Ford Business Services Centre Pvt. Ltd., CHENNAI v. ACIT, CHENNAI

ITA 613/CHNY/2010 | 2002-2003
Pronouncement Date: 08-10-2010 | Result: Allowed

Appeal Details

RSA Number 61321714 RSA 2010
Assessee PAN AAACF5984H
Bench Chennai
Appeal Number ITA 613/CHNY/2010
Duration Of Justice 5 month(s) 8 day(s)
Appellant Ford Business Services Centre Pvt. Ltd., CHENNAI
Respondent ACIT, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 08-10-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 08-10-2010
Date Of Final Hearing 04-10-2010
Next Hearing Date 04-10-2010
Assessment Year 2002-2003
Appeal Filed On 30-04-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH D : CHENNAI [BEFORE SHRI HARI OM MARATHA JUDICIAL MEMBER AND SHRI ABRAHAM P GEORGE ACCOUNTANT MEMBER] I.T.A.NO.613/MDS/2010 ASSESSMENT YEAR : 2002-03 M/S FORD BUSINESS SERVICES CENTER PVT. LTD NO.143 DR. MGR ROAD (NORTH VEERANAM SALAI) PERUNGUDI CHENAI -96 VS THE CIT CHENNAI [PAN AAACF5984H] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI T. BANUSEKAR RESPONDENT BY : SHRI K.B RANGARAJAN O R D E R PER HARI OM MARATHA JM: THIS APPEAL OF THE ASSESSEE FOR ASSESSME NT YEAR 2002-03 IS DIRECTED AGAINST THE ORDER OF THE LD. CIT CHENNAI DATED 24.3.2010 PASSED U/S 263 OF THE INCOME-TAX ACT 1961 (HEREINA FTER REFERRED TO AS 'THE ACT' FOR SHORT). 2. BRIEFLY STATED THE FACTS OF THE CASE LEADING TO REVISION ARE THAT FOR ASSESSMENT YEAR 2002-03 THE ASSESSMENT WAS COM PLETED ON 30.11.2007 U/S 143(3) OF THE ACT. IN THIS ORDER L OSS FROM ACCOUNTING SERVICE DIVISION OF M/S FORD BUSINESS SERVICES CEN TER PVT. LTD WAS ITA 613/10 :- 2 -: DETERMINED AT ` NIL AND U/S 115JB BOOK LOSS WAS DETERMINED AT ` 98 84 339/-. THIS WAS CONSIDERED BY THE LD. CIT AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. CONSE QUENTLY A SHOW CAUSE NOTICE U/S 263 OF THE ACT WAS ISSUED TO THE ASSESSEE. AFTER CONSIDERING THE REPLY TO THE SHOW CAUSE NOTICE THE LD. CIT HAS REVISED THE ASSESSMENT ORDER BY DIRECTING A FRESH ASSESSMEN T AFTER SETTING ASIDE THE ORDER DATED 30.11.2007. THE MAIN GROUND FOR REVISION IS THAT THE ASSESSING OFFICER AFTER DETERMINING THE I NCOME FROM ACCOUNTING SERVICE DIVISION OF ` 1 13 72 504/- HAS SET OFF BROUGHT FORWARD LOSS FROM ASSESSMENT YEAR 1999-2000 TO THE TUNE OF ` 1 13 72 504/- AGAINST THE BUSINESS INCOME. ACCORD ING TO THE LD. CIT AS PER SECTION 10B(6) ANY LOSS WHETHER IT IS DEP RECIATION LOSS OR BUSINESS LOSS SHALL NOT BE CARRIED FORWARD AND SET OFF AGAINST INCOME OF UNDERTAKING FOR ANY SUBSEQUENT YEARS. NOW THE ASSESSEE IS AGGRIEVED AND HAS RAISED THE FOLLOWING GROUNDS: 1. FOR THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX IS WITHOUT JURISDICTION IS CONTRARY TO LAW FA CTS AND CIRCUMSTANCES OF THE CASE AND AT ANY RATE IS OPPOSED TO THE PRINCIPLES