Calcutta High Court
Principal Commissioner Of Income ... vs M/S. Britannia Industries ... on 23 December, 2022
ITAT NO. 211 OF 2022
REPORTABLE
IN THE HIGH COURT OF JUDICATURE AT CALCUTTA
SPECIAL JURISDICTION (INCOME TAX)
ORIGINAL SIDE
RESERVED ON:13.12.2022
DELIVERED ON: 23.12.2022
CORAM:
THE HON'BLE MR. JUSTICE T.S. SIVAGNANAM
AND
THE HON'BLE MR. JUSTICE HIRANMAY BHATTACHARYYA
ITAT/211/2022
IA NO. GA/01/2022
PRINCIPAL COMMISSIONER OF INCOME TAX 1, KOLKATA
VERSUS
M/S. BRITANNIA INDUSTRIES LIMITED
Appearance:-
Mr. Amit Sharma, Adv.
.....For the Appellant.
Mr. R.K. Muraka, Sr. Adv.
Ms. Sutapa Roy Choudhury, Adv.
Ms. Aratrika Roy, Adv.
.....For the Respondent.
Page 1 of 10
ITAT NO. 211 OF 2022
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JUDGMENT
(Judgment of the Court was delivered by T.S.SIVAGNANAM, J.)
1. This appeal by the revenue filed under Section 260A of the Income Tax
Act, 1961(the Act) is directed against the order dated 28.03.2022 passed by
the Income Tax Appellate Tribunal "B" Bench Kolkata in ITA No.
1501/Kol/2021 for the assessment year 2016-2017.
2. The revenue has raised the following substantial questions of law for
consideration:-
(i) Whether the Learned Tribunal is justified in setting
aside the order under Section 263 of the said Act
passed on the ground that the Assessing Officer had
already conducted enquiry on the issues on which the
order under Section 263 of the Income Tax Act, 1961
was passed, when the order of Assessing Officer is
erroneous and bases on non application of mind as
well as against the provisions of law and when no
such embargo has been put in the language of the
section that when the Assessing Officer passed the
order after conducting enquiry it cannot be reviewed
and, the intention of the legislature was never such so
as to render the revenue remedies against erroneous
orders of the Assessing Officer or to make the revenue
suffer a continuous wrong?
(ii) Whether the provisions of the Section 263 of the said
Act can be invoked in case where the Assessing Officer
though makes thorough enquiry, ignores to appreciate
that deductions claimed by the assessees are not in
consonance with the provisions of law and it is found
that the Assessing Officer failed to apply his mind?
(iii) Whether the Learned Tribunal erred in law in
interpreting the provisions of Section 263 of the said
Act and holding that the action of the learned PCIT in
the present case is not justifiable and cannot be
sustained under the facts and circumstances of the
present case?
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3. We have heard Mr. Amit Sharma, learned standing counsel for the
appellant and Mr. R.K. Muraka, learned senior advocate assisted by Ms
Sutapa Roy Chowdhury, and Mrs. Aratrika Roy, learned advocates for the
respondents.
4. The assessee had filed its return of income for the assessment year
under consideration (A.Y. 2016-2017) on 30.11.2016 declaring a total
income of Rs. 1062,44,65,120/-. Subsequently revised return was filed on
27.03.2018 declaring a total income of Rs. 1054,14,38,420/- and the case
was selected for scrutiny and notices under Section 143(2) and Section
142(1) were issued. In response to such notices and the queries which were
raised the assessee submitted documents and on certain discrepancies
which were found the assessing officer issued show cause notice dated
23.12.2018 for which reply was submitted by the assessee on 26.12.2018
after which the assessment was completed by order dated 30.12.2018 under
Section 143(3) of the Act. The Principal Commissioner of Income Tax,
Calcutta (PCIT) issued the show cause notice dated 15.03.2021 under
Section 263 of the Act. Pointing out two issues:-
(i) That in the Schedule 19 of TAR, the assessee debited an amount of
Rs. 21,95,56,764/- to the profit and loss account however the
amount admissible under Section 35 of the Act is only Rs.
20,61,11,598/- and in the computation of total income excess
debited amount of Rs. 1,34,45,166/- (i.e. Rs. 21,95,56,764 - Rs.
20,61,11,598) has not been added back to the total income.
