Kerala High Court
Cochin International Airport Ltd vs The Assistant Commissioner Of Income ... on 7 January, 2025
Author: A.K.Jayasankaran Nambiar
Bench: A.K.Jayasankaran Nambiar
2025:KER:298
ITA NO. 77 OF 2018
1
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR
&
THE HONOURABLE MR. JUSTICE EASWARAN S.
TUESDAY, THE 7TH DAY OF JANUARY 2025 / 17TH POUSHA, 1946
ITA NO. 77 OF 2018
AGAINST THE ORDER/JUDGMENT DATED 15.03.2018 IN ITA
NO.501/COCH/2016 OF I.T.A.TRIBUNAL,COCHIN BENCH
APPELLANT/APPELLANT:
COCHIN INTERNATIONAL AIRPORT LTD.,
KOCHI AIRPORT P.O.,
NEDUMBASSERY [PAN : AAACA 9658B]
BY ADVS.
SRI.JOSEPH MARKOS (SR.)
SRI.ABRAHAM JOSEPH MARKOS
SRI.ISAAC THOMAS
SRI.HARAN THOMAS GEORGE
SRI.P.G.CHANDAPILLAI ABRAHAM
SMT.RACHEL ABRAHAM
RESPONDENT(S)/RESPONDENT(S):
1 THE ASSISTANT COMMISSIONER OF INCOME TAX
CORPORATE CIRCLE-1(1), KOCHI.
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2
*ADDL.R2 THE STATE, REP. BY THE CHIEF SECRETARY,
GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM.
*ADDL.R3 THE PRINCIPAL SECRETARY, FINANCE DEPARTMENT,
GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM.
*ADDL.R4 THE LAW SECRETARY,
GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM.
*ADDL.R5 THE REGISTRAR GENERAL,
HIGH COURT OF KERALA, ERNAKULAM.
*ADDL.R2 TO R5 ARE IMPLEADED AS PER ORDER DATED 26.11.2018 IN
UNNUMBERED ITA OF 2018
BY ADVS.
SRI.P.K.R.MENON,SENIOR COUNSEL, GOI(TAXES)
SRI.JOSE JOSEPH, SC, FOR INCOME TAX
SRI.C.E.UNNIKRISHNAN, SPL.GOVERNMENT PLEADER
SRI.MOHAMMED RAFIQ, SPL.GOVERNMENT PLEADER
THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON
16.12.2024, THE COURT ON 07.01.2025 DELIVERED THE FOLLOWING:
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3
JUDGMENT
Easwaran S., J.
The assessee is before us in this appeal aggrieved by the order of the
Income Tax Appellate Tribunal, Kochi bench.
Facts of the case
2. The appellant, a domestic company engaged in operating and
maintaining of the Cochin International Airport, is an assessee under the
provisions of the Income Tax Act, 1961. For the assessment year 2012-13,
the appellant declared a total income of Rs.134,43,40,439/- under Section
115-JB of the Income Tax Act, 1961. Since the tax payable under the
regular provisions of the Act was lower and the appellant had claimed
deduction under Section 80-IA of the Act in respect of the eligible activity
of operating and maintaining the Airport, which is an infrastructure facility,
it filed a revised return on 4.12.2013 declaring a taxable income of
Rs.11,88,92,410/-. The return was selected for scrutiny under Section
143(3) of the Income Tax Act, 1961 and was completed by order dated
27.3.2015. Since the 1st respondent-Department did not accept the claim
of deduction under Section 80-IA and also made various other
disallowances, the appellant preferred appeal against the order and the
same is stated to be pending. During the said financial year, the appellant
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debited to the profit and loss account an amount of Rs.1,00,33,280/-
towards the provision for bad and doubtful debts and the said amount was
reduced from the amount of trade receivables and short term loans and
advances. Since the Provision debited in the profit and loss account is
simultaneously obliterated from the value of trade receivables and short
term loans and advances, the same was treated by the appellant as a write
off in the income tax return. In the assessment proceedings, however, the
Department examined this aspect and called for the break up of the
provision for bad and doubtful debts vide letter dated 3.2.2015. The
appellant replied to the said notice by pointing out the decision of the
Hon'ble Supreme Court in Vijaya Bank v. Commissioner of Income Tax (CIT)
[323 ITR 166]. The appellant contends that it is after considering the said
reply that the assessing authority decided to accept the explanation and
proceeded to issue the assessment order. However, the Principal
Commissioner of Income Tax-1, Kochi found that the said assessment was
erroneous and prejudicial to the interest of the Revenue, and decided to
invoke the jurisdiction under Section 263 of the Income Tax Act, 1961 and
issued a notice proposing to revise the order of assessment. The appellant
showed cause by its reply dated 22.9.2016. However, the reply was found
to be unsatisfactory and therefore, the Principal Commissioner of Income
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Tax-1, Kochi directed the assessing authority to re-examine the issue.