OF EQUITY NATURAL JUSTIC E AND FAIR PLAY. 2. FOR THAT THE COMMISSIONER OF INCOME TAX FAILED TO APPRECIATE THAT THERE WAS NO ERROR OR PREJUDICE MUCH LESS BOTH TO WARRANT THE INVOCATION OF THE POWERS CONFERRED U/S.263 3. FOR THAT THE COMMISSIONER OF INCOME TAX FAILED TO APPRECIATE THAT THE PROVISIONS OF SECTION 10B(6) AR E APPLICABLE ONLY AFTER THE EXPIRY OF THE 'RELEVANT ITA 613/10 :- 3 -: ASSESSMENT YEARS' AND THAT SINCE THE YEAR UNDER APPEAL FALLS WITHIN THE MEANING OF 'RELEVANT ASSESSMENT YEAR' THE PROVISIONS OF SECTION 10B(6) ARE NOT APPLICABLE TO THE APPELLANT'S CASE. 4. FOR THAT CONSEQUENTLY THE COMMISSIONER OF INCOME TAX ERRED IN APPLYING THE PROVISIONS OF SECTION 10B(6) TO THE APPELLANT'S CASE. 5. FOR THAT THE COMMISSIONER OF INCOME TAX FAILED TO APPRECIATE THAT THE FACTS OF THE APPELLANT'S CASE F OR THE YEAR UNDER APPEAL WERE IDENTICAL TO THE FACTS I N ASSESSMENT YEAR 2001-02 WHERE THE HON'BLE INCOME TAX APPELLATE TRIBUNAL HAD HELD IN FAVOUR OF THE APPELLANT THAT THE UNABSORBED LOSSES COULD BE SET OFF AGAINST AVAILABLE PROFITS AFTER AVAILING DEDUCTION U/S 10B. 6. FOR THAT THE COMMISSIONER OF INCOME TAX FAILED TO APPRECIATE THAT THE DECISION IN M/S INTIMATE FASHIONS (INDIA) LTD. [ITA NO. 2097/MDS/2006 DECIDED ON 27.11.2007] CITED BY HIM WOULD NOT BE APPLICABLE TO THE APPELLANT'S CASE SINCE IN THE CAS E OF M/IS INTIMATE FASHIONS (INDIA) LTD. THE HON'BLE INCOME TAX APPELLATE TRIBUNAL HAD DECIDED ON THE ALLOWABILITY OF UNABSORBED BUSINESS LOSSES AND UNABSORBED DEPRECIATION AGAINST PROFITS OF PERIODS SUBSEQUENT TO THE RELEVANT ASSESSMENT YEARS AND NOT DURING THE RELEVANT ASSESSMENT YEARS. 7. FOR THESE GROUNDS AND SUCH OTHER GROUNDS THA T MAY BE ADDUCED BEFORE OR DURING THE HEARING OF THE APPEAL IT IS PRAYED THAT THE HON'BLE TRIBUNAL MAY BE PLEASED TO (I) CANCEL THE ORDER PASSED U/S.263 (II) PASS SUCH OTHER ORDERS AS THE HON'BLE TRIBU NAL MAY DEEM FIT. 3. IT WAS MAINLY ARGUED BY THE LD.AR THAT THE ASSESSIN G OFFICER HAS ALLOWED SET OFF IN QUESTION ON THE BASIS OF THE ORD ER OF THE ITAT IN ASSESSEES OWN CASE REPORTED IN 114 TTJ 881 IN WHIC H SUCH A SET OFF OF LOSS WHICH REMAINED UNABSORBED OF EARLIER ASSESS MENT YEARS AFTER ITA 613/10 :- 4 -: ALLOWING DEDUCTION U/S 10B HAS BEEN ALLOWED. BUT T HE CASE OF THE DEPARTMENT IS THAT THERE IS ANOTHER DECISION OF THI S VERY BENCH IN THE CASE OF M/S INTIMATE FASHIONS(INDIA) PVT. LTD VS AC IT IN I.T.A.NOS.2069 AND 2070/MDS/2006 FOR ASSESSMENT YEA RS 2002-03 AND 2003-04 ORDER DATED 11.1.2008 WHEREIN CONTRARY VIE W HAS BEEN TAKEN. 