×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
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03-01-2020, Asian Homes, Section 263, 56, 115JB, Tribunal Mumbai
1. By way of this appeal for Assessment Year [in short referred to as ‘AY’] 2013-14, the assessee contest correctness of invocation of revisional jurisdiction u/s 263 by Ld. Pr. Commissioner of Income-Tax -9, Mumbai [in short referred to as ‘Pr.CIT’] vide order dated 27/02/2018.The grounds raised by the assessee read as under: -
1. Validity of Order passed under section 263 of the Income Tax Act, 1961 ('The Act') That on facts and under the circumstances of the case, learned Principal Commissioner of Income Tax - 9, Mumbai, , erred in holding that the assessment order dated 27.02.2016 passed under section 143(3) of the Act by learned Assessing officer is erroneous and prejudicial to the interest of revenue and thereby setting aside and/or cancelling the order passed by Id. AO under section 263 of the Act .
1.1. Ld. Pr. CIT has erred in holding the order passed by Id. AO as erroneous and prejudicial to revenue on the contention that Id. AO passed the order without making enquiries and verification and therefore, without appreciating the fact that Id. AO had made detailed enquiry on the issue under consideration and after having satisfied himself with the same, order was passed by Id. AO.
1.2. Ld. Pr. CIT has erred in law in holding the order passed by Id. AO as erroneous and prejudicial to revenue while treating interest income as 'Income from Other Sources' by placing reliance on case laws which are not applicable to facts of the Appellant and has further erred in not appreciating that same issue has been categorically analyzed and decided in favour of Appellant by Id. CIT (A) in its own case for AY 2011 12 and AY 2012-13.
1.3. Ld. Pr. CIT has erred in law in holding the order passed by Id. AO as erroneous and prejudicial to revenue by applying decision of Malabar Industrial Co. Ltd. v. CIT [243 ITR 83] - [SC], without providing any basis or justification that the view taken by Id. AO is unsustainable in law and has further erred in not appreciating that the view of Id. AO is supported by judicial decisions and ii) allowed by CIT (A) in appellant own's case for AY 2011-12 and AY 2012-13.
1.4. Ld. Pr. CIT erred in law in holding the order passed by Id. AO as erroneous and prejudicial to revenue by not appreciating the fact that Id. AO has passed the order after making detailed enquiries and also following the categorical findings of his senior authority i.e., order of Id. CIT [A) in AY 2011-12 and 2012-13 and therefore, ld. Pr. CIT has erred in holding that order passed by Id. AO is erroneous and prejudicial to the interest of revenue.
1.5. Ld. Pr. CIT has erred in holding that order passed by Id. AO is erroneous and prejudicial to interest of revenue, without appreciating that an order based on an interpretation of law where two different views are possible, the order shall not be considered as erroneous and prejudice to the revenue. Hence, Appeal.
2. Without prejudice to Ground No 1, Id. Pr. CIT has erred in law as well as on facts in considering the interest income as 'Income from Other Sources' under section 56 of the Act, without appreciating the submissions of Appellant and favorable CIT (A) order in Appellant own case for AY 2011-12 and AY 2012-13. Hence, Appeal.
2. We have heard rival submissions, perused relevant material on record including judicial pronouncements as cited before us during the course of hearing. Our adjudication to the appeal would be as given in succeeding paragraphs.
3.1 Facts on record would reveal that assessee being resident corporateassessee, stated to be engaged as builders & developer, was assessed for year under consideration u/s. 143(3) on 26/02/2016 wherein the income of the assessee was determined at Rs.1.08 Lacs under normal provisions after certain additions / adjustments as against ‘Nil’ return filed by the assessee on 28/09/2013. The business income was determined at Rs.25.01 Lacs, against which brought forward business losses were set-off. While computing business income, an addition of Rs.2.27 Lacs representing interest income received from an entity was added since the same was not credited in the Profit & Loss Account. The said addition was made following the appellate orders for AY 2011-12. The interest on income tax refund and excess provisions written back aggregating to Rs.1.08 Lacs were brought to tax as Income from other sources. The Book profits u/s 115JB was accepted to be at Rs.23.18 Lacs as offered by the assessee. The assessee has been found liable to pay tax on Book Profit as per the provisions of Sec 115JB since the tax on income under normal provisions was lower than tax on Book Profits as computed u/s 115JB.
3.2 Subsequently, upon perusal of case records, Ld. Pr.CIT formed an opinion that the quantum assessment order was erroneous and prejudicial to revenue which require exercise of revisional jurisdiction u/s 263. Accordingly, a show-cause notice was issued on 30/11/2017, the contents of which have already been extracted in the impugned order in para-1. It was pointed out that interest income of Rs.27.13 Lacs as credited to Profit & Loss Account as Other Income was accepted as business income and the assessee has claimed set-off of brought forward business losses of earlier AY against the same. It was also stated that interest income was earned out of idle funds borrowed for the business which had neither commenced nor carried out during the year under consideration and
therefore, the interest was to be assessed as Income from other sources and accordingly, not available for set-off against brought forward business losses. Since Ld. AO failed to verify the same during regular assessment proceedings, therefore the quantum assessment order was erroneous and prejudicial to revenue within the meaning of Sec. 263.
3.3 The assessee, in defense of quantum assessment order, submitted that Ld. AO vide point No. 10 of notice u/s 142(1) dated 14/09/2015 raised specific query as to why interest on loans should not be considered as income from other sources. The query was duly responded to by the assessee vide letter dated 12/02/2016 wherein the assessee submitted detailed explanation along-with supporting judicial decisions in relation to said query. After verifying the same, Ld. AO passed assessment order accepting the interest income as business income. Therefore, since the matter was specifically verified by Ld.AO during the course of scrutiny assessment proceedings and therefore, the said order could no be termed as erroneous or prejudicial to the revenue which would require revisions u/s 263.
3.4 However, not convinced, Ld. Pr. CIT chose to rely upon the decision of Hon’ble Supreme Court rendered in Malabar Industrial Co. V/s CIT [243 ITR 83 10/02/2000] and made observation that tax treatment of interest