Aggrieved by the order, the appellant preferred an appeal before the
Income Tax Appellate Tribunal, which was dismissed by order dated
15.3.2018, which is impugned in the present appeal. While the appeal was
pending, the assessing authority passed revised orders of assessment
under Section 143 of the Income Tax Act, 1961 on 21.2.2017 disallowing
the deduction of the claim of doubtful debts amounting to Rs.1,00,33,280/-.
It is stated that the order is also under challenge in a separate appeal
preferred before the Tribunal. In the appeal before us, the assessee has
raised the following questions of law, for our consideration:
"i. Whether on the facts and in the circumstances of the case
the Appellate Tribunal is right in holding that the
Commissioner was justified in invoking the revisionary
jurisdiction under Section 263 of the Income Tax Act?
ii. Whether on the facts and in the circumstances of the case
and in the light of Annexure C and D replies by the Appellant
there was any evidence or material before Appellate
Tribunal to justify its finding that the Assessing Officer has
not made any enquiry with respect to the issue in question
and therefore the Commissioner was justified in invoking
the jurisdiction under Section 263 of the Income Tax Act."
3. We have heard Sri.Joseph Marcose, the learned Senior Counsel
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appearing on behalf of the appellant, assisted by Ms.Rachel Abraham, and
Sri.Jose Joseph, the learned Senior Standing Counsel appearing for the 1st
respondent-Department.
4. The learned Senior Counsel appearing for the appellant
primarily contended that the Principal Commissioner of Income Tax-1,
Kochi had no jurisdiction to invoke Section 263 of the Income Tax Act, 1961
because it was basically due to a change of opinion that he decided to
revise the order of assessment, which is impermissible under law. He
maintained the stand that going by the decision of the Hon'ble Supreme
Court in Vijaya Bank (supra), the appellant was entitled to claim deduction
of the amount of Rs.1,00,33,280/- towards the provision for bad and
doubtful debts. Reliance is also placed on the decision of the Hon'ble
Supreme Court in Commissioner of Income Tax (Central), Ludhiana v. Max
India Ltd. [(2007) 15 SCC 401] to contend that when there are two views
possible and the income tax officer had taken one view, it cannot be treated
as an erroneous order prejudicial to the interest of the Revenue and that
the said order cannot be revised by exercising the power under Section
263 of the Income Tax Act, 1961.
5. On the other hand, the learned Senior Standing Counsel
appearing for the 1st respondent-Department contended that though a
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provision for bad debts was made in the profit and loss account, the same
is not seen obliterated. He further pointed out that even in the profit and
loss account, especially clause 2.15.1, it is specifically stated by the
appellant that the Company is hopeful of recovering the aforesaid amount
at some point of time.
6. We have considered the rival submissions raised across the bar.
7. The question that falls for our consideration is as to whether
the Commissioner can exercise revisional jurisdiction under Section 263 of
the Income Tax Act, 1961, if he is satisfied that the order of the assessing
officer sought to be revised is erroneous and also prejudicial to the interest
of the Revenue? Pertinently, the order of assessment passed under Section
143 is always subject to the power of revision under Section 263 by the
Principal Commissioner of Income Tax. Of course, for exercise of the said
power, two conditions must be satisfied; (a) the order is erroneous, and (b)
it is prejudicial to the interest of the Revenue.
8. It is in this context that we are called upon to decide as to
whether the order passed by the Principal Commissioner of Income Tax as
affirmed by the appellate tribunal suffers from any material irregularity.
9. An order sought to be revised under Section 263 would become
erroneous and fall within the category of errors, if it is based on an
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incorrect assumption of facts or application of law. Admittedly, the
appellant claimed deduction of Rs.1,00,33,280/- for which notice under
Section 142 of the Income Tax Act was issued by the assessing officer on
26.5.2014 and 24.12.2014. The appellant replied to the said notice.
Thereafter on 27.3.2015, the assessment order was passed accepting the
stand of the assessee in not including the amount of Rs.1,00,33,280/-. In
fact, we must note that in the assessment order, the assessing officer has
not stated any reason as to why the claim for deduction of Rs.1,00,33,280/-
was accepted. Therefore, the said order was palpably wrong and falls
within the meaning of "error".
10. It is true that all orders, which are erroneous, are not liable to
be subjected to proceedings under Section 263 of the Income Tax Act, 1961.
To invoke Section 263, the Principal Commissioner of Income Tax must be
satisfied that the erroneous order also causes prejudice to the Revenue.
The real purport of Section 263 is to remove the prejudice caused to the
Revenue by the erroneous order passed by the assessing officer and it
empowers the Commissioner to initiate suo motu proceedings, when either
the assessing officer takes a wrong decision without considering materials
available on record or renders a decision without enquiry. The role of the
assessing officer under the Income Tax Act, 1961 is not only that of an
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adjudicator but also of an investigator and he cannot remain oblivious in
the face of a claim without any enquiry. The assessing officer must exercise
a dual role of protecting the interest of the Revenue as well as that of the
assessee and that is the reason why he is expected to pass orders with
utmost diligence. If, on facts, a claim made is assumed to be correct, then
the assessing officer must necessarily state reasons as to why he is
allowing the claim.
