Dsiidc Ltd. v. Principal Commissioner Of Income Tax-03, New Delhi ., Income Tax Appellate Tribunal, Judgment, Law, casemine.com

Citation Codes

Equivalent Citations

citation codes

Case Number

I.T.A. No. 2673/DEL/2016 (A.Y 2011-12) and I.T.A. No. 2674/DEL/2016 (A.Y 2012-13)

Disposition

dismissed

Attorney(S)

Appellant by Sh. H. P. Agarwal, CA;
Respondent by Sh. Sushma Singh, CIT DR.

Judges

R.K. Panda, A.M.
Suchitra Kamble, J.M.

Acts

SECTION 263 INCOME TAX ACT 1961
u/s 263 of Income Tax Act, 1961.
u/s 143(3) of I.T. Act, 1961
Delhi State Industrial Operation and Maintenance Act, 2010,
u/s 263 of the Income Tax Act,

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Smart Summary

Factual and Procedural Background

These two appeals were filed by the assessee (a State Corporation) against separate orders dated 30/03/2016 passed by the Principal Commissioner of Income Tax (PCIT) for assessment years 2011-12 and 2012-13 respectively.

The assessee acts as a Developing and Collecting agency for various schemes on behalf of the Government of NCT Delhi and also provides infrastructure services under the Delhi State Industrial Operation and Maintenance Act, 2010. For the year under consideration, the assessee filed an original e-return on 30/09/2011 (declaring income of Rs. 22,77,90,022) and a revised e-return on 21/06/2012 (declaring income of Rs. 20,78,45,459). The case was selected for scrutiny under CASS norms. Notices under sections 143(2) and 142(1) were issued and served; the assessee's representatives (Deputy Accountant Manager (Taxation) and AR) attended and furnished accounts and the tax audit report.

The assessee claimed a deduction under section 80IA(4) amounting to Rs. 111.47 crore on the basis that it operated and managed industrial sheds and flatted factory complexes qualifying as infrastructure projects. The Assessing Officer (AO) accepted the claim in the assessment order dated 31/01/2014.

The PCIT issued a show cause notice under section 263 dated 29/02/2016, observing that the assessment order (to the extent of granting deduction under section 80IA(4)) had not been made in accordance with law and that due taxes had not been levied. By order dated 30/03/2016 the PCIT held that the assessment orders for AYs 2011-12 and 2012-13 were erroneous insofar as they were prejudicial to the interest of the Revenue with respect to the grant of deductions under section 80IA(4) (arising from maintenance of industrial sheds, ground rent, sale of flats and industrial sheds and housing project for EWS) and directed the AO to withdraw the assessment to that extent.

The assessee challenged the PCIT's orders before the Tribunal, resulting in the present opinion in which the Tribunal heard the parties and dismissed the appeals on 09 September 2021.

Legal Issues Presented

Whether the Principal Commissioner of Income Tax was justified in holding that the assessment order passed under section 143(3) was erroneous and prejudicial to the interest of the Revenue.
Whether there was any case for invoking jurisdiction under section 263 of the Income Tax Act where the statutory claim under section 80IA(4) had been allowed in the original assessment after consideration of facts and legal provisions.
Whether the PCIT's order under section 263 amounted to an impermissible change of opinion rather than a valid exercise of jurisdiction (i.e., whether there was lack of enquiry or failure to apply mind by the AO).
Whether the assessee's claim under section 80IA(4) was correctly allowed by the AO based on the facts and legal provisions—specifically, whether the activities claimed fell within the statutory definition of "infrastructure project".

Arguments of the Parties

Appellant's (Assessee / Ld. AR) Arguments

The AO had raised specific queries regarding the claim under section 80IA(4), see questionnaire No. 14 issued during the assessment proceedings, and had considered audit objections (one of which was dropped on 02/02/2016).
The PCIT merely formed a second opinion; invoking section 263 on the basis of a change of opinion is impermissible. The PCIT did not allege lack of enquiry or absence of application of mind by the AO.
The section 80IA(4) claim was based on facts and legal provisions and there was no infirmity in accepting it in the original assessment.
Reliance was placed by the assessee on several decisions (as cited in the opinion) to support the contention that section 263 cannot be invoked merely because the Commissioner forms a different view.

