 TaxPub(DT) 1357 (Bom-HC) : (1993) 203 ITR 108 (Bom), and several other courts. Where the assessing officer fails to exercise the quasi-judicial power vested in him and passes an order without application of mind and not in accordance with law, and without making proper verification, the conclusion drawn by the assessing officer makes the order erroneous, open to exercise of jurisdiction of Commissioner under section 263, coupled with the fact that such an order had resulted in loss of tax, thus making it an order prejudicial to the interest of revenue. [Para 28] As is apparent from record, no inquiry or investigation was made by the assessing officer while considering the eligibility of claim of deduction under section 80-IA in the hands of the assessee i.e., whether the assessee is eligible for the said deduction under section 80-IA. Various aspects which needed to be addressed by the assessing officer i.e., the fulfillment of the various conditions laid down under section 80-IA including the provisions of sub-sections (2), (2A), (4)(ii) of section 80-IA, were not considered and adjudicated upon by the assessing officer. The Authorised Representative for the assessee argued at length on the merits regarding the issue of allowability of deduction in the hands of the assessee for the relevant year under appeal. However, for the purpose of adjudicating the issue of exercise of power of revision under section 263 by the Commissioner , Tribunal does not deem it necessary to address the issue on merits of claim of deduction under section 80-IA. The assessing officer completed the assessment without looking into the merits of the claim of the assessee in relation to its eligibility of deduction available under section 80-IA. The assessment order passed by the assessing officer is without making any investigation and without application of mind in granting the deduction under section 80-IA, both on the profits of the business and also on the interest income and other income earned by the assessee. The assessing officer having failed to look into the merits of the claim of the assessee and also it being eligible or otherwise to the said claim under section 80-IA, and the assessee having failed to furnish the requisite information pertaining to the deduction claimed under section 80-IA during the assessment proceedings, makes the order of the assessing officer erroneous. The assessee had failed to produce any record or evidence of having produced the requisite information/documents in relation to its claim of deduction under section 80-IA, during the course of assessment proceedings before the assessing officer. [Para 29] assessing officer had failed to make proper investigation into the eligibility of the assessee in relation to claim of deduction under section 80-IA both on the business profits, interest income and other income received during the year. The order passed by the assessing officer is without application of mind, is an erroneous order which has resulted in loss of taxes and hence is prejudicial to the interest of Revenue. The Commissioner, in the facts and circumstances of the case, is empowered to validly exercise his revisionary jurisdiction under section 263. [Para 30] Commissioner while remitting the matter to the file of assessing officer had observed that the assessee was not entitled to the claim of deduction under section 80-IA. This Tribunal uphold the satisfaction recorded by the Commissioner in passing the order under section 263 and dismisses the this Tribunal grounds of appeal raised by the assessee. However, Court modifies the conclusion of the Commissioner recorded in the order passed under section 263, while setting aside the assessment with directions to the assessing officer to decide the issue uninfluenced by the observations of the Commissioner that the assessee is not entitled to the claim of deduction under section 80-IA and also the reliance on the findings in the order passed under section 143(3) relating to assessment year 2006-07 are to be ignored. The assessing officer shall decide the issue de novo in accordance with law, after affording reasonable opportunity of hearing to the assessee. [Para 33]