11. In Malabar Industrial Company Ltd. v. Commissioner of Income
Tax [243 ITR 83 (SC)], the Hon'ble Supreme Court held as follows:
"There can be no doubt that the provision 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 that the section will be attracted. An incorrect
assumption of facts or an incorrect application of law will
satisfy the requirement of the order being erroneous. In the
same category fall orders passed without applying the
principles of natural justice or without application of mind."
12. Therefore, in the light of the principle discussed above, we find
that Section 263 of the Income Tax Act, 1961 applies in the following cases:
(a) the order sought to be revised contained error for lack of reasoning;
(b) the order sought to be revised proceeds on incorrect assumption of
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facts and applies the law incorrectly, and
(c) stereotype orders passed by the assessing officer simply accepting the
version of the assessee.
13. Turning to the facts of this case, on a perusal of the order of
assessment, it is evident that the assessing officer did not show any
application of mind and mechanically accepted the statement of the
assessee. When the assessee is found to have claimed deduction for
Rs.1,00,33,280/- towards the "provision for doubtful assets" for the
purpose of computation of book profit under Section 115-JB of the Income
Tax Act, 1961, the assessing officer did not state any reason as to why he
decided, if at all, to accept the explanation of the assessee despite the fact
that the said amount was not debited for the provision for doubtful account
and consequently, the provision of doubtful debts account has not been
obliterated. Thus, it is only for disclosure purposes that the amount was
shown as a reduction from the trade receivables in the balance sheet. The
assessee has not included the said amount as written off debts, but was
hopeful of getting it back at some point of time.
14. Viewed in the above perspective, we cannot find fault with the
Principal Commissioner of Income Tax for having exercised his jurisdiction
under Section 263 of the Income Tax Act, 1961. Consequently, the order
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passed by him after hearing the appellant and directing the assessing
officer to re-examine the said issue is perfectly justifiable and legal. The
Tribunal, on the other hand, had analysed the position of law as stated by
us above and concluded rightly that the order passed by the Commissioner
of Income Tax did not suffer from any illegality or perversity. Therefore,
we are of the considered view that the order impugned in the appeal does
not suffer from any jurisdictional infirmity.
As an upshot of these discussions, we are of the considered view that
there is no merit in the appeal and the appeal is liable to be dismissed.
Thus, we dismiss the income tax appeal by answering the questions of law
against the assessee and in favour of the Revenue. No order as to costs.
Sd/-
DR.A.K.JAYASANKARAN NAMBIAR
JUDGE
Sd/-
EASWARAN S.
JUDGE
jg
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PETITIONER ANNEXURES
Annexure A TRUE COPY OF THE ASSESSMENT ORDER DATED
27/03/2015 PASSED UNDER SECTION 143(3) BY THE
RESPONDENT
Annexure B TRUE COPY OF THE RELEVANT PAGES OF ANNUAL
ACCOUNTS
Annexure C TRUE COPY OF THE REPLY DATED 03/02/2015 FILED
BY THE APPELLANT TO QUERIES RAISED DURING THE
ASSESSMENT PROCEEDINGS
Annexure D TRUE COPY OF REPLY DATED 03/03/2015 FILED BY
APPELLANT BEFORE THE RESPONDENT
Annexure E TRUE COPY OF THE NOTICE UNDER SECTION 263
DATED 05/09/2016 ISSUED BY THE PRINCIPAL
COMMISSIONER OF INCOME TAX-1, KOCHI TO THE
APPELLANT
Annexure F TRUE COPY OF THE APPELLANT'S DETAILED REPLY
DATED 22/09/2016 SUBMITTED BEFORE THE
PRINCIPAL COMMISSIONER OF INCOME TAX-1, KOCHI
Annexure G TRUE COPY OF THE ORDER DATED 26/09/2016 UNDER
SECTION 263 ISSUED BY THE COMMISSIONER
Annexure H TRUE COPY OF THE APPEAL TRIBUNAL DATED
17/11/2016 PREFERRED BEFORE THE INCOME TAX
APPELLATE TRIBUNAL
Annexure I TRUE COPY OF THE IMPUGNED ORDER DATED
15/03/2018 PASSED BY THE INCOME TAX APPELLATE
TRIBUNAL
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Annexure J TRUE COPY OF THE REVISED ASSESSMENT ORDER
DATED 21/02/2017 ISSUED BY THE RESPONDENT
RESPONDENT'S ANNEXURES
ANNEXURE-1 TRUE COPY OF THE TABLE SHOWING THE DETAILS OF
COLLECTION OF COURT FEE FOR THE YEAR 2015-16,
2016-17, AND 2017-18 AND ALSO THE AMOUNTS
SPENT TOWARDS JUDICIAL DEPARTMENT INCLUDING
COURTS