Respondent's (Revenue / Ld. DR) Arguments

The AO did not take cognizance of the actual definition of "infrastructure project" under section 80IA(4) and simply allowed the claim without examining whether the statutory conditions were fulfilled.
The explanation referred to by the assessee's counsel (to support the claim) is not applicable because the relevant amendment took effect from 01/04/2015.
The AO had not discussed the applicability of section 80IA(4) in any detail and had merely accepted the assessee's submissions; incorrect assumptions of fact and law render an order erroneous and prejudicial to the interest of the Revenue.
The PCIT rightly invoked section 263; reliance was placed on the decision of the Supreme Court in Deniel Merchants Private Limited v. Income Tax Officer (order dated 29.11.2017) and several other authorities (as listed in the opinion) to support invocation of section 263 where the AO failed to make proper inquiry.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Narayan Tatu Rane v. Income-tax Officer, Ward 27(1)(1), Mumbai	This information was not available in the provided opinion.	Listed as relied upon by the assessee's representative; the Tribunal found the assessee's cited case laws generally inapplicable on the facts of the present case.
The Commissioner Of Income Tax-Xiii v. Shri Ashish Rajpal (2009) 320 ITR 674 (Delhi HC)	This information was not available in the provided opinion.	Relied upon by the assessee; the Tribunal did not treat the citation as determinative and found the cited authorities inapplicable to the facts here.
CIT v. M/s. Vikas Polymers ([2010] 194 Taxmann 57 (Delhi HC))	This information was not available in the provided opinion.	Relied upon by the assessee; Tribunal indicated the facts here differ and did not apply this precedent to uphold the appeal.
Salora International Ltd. v. Additional Commissioner of Income-tax ([2005] 2 SOT 705 (Delhi) (Trib.))	This information was not available in the provided opinion.	Cited by the assessee; not applied by the Tribunal in its decision.
Malabar Industrial Co. Ltd. v. CIT (243 ITR 83) (SC)	The Commissioner must satisfy himself of both conditions: that the order is erroneous and that it is prejudicial to the interest of the Revenue.	The Tribunal explicitly relied on this principle: it held that the PCIT examined both tests and applied Malabar in concluding section 263 was attracted in the present case.
Commissioner Of Income-Tax v. Sohana Woollen Mills (2008) 296 ITR 238	This information was not available in the provided opinion.	Cited in the list of authorities by the parties; the Tribunal did not treat it as determinative for allowing the appeal.
Commissioner Of Income-Tax v. Sunbeam Auto Ltd. (332 ITR 167 (Delhi HC))	This information was not available in the provided opinion.	Listed among citations; the Tribunal did not rely on this authority to reverse the PCIT's order.
Commissioner Of Income-Tax v. Honda Siel Power Products Ltd. (333 ITR 547 (Delhi HC))	This information was not available in the provided opinion.	Mentioned in the authorities cited; not applied by the Tribunal to support the assessee's appeal.
Surinder Kumar Jain v. ITO (Delhi Tribunal), I.T.A. No. 2481/DEL/2014	This information was not available in the provided opinion.	Cited by the assessee; the Tribunal found the factual matrix in the present case different and did not rely on this decision to allow the appeal.
Deniel Merchants Private Limited v. Income Tax Officer (Appeal No. 2396/2017) (order dated 29.11.2017)	The Commissioner may set aside an assessment under section 263 where the Assessing Officer did not make a proper inquiry and merely accepted the assessee's explanations; the Commissioner can direct the AO to carry out a thorough inquiry.	The Tribunal expressly held the present case was covered by this authority, quoted the Supreme Court's reasoning, and treated it as supporting the PCIT's exercise of jurisdiction under section 263.
Rajmandir Estates (P) Ltd. v. PCIT (2016) 386 ITR 162 (Cal.) and (2017) 245 Taxman 127 (SC)	This information was not available in the provided opinion.	Cited by the Revenue among other authorities; the Tribunal did not specifically base its ruling on these decisions in the written reasoning visible in the opinion.
Shree Manjunathesware Packing Products & Camphor Works v. CIT (1998) 231 ITR 53 (SC)	This information was not available in the provided opinion.	Cited by the Revenue; the Tribunal did not single out this case as the primary basis of its decision but treated the body of authorities as supporting the proposition that s.263 may be invoked where the AO did not make proper inquiry.

Court's Reasoning and Analysis

The Tribunal considered the record and submissions of both parties and summarized the material circumstances and legal contentions.

The Tribunal noted that, although the AO had raised a query (questionnaire No. 14) before completing the assessment under section 143(3), the AO had not given any cogent finding on the applicability of section 80IA(4). On that basis the Tribunal accepted the PCIT's observation that the assessment order was erroneous and prejudicial to the interest of the Revenue insofar as the allowance of deduction under section 80IA(4) was concerned.