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(ii) That Schedule 27b of TAR reveals that the assessee company
debited an amount of Rs. 9,89,485/- on account of advertisement
to the profit and loss account, the expenditure is a prior period
expenditure relating to the financial year 2014-2015 and as this
expenditure does not relate to the year under consideration the
same deserves to be disallowed.
5. According to the PCIT, the assessing officer failed to verify the above
issues and therefore it was proposed to invoke Section 263 of the Act.
6. With regard to the first query, the assessee in their response dated
24.03.2021 stated that the allegation is factually incorrect. It was stated
that the assessee has suo moto added back Rs. 1,34,45,166/- while
computing the taxable income for the relevant assessment year. The
assessee also furnished break-up of the amount of Rs. 21,95,56,764/-
debited to the profit and loss account as reported in Schedule 19 of the TAR.
After giving all the facts and the figures, the assessee stated that it is evident
the said sum of Rs. 1,34,45,166/- was added back in the computation of
income which proves that the allegations mentioned in the show cause
notice is factually erroneous and unsustainable in law. Further the assessee
stated that the assessing officer had made due enquiries on the said issue
and after being satisfied that the excess sum has been added back to the
total income the assessment was completed under Section 143(3) of the Act.
Further it was pointed out that in the notice dated 08.10.2018 issued under
Section 142(1) of the Act specific details were called for on the said issue
which was furnished by the assessee by the letters dated 20.11.2018 and
03.12.2018. It was further stated that the assessing officer examined the
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details of scientific research expenditure as claimed as deduction vis-a-vis
the amount debited to profit and loss account including depreciation debited
in books in relation to scientific research assets. Thereafter, another show
cause notice was issued on 23.12.2018 requiring the assessee to explain as
to why the excess deduction claimed under Section 35 (2AB) of the Act
should not be allowed. For this query the assessee submitted their reply
dated 26.12.2018. It was contended that it is clear that the assessing officer
had gone through the tax audit report, financials, income tax return,
submissions in response to the notices after which he made further
enquiries inter alia scientific research expenditure before completing the
assessment. Mr. Muraka had placed before us the copy of the income tax
return which also establishes that the amount was suo-moto added back by
the assessee.
7. With regard to the second issue, the assessee pointed out that sum of
Rs. 9.89,485/- pertains to the advertisement expenditure for employment
charged by "LINKED IN" and bank charges therein and the details of the
invoices raised by the "LINKED IN" were furnished. It was stated that
though invoices were raised in the month of June 2014, they being a non-
resident essential documents like copy of TRC, no PE certificate etc. were
provided by them only during the financial year 2015-2016 and hence the
assessee could account and pay for all the bills only during the financial
year 2015-2016. Further the assessee referred to several decisions for the
proposition that expenses pertaining to earlier years, which was quantified
and crystallized during the previous year was allowable deduction.
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8. The PCIT after briefly setting out the objections raised by the assessee to
the show cause notice issued under Section 263 of the Act came to the
conclusion that the assessing officer has passed the assessment order
without making enquiries or verification and therefore clause (a) of
explanation (2) to Section 263 (1) of the Act is attracted and accordingly held
the assessment order to be erroneous in so far as it is prejudicial to the
interest of revenue. After referring to a few decisions the PCIT by order dated
27.03.2021 set aside the assessment order and directed the assessing officer
to pass a fresh assessment order after considering the two issues which
were pointed out. Aggrieved by such order, the assessee preferred appeal
before the tribunal which has been allowed by the impugned order.
9. Firstly, we need to point out that the both the issues on which the show
cause notice under Section 263 of the Act was issued are fully factual. The
learned tribunal which is the last fact-finding authority has elaborately
considered the factual position and granted relief to the assessee. Unless
and until the order passed by the learned tribunal suffers from any
perversity or ignores any vital fact in an appeal under Section 260A of the
Act, we are not expected to interfere in such an order.
10. Nevertheless, since elaborate submissions were made by Mr. Sharma
and Mr. Muraka we embarked upon the fact finding exercise though not
required to be done. The respondent assessee filed a paper book containing
all documents which was filed before the learned tribunal including the
written submissions filed by the assessee. From the annexure, it is seen that
under the column amount admissible under Section 35, in the sub column
A1 the figure debited to the statement of profit and loss has been shown as
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Rs. 219,556,764/- in column A(ii)the amount admissible (net depreciation
and asset written off) Rs. 206, 111,599/- has been mentioned. In column
B(1) (i) the amount not debited to the statement of profit and loss-capital
expenditure has been given as Rs. 218,424,479/- and in column b(2) the
amount admissible is shown as Rs. 210, 494, 435/-. The details of the
scientific research expenditure reported in Schedule 19 of the TAR has been
explained as follows:-
SL PARTICULARS AMOUNT
NO.