4. WE HAVE HEARD BOTH SIDES IN DETAIL. WE HAVE ALSO P ERUSED CAREFULLY THE ENTIRE EVIDENCES AVAILABLE ON RECORD. IT IS TRITE THAT AN ORDER CAN BE REVISED ONLY AND ONLY IF TWIN CONDITIO NS OF ERROR IN THE ORDER AND PREJUDICE CAUSED TO THE REVENUE CO-EXI ST. 5. THE SUBJECT OF REVISION UNDER SECTION 263 HAS BEE N VASTLY EXAMINED AND ANALYSED BY VARIOUS COURTS INCLUDING T HAT OF HONBLE APEX COURT. THE REVISIONAL POWER CONFERRED ON THE CIT VIDE SECTION 263 IS OF VIDE AMPLITUDE. IT ENABLES THE CIT TO CA LL FOR AND EXAMINE THE RECORDS OF ANY PROCEEDING UNDER THE ACT. IT EM POWERS THE CIT TO MAKE OR CAUSE TO BE MADE SUCH AN ENQUIRY AS HE DEEM S NECESSARY IN ORDER TO FIND OUT IF ANY ORDER PASSED BY ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF T HE REVENUE. THE ONLY LIMITATION ON HIS POWERS IS THAT HE MUST HAVE SOME MATERIAL(S) WHICH WOULD ENABLE HIM TO FORM A PRIMA FACIE OPINION THAT THE ORDER PASSED BY THE OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJ UDICIAL TO THE INTEREST OF ITA 613/10 :- 5 -: THE REVENUE. ONCE HE COMES TO THE ABOVE CONCLUSION S ON THE BASIS OF THE MATERIAL THAT THE ORDER OF THE ASSESSING OFFI CER IS ERRONEOUS AND ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE T HE CIT IS EMPOWERED TO PASS AN ORDER AS THE CIRCUMSTANCES OF THE CASE M AY WARRANT. HE MAY PASS AN ORDER ENHANCING THE ASSESSMENT OR HE MA Y MODIFY THE ASSESSMENT. HE IS ALSO EMPOWERED TO CANCEL THE ASS ESSMENT AND DIRECT TO FRAME A FRESH ASSESSMENT. HE IS EMPOWERE D TO TAKE RECOURSE TO ANY OF THE THREE COURSES INDICATED IN SECTION 26 3. SO IT IS CLEAR THAT THE CIT DOES NOT HAVE UNFETTERED AND UNCHEQURED DIS CRETION TO REVISE AN ORDER. THE CIT IS REQUIRED TO EXERCISE REVISION AL POWER WITHIN THE BOUNDS OF THE LAW AND HAS TO SATISFY THE NEED OF FA IRNESS IN ADMINISTRATIVE ACTION AND FAIR PLAY WITH DUE RESPEC T TO THE PRINCIPLE OF AUDI ALTERAM PARTEM AS ENVISAGED IN THE CONSTITUTIO N OF INDIA AS WELL IN SECTION 263. AS ORDER CAN BE TREATED AS ERRONE OUS IF IT WAS PASSED IN UTTER IGNORANCE OR IN VIOLATION OF ANY LAW; OR P ASSED WITHOUT TAKING INTO CONSIDERATION ALL THE RELEVANT FACTS OR BY TAK ING INTO CONSIDERATION IRRELEVANT FACTS. THE PREJUDICE THAT IT CONTEMPL ATED UNDER SECTION 263 IS THE PREJUDICE TO THE INCOME TAX ADMINISTRATION A S A WHOLE. THE REVISION HAS TO BE DONE FOR THE PURPOSE OF SETTING RIGHT DISTORTIONS AND PREJUDICES CAUSED TO THE REVENUE IN THE ABOVE CONTE XT. THE ITA 613/10 :- 6 -: FUNDAMENTAL PRINCIPLES WHICH EMERGE FROM THE SEVERA L CASES REGARDING THE POWERS OF THE CIT UNDER SECTION 263 MAY BE SUMM ARIZED BELOW: (I) THE CIT MUST RECORD SATISFACTION THAT THE ORDE R OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO T HE INTERESTS OF THE REVENUE. BOTH THE CONDITIONS MUS T BE FULFILLED. (II) SECTION 263 CANNOT BE INVOKED TO CORRECT EAC H AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER AND IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. (III) AN INCORRECT ASSUMPTION OF FACTS OR AN INCORR ECT