The Tribunal found the Revenue's contention — that the activities for which the deduction under section 80IA(4) was claimed do not fall within the statutory definition of "infrastructure project" (specifically clause (b)) — to be a correct proposition. Although the assessee had provided certain details relating to infrastructure projects, those items are included in the definition of "infrastructure project" as per the amended position effective from 01/04/2015. The AO had not applied the proper interpretation of section 80IA(4) in consonance with the evidence on record.

Applying the principles laid down by the Supreme Court in Malabar Industrial Co. Ltd. v. CIT, the Tribunal emphasized that the Commissioner must be satisfied of both conditions for exercise of power under section 263 — namely, that the order is erroneous and that it is prejudicial to the interests of the Revenue. The Tribunal concluded that the PCIT had in fact considered and been satisfied of both these tests in the present case.

The Tribunal also observed that section 263 is not to be invoked to correct every mistake or error committed by an AO; it is attracted only where an order is erroneous and prejudicial to the Revenue. Having found that the AO failed to properly adjudicate the issue of applicability of section 80IA(4), the Tribunal held that the PCIT was justified in invoking section 263.

The Tribunal rejected the assessee's contention that the PCIT merely formed a second opinion without any basis. It held that the PCIT had considered the assessee's contentions and evidence and appropriately concluded that the AO had failed to apply the correct legal interpretation. The Tribunal further noted that the decision in Deniel Merchants Private Limited supported such an intervention by the Commissioner where the AO had not made proper inquiry and had accepted explanations without adequate scrutiny.

Holding and Implications

Holding: The Tribunal upheld the order passed by the Principal Commissioner of Income Tax under section 263 of the Income Tax Act. Both the assessee's appeals are dismissed.

Implications:

The PCIT's order dated 30/03/2016 (invoking section 263 and directing the AO to withdraw the assessment to the extent of the grant of deduction under section 80IA(4)) stands affirmed by the Tribunal.
The direct consequence for the parties is that the PCIT's direction to the AO remains intact and the AO is to act in accordance with the PCIT's order; the Tribunal found no reason to interfere with the PCIT's exercise of jurisdiction under section 263.
The Tribunal did not state or establish any new legal principle; it applied established authorities (notably Malabar Industrial Co. Ltd. and the Supreme Court's decision in Deniel Merchants) to the facts and concluded that the statutory conditions for invoking section 263 were satisfied. Thus, no novel precedent was laid down by this opinion beyond applying existing law to the facts.

Order pronounced in open court on 09th September, 2021. Both appeals dismissed.

Show full summary ...

Dsiidc Ltd. v. Principal Commissioner Of Income Tax-03, New Delhi .

Suchitra Kamble, J.M.:— These two appeals are filed by the assessee against the separate orders dated 30/03/2016 passed by Principal Commissioner of Income Tax-03, New Delhi for assessment year 2011-12 & 2012-13 respectively.

2. The grounds of appeal are as under:—

I.T.A. No. 2673/DEL/2016 (A.Y 2011-12)

1(i) That on facts and circumstances of the case Pr. CIT was not justified in holding assessment order passed u/s 143(3) as erroneous and prejudicial to the interest of revenue.

(ii) That statutory claim u/s 801 A(4) was allowed in the original assessment after consideration of facts and legal provisions and as such there is no case for assuming jurisdiction u/s 263 of Income Tax Act, 1961.

(iii) That Pr. CIT has admitted that there is no charge of lack of enquiry or application of mind on the part of AO while accepting the claim in the assessment order passed u/s 143(3) of I.T. Act, 1961 and as such order u/s 263 is merely on the basis of change of opinion and not sustainable on facts and under the law.

(iv) That claim u/s 80IA(4) is based on facts and legal provisions and there is no infirmity in accepting the same in the original assessment.

2. That the assessee craves leave to add, amend, alter or forgo any or all of the grounds as may be necessary and in the interest of justice.

3. That the order of Pr. CIT is not justified on facts and same is bad in law.

I.T.A. No. 2674DEL/2016 (A.Y 2012-13)

1(i) That on facts and circumstances of the case Pr. CIT was not justified in holding assessment order passed u/s 143(3) as erroneous and prejudicial the interest of revenue.

(ii) That statutory claim u/s 80IA(4) was allowed in the original assessment after consideration of facts and legal provisions and as such there is no case for assuming jurisdiction u/s 263 of Income Tax Act, 1961.

(iv) That claim u/s 80IA(4) is based on facts and legal provisions and there is no infirmity in accepting the same in the original assessment.