A. Operating Expenses on SR 20,61,11,598
B. Depreciation on SR Assets 94,90,862
C. SR Asset written off 39,81,203
D. Loss on sale of SR Assets 4295
E. Profit on sale of SR Assets (-) 31,194
F. TOTAL 21,95,56,764
G. Amount allowable u/s 35 [Sch 19 of 20,61,11,598
TAR]
H. Difference [B+C+D+E] 1,34,45,166
*SR= Scientific Research
*FS=Financial Statements
Items B,C,D & E were debited under the respective Heads viz.,
Depreciation, Assets Written off, Profit/Loss on Sale of Assets.
11. The assessee also furnished the relevant extracts of the financial
statement for the financial year 2015-2016 highlighting all the relevant
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details. Further the location wise break up of those items of expenses as
reflected in the profit and loss account were also placed before the learned
tribunal and it was explained that the items set out in the Column
(B)(C)(D)(E) in the above table formed part of the depreciation on scientific
research assets; assets written off and profit and loss on sales of asset
debited in the profit and loss account. Thus, it was explained that the sum
of Rs. 1,34,45,166/- was added back in the computation of income. This
aspect of the matter has been analyzed by the learned tribunal and it has
found that the said sum was added back in the computation of income and
therefore there was absolutely no basis for the PCIT to invoke his power
under Section 263 of the Act. Furthermore, records clearly show that the
assessing officer had issued notices to the assessee on the very same issue
considered their reply thereafter pointing out certain discrepancies issued
show cause notice for which reply was submitted by the assessee and after
a detailed enquiry the assessment has been completed. Thus, it is not a
case of lack of enquiry or lack of proper enquiry. The PCIT does not in as
many words states that there was lack of enquiry or lack of proper enquiry
and all that is said is that the assessing officer did not verify these aspects
which is factually incorrect. Therefore, it is not a case where the PCIT could
have invoked his jurisdiction under Section 263 of the Act.
12. With regard to the second issue, the learned tribunal had noted the
facts that the invoices issued by the "LINKED IN" towards advertisement
expenses in June 2014 were admitted as liability and crystallized for
payment in the year under consideration owing to the fact that the
"LINKED IN" being non-resident had furnished the necessary documents in
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the such as TRC under Section 90(4) of the Act read with Rule 21 AB of the
Rules and no PE certificate etc. only in the assessment year under
consideration. Further the tribunal noted it is not the case where these
expenses were charged as deduction in the preceding year more
importantly, the tribunal noted that there is no revenue implication and no
prejudice is caused to the revenue since the tax rate applicable to the
assessee during the assessment year 2015-2016 to which invoices relates
and the tax rates applicable for the assessment year 2016-2017 in which
the invoices were accounted and paid were the same.
13. At this juncture, we take note of the decision in the case of the
Hon'ble Supreme Court in Malabar Industrial Company Limited Versus
Commissioner of Income Tax 1 wherein it was held that every loss of
revenue cannot be treated as prejudicial to the interest of revenue and if the
assessing officer has adopted one of the courses permissible under law or
where two views are possible and the assessing officer has taken one view
with which the CIT does not agree, it cannot be treated as an erroneous
order, unless the view taken by the assessing officer is unsustainable under
law. Furthermore, on facts the tribunal found that the PCIT has not carried
out any enquiry on his own and merely set aside the assessment order and
sent the file back to the assessing officer to re-examine the issues which is
contrary to the law as laid down in several decisions and the tribunal rightly
noted the decision in Income Tax Officer Versus DG Housing Projects
Limited 2.
(2000) 243 ITR 83 (SC)
(2012) 343 ITR 329 (Del)
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14. Thus, for all the above reasons, we find that no questions of law much
less substantial questions of law arises for consideration in this appeal.
Accordingly, the appeal fails and is dismissed.
(T.S. SIVAGNANAM, J)
I agree
(HIRANMAY BHATTACHARYYA, J)
(P.A - SACHIN)