APPLICATION OF LAW WILL SUFFICE FOR THE REQUIREME NT OR ORDER BEING ERRONEOUS. (IV) IF THE ORDER IS PASSED WITHOUT APPLICATION OF MIND SUCH ORDER WILL FALL UNDER THE CATEGORY OF ERRONEOUS ORD ER. (V) EVERY LOSS OF REVENUE CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND IF THE ASSESSING OF FICER HAS ADOPTED ONE OF THE COURSES PERMISSIBLE UNDER LA W OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW UNDER WITH WHICH THE CIT DOES NOT AGREE IT CANNOT BE TREATED AS AN ERRONEOU S ORDER UNLESS THE VIEW TAKEN BY THE ASSESSING OFFIC ER IS UNSUSTAINABLE UNDER THE LAW. ITA 613/10 :- 7 -: (VI) IF WHILE MAKING THE ASSESSMENT THE ASSE SSING OFFICER EXAMINES THE ACCOUNTS MAKES ENQUIRIES APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME THE CIT WHILE EXERCISING HI S POWER UNDER SECTION 263 IS NOT PERMITTED TO SUBSTI TUTE HIS ESTIMATE OF INCOME IN PLACE OF THE INCOME ESTIM ATED BY THE ASSESSING OFFICER. (VII) THE ASSESSING OFFICER EXERCISE QUASI-JUDI CIAL POWER VESTED IN HIM AND IF HE EXERCISE SUCH POWER IN ACCORDANCE WITH LAW AND ARRIVES AS A CONCLUSION SUCH CONCLUSION CA NNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE CIT DO ES NOT FEEL SATISFIED WITH THE CONCLUSION. (VIII) THE CIT BEFORE EXERCISING HIS JURISDICT ION UNDER SECTION 263 MUST HAVE MATERIAL ON RECORD TO ARRIVE AT A SATISFACTION. (IX) IF THE ASSESSING OFFICER HAS MADE ENQUIRI ES DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON THE RELEVANT ISSUES AND THE ASSESSEE HAS GIVEN DETAILED EXPLANAT ION BE A LETTER IN WRITING AND THE ASSESSING OFFICER AL LOWED THE CLAIM ON BEING SATISFIED WITH THE EXPLANATION O F THE ASSESSEE THE DECISION OF THE ASSESSING OFFICER CAN NOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DOES NOT MAKE AN ELABORATE DISCUSSION IN THAT REGAR D. ITA 613/10 :- 8 -: 6. ADVERTING TO THE FACTS OF THE CASE IT IS FOUND FOR CERTAIN THAT THE ASSESSING OFFICER HAS RELIED ON THE DECISION OF THE TRIBUNAL (SUPRA) TO ARRIVE AT HIS DECISION. THAT DECISION WAS BROUG HT TO THE NOTICE OF THE ASSESSING OFFICER AND HE HAS ACTED AS PER LAW A S HE WAS BOUND TO FOLLOW THE DECISION OF THE JURISDICTIONAL TRIBUNAL. THEREFORE ALLOWING SUCH A SET OFF OF LOSS CANNOT BE SAID TO BE ERRONE OUS. IN THE ABOVE DECISION THE TRIBUNAL HAS HELD AS UNDER: IT IS NOT IN DISPUTE THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER S. 10B. UNDOUBTEDLY S. 10B IS A PA RT OF CHAPTER III OF THE ACT. IT IS TRUE THAT HEADING OF CHAPTER III IS 'INCOMES WHICH DO NOT FORM PART OF T OTAL INCOME'. HOWEVER THIS CAPTION OF CHAPTER III CANNO T BE CONCLUSIVE ABOUT THE EXACT PURPORT OF ANY PROVIS ION CONTAINED IN THE SAID CHAPTER. EARLIER THIS CHAPTE R CONTAINED ONLY S. 10 WHICH PROVIDED FOR THE EXCLUSI ON OF SEVERAL INCOMES FROM THE TOTAL INCOME. SUBSEQUENTLY