2. That the assessee craves leave to add, amend, alter or forgo any or all of the grounds as may be necessary and in the interest of justice

3. That the order of Pr. CIT is not justified on facts and same is bad in law.

3. The assessee is a State Corporation. During the year under consideration, the Corporation is acting as a Developing and Collecting agency for various schemes i.e. Low Cost Housing Scheme, re locations scheme, Narela Scheme and CETP Scheme on behalf of the Government of NCT Delhi and also providing infrastructure Services under Delhi State Industrial Operation and Maintenance Act, 2010. The assessee filed original e-return on 30/09/2011 declaring income of Rs. 22,77,90,022/-. Later on, the assessee filed revised e-return on 21/06/2012 declaring income of Rs. 20,78,45,459/-. The case was selected for scrutiny under CASS norms and notice u/s 143(2) was issued and duly served upon the assessee. Further, notice u/s 142(1) along with detailed questionnaire was issued which was served upon the assessee. In response to notice u/s 143(2) and 142(1) Deputy Accountant Manager (Taxation) and AR of the assessee attended the proceedings and furnished copy of profit and loss account, balance sheet and tax audit report. The assessee claimed deduction u/s 80IA(4) to the extent of Rs. 111.47 crore as per certificate of Chartered Accountant and submitted that under Delhi State Industrial Operation and Maintenance Act, 2010, the assessee is operating and managing 29 Industrial Sheds and 4 flatted factory complex which are in the nature of infrastructural projects in terms of provisions of Section 80IA(4). The Assessing Officer vide assessment order dated 31/1/2014 accepted the claim of the assessee.

4. The show cause notice u/s 263 of the Income Tax Act, was issued on 29/2/2016 by the Principal Commissioner of Income Tax thereby observing that the assessment order dated 27/2/2015 to the extent of grant of deduction u/s 80IA(4) of the Act has not been made in accordance with the provisions of the Act and due taxes have not been levied. The Principal Commissioner of Income Tax vide order dated 30/03/2016 u/s 263 of the Act held that the assessment order for Assessment Year 2011-12 & 2012-13 is erroneous in so far as it is pre-judicial to the interest of the Revenue to the extent of grant of deduction u/s 80IA (4) of the Act arising from maintenance of an Industrial Sheds, ground rent, sale of flats and Industrial Sheds and Housing Project for EWS and directed the Assessing Officer to withdraw the same.

5. Being aggrieved by the order of the Principal CIT u/s 263, the assessee is in appeal before us.

6. The Ld. AR submitted that in the original assessment, the Assessing Officer has raised specific queries regarding the claim u/s 80IA (4) which can be seen from questionnaire No. 14 issued during the assessment proceedings. The Ld. AR pointed out the audit objections and also pointed out the letter regarding the audit objection which was dropped later on 2/2/2016 in relation to 80IA(4) deduction claimed. The Ld. AR submitted that the Principal CIT has only formed second opinion which is not permissible u/s 263 of the Act and reiterated explanation of Section 263. The Ld. AR relied upon the following decisions:—

1. Narayan Tatu Rane v. Income-tax Officer, Ward 27(1)(1), Mumbai, [2016] 70 Taxmann 227 (Mumbai-Trib.)

2. The Commissioner Of Income Tax-Xiii v. Shri Ashish Rajpal, (2009) 320 ITR 674 (Delhi) (HC)

3. Cit v. M/S. Vikas Polymers, [2010] 194 Taxmann 57 (Delhi) (HC)

4. Salora International Ltd. v. Additional Commissioner of Income-tax, [2005] 2 SOT 705 (Delhi) (Trib.)

5. Malabar Industrial Co. Ltd. v. CIT, 243 ITR 83 (SC)

6. Commissioner Of Income-Tax v. Sohana Woollen Mills, (2008) 296 ITR 238 (Commissioner Of Income-Tax v. Sunbeam Auto Ltd., 332 ITR 167 (Delhi) (HC)

8. Commissioner Of Income-Tax v. Honda Siel Power Products Ltd., 333 ITR 547 (Delhi) (HC)

9. Surinder Kumar Jain v. ITO, (Delhi Trib.), I.T.A. No. 2481/DEL/2014

7. The Ld. DR submitted that the Assessing Officer has not taken cognizance of the actual definition of infrastructure project as per Section 80IA (4) and without looking into the fulfillment of the conditions under the said Section has simplicitor allowed the claim. Therefore, the Principal Commissioner of Income Tax has rightly held the order to be erroneous and prejudicial to the interest of the Revenue. The Ld. DR further submitted that the explanation which was referred to by the Ld. AR is not applicable in the present case as the amendment took place in 2015. The Ld. DR further submitted that the Assessing Officer had not discussed the issue of Section 80IA (4) in detail and simply accepted the submissions of the Assessee. It is held in various decisions that incorrect assumption of fact and law makes the order erroneous as well as prejudicial to interest of Revenue. The Ld. DR submitted that the present case is covered by the decision of the Hon'ble Apex Court in case of Deniel Merchants Private Limited v. Income Tax Officer (Appeal No. 2396/2017 order dated 29.11.2017). The Ld. DR also relied upon following decision of the various Hon'ble High Courts and Tribunal:

(a) Malabar Industrial Co. Ltd. v. CIT, (2000) 243 ITR 83 (SC)

(b) Rajmandir Estates (P) Ltd. v. PCIT, (2016) 386 ITR 162 (Cal.)

(d) Shree Manjunathesware Packing Products & Camphor Works v. CIT, (1998) 231 ITR 53 (SC)

8. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the Assessing Officer has raised only a query before completion of assessment u/s 143 (3) relating to claim of 80IA(4). However, the Assessing Officer has not given any cogent finding. Thus, the observation of the Principal Commissioner of Income Tax that the assessment order is erroneous and prejudicial to the interest of the Revenue does have footing. The Ld. DR's contention that the activities for which claim u/s 80IA (4) was claimed does not come under the purview of infrastructure project specifically Clause (b) is also correct proposition. Although the assessee has given the details relating to infrastructure projects, these are included in the definition of infrastructure project u/s 80IA of the Act, amended position which come into effect from 01/04/2015. The A.O has not applied the proper interpretation of Section 80IA(4) in consonance with evidence. Thus, the Principal Commissioner of Income Tax has rightly invoked Section 263 of the Act. The case laws cited by the Ld. AR will not be applicable in the present case as the facts in the present case are different. In fact the Hon'ble Supreme Court in Malabar Industrial Company Ltd. v. CIT (243 ITR 83) (SC) has held that the Commissioner has to satisfy himself of both the conditions i.e. the order is erroneous and prejudicial to the interest of revenue. Both these tests have been seen by the Principal Commissioner of Income Tax in the present case and aptly applies in the present case. It is also held by the Hon'ble Apex Court that the provisions cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous and prejudicial to the interest of the Revenue that the section will be attracted. Thus, the Principal CIT has looked into the aspect of the Assessment Order in the present case to the extent of erroneous and prejudicial to the interest of Revenue and thus, Section 263 of the Act is attracted in the present case. Section 263 of the Act is not invoked simply for correcting mistake or error committed by the Assessing Officer in the present case. It can be observed that the Pr. CIT has considered all the contentions of the assessee and thereafter rightly came to the conclusion that the Assessing Officer failed to look into the correct applicability of Section 80IA(4) in respect of the assessee's claim which amounts to erroneous and prejudicial to the interest of the revenue. The present case is covered by the decision of the Hon'ble Apex Court in case of Deniel Merchants Private Limited v. Income Tax Officer (Appeal No. 2396/2017 order dated 29.11.2017). The Hon'ble Supreme Court held as under:

“In all these cases, we find that the Commissioner of Income Tax had passed an order under Section 263 of the Income Tax Act, 1961 with the observations that the Assessing Officer did not make any proper inquiry while making the assessment and accepting the explanation of the assessee(s) insofar as receipt of share application money is concerned. On that basis the Commissioner of Income Tax had, after setting aside the order of the Assessing Officer, simply directed the Assessing Officer to carry thorough and detailed inquiry. It is this order which is upheld by the High Court. We see no reason to interfere with the order of the High Court. The Special Leave Petitions are dismissed.”

9. Thus, in the present case the Assessing Officer has not properly adjudicated the issue as per law and, therefore, the Pr. CIT has rightly invoked Section 263 of the Act and passed the order. Therefore, the Order under Section 263 of the Income Tax Act, 1961 passed by the Principal Commissioner of Income Tax is just and proper. There is no need to interfere with the same. The appeal of the assessee is dismissed.

10. In result, both the appeals of the assessee are dismissed. Order pronounced in the Open Court on this 09th Day of September, 2021.

Dsiidc Ltd. v. Principal Commissioner Of Income Tax-03, New Delhi .

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's (Assessee / Ld. AR) Arguments

Respondent's (Revenue / Ld. DR) Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Dsiidc Ltd. v. Principal Commissioner Of Income Tax-03, New Delhi .

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