ALSO WHEN S. 10A WAS FIRST INTRODUCED BY THE FINANCE ACT 1981 W.E.F. 1ST APRIL 1981 TH E SAID PROVISION PROVIDED FOR TOTAL EXEMPTION OF THE INCOME DESCRIBED IN S. 10A. SIMILARLY WHEN S. 10B WAS INTRODUCED FOR THE FIRST TIME BY THE FINANCE AC T 1988 W.E.F. 1ST APRIL 1989 SUB-SEC (1) THEREOF PROVIDED FOR A CLEAR EXCLUSION OF THE INCOME REFERR ED TO IN THE SAID SECTION FROM THE TOTAL INCOME OF AN ASSESSEE. SINCE THESE PROVISIONS PROVIDED FOR TOTAL EXCLUSION FROM THE TOTAL INCOME THEY WERE GROUPED ALONG WITH S. 10 IN CHAPTER III OF THE ACT. HOWEVER LATER ON THE NATURE OF RELIEF PROVIDED BY THESE SE CTIONS UNDERWENT A SEA CHANGE INSOFAR AS THAT TOTAL EXCLUS ION OF THE INCOME WAS REMOVED AND ONLY DEDUCTION WAS PROVIDED FOR. THIS IS CLEAR FROM THE LANGUAGE USED IN S. 10A S. 10AA S. 10B AND S. 10BA. AGAIN S. 10C PROVIDES FOR TOTAL EXCLUSION OF THE INCOME DERIVED BY ASSESSEE FROM AN INDUSTRIAL UNDERTAKING IN ANY INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE OR ITA 613/10 :- 9 -: INDUSTRIAL GROWTH CENTRE LOCATED IN THE NORTH-EASTE RN REGION. THUS WHEREVER THE LEGISLATURE HAS INTENDED FOR TOTAL EXCLUSION OF INCOME IT HAS SPECIFICALLY PROVI DED SO AND WHEREVER IT IS NOT INTENDED THE WORD 'DEDUCTIO N' HAS BEEN USED IN THOSE SECTIONS. ONCE WHEN DEDUCTION UNDER S. 10B HAS TO BE ALLOWED THE TOTAL INCOME OF THE UNDERTAKING WILL ENTER THE COMPUTATIO N AND TH'EN ONLY DEDUCTION WILL BE GIVEN TO THE ASSES SEE. IF THAT IS THE CASE THEN THE STAND OF THE C!T(A) T HAT S 10B IS A SECLUDED PROVISION CANNOT BE ACCEPTED. HAD IT BEEN A CASE WHERE TOTAL EXCLUSION FROM INCOME WAS PROVIDED FOR THEN PERHAPS THE OBSERVATION OF THE C!T(A) THAT SUCH INCOME CANNOT BE TAKEN INTO CONSIDERATION FOR SET OFF UNDER S. 70 71 OR 72 WOU LD HAVE BEEN PROPER. IN THE LIGHT OF THESE PROVISIONS THE AO IS DIRECTED TO CONSIDER THE SET OFF OF UNABSORBE D BUSINESS LOSSES AND DEPRECIATION AFTER AVAILING DEDUCTION UNDER S. 10B. SEE. 10B(6) IS APPLICABLE O NLY FOR THE LAST YEAR OF DEDUCTION AND NOT FOR THE EARL IER YEARS OF DEDUCTION. ACCORDINGLY THE CLAIM OF THE ASSESSEE IS ALLOWED. 7. THEREFORE ONCE THE ASSESSING OFFICER HAS TAKEN A P OSSIBLE VIEW ON THE BASIS OF THE DECISION OF THE JURISDICTIONAL TRIBUNAL HIS ORDER CANNOT BE SAID TO BE ERRONEOUS. HENCE ONE OF THE CONDITIONS OF SECTION 263 IS FOUND TO BE MISSING. THEREFORE IN VIEW OF THE ABOVE LEGAL POSITION WE REVERSE THE ORDER OF THE LD. CIT AND RESTORE THAT OF THE ASSESSING OFFICER. ITA 613/10 :- 10 - : 8. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE ST ANDS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 8.10.2010. SD/- SD/- (ABRAHAM P GEORGE) ACCOUNTANT MEMBER ( HARI OM MARATHA ) JUDICIAL MEMBER DATED: 8 TH OCTOBER 10 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR