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If the Assessing Officer has followed a decision of the High Court holding the field, the order of the Assessing Officer cannot be said to be erroneous

In SPPL Property Management, Hon’ble Calcutta High Court has held that in case of revision proceedings under section 263 of Income Tax Act, 1961, if the Assessing Officer has followed a decision of the High Court holding the field, the order of the Assessing Officer cannot be said to be erroneous- Assessmemt Order was in line with the decision of the High Court in case of Vijay Shree Ltd (2014) 43 taxmann.com 396 (Cal). Further, the Commissioner of Income Tax cannot initiate revision proceedings merely because he disagrees with the findings of the AO.

IN THE HIGH COURT AT CALCUTTA SPECIAL

JURISDICTION (INCOME TAX) ORIGINAL SIDE

ITAT/49/2023

IA NO: GA/1/2023, GA/2/2023

PRINCIPAL COMMISSIONER OF INCOME TAX 1, KOLKATA

VS.

M/s. SPPL PROPERTY MANAGEMENT PVT. LTD.

BEFORE :

THE HON’BLE T.S. SIVAGNANAM ACTING CHIEF JUSTICE

And

THE HON’BLE JUSTICE HIRANMAY BHATTACHARYYA

Date : 31st March, 2023

Appearance : Mr. Prithu Dudhoria, Adv.

…for appellant Mr. Pratyush Jhunjhunwala,

Adv. Mr. Mrigank Kejriwal, Adv.

…for respondent

The Court : – We have heard Mr. Prithu Dudhoria, learned Standing Counsel for the appellant and Mr. Pratyush Jhunjhunwala, learned Advocate appearing for the respondent/assessee. There is a delay of 64 days in filing the appeal.

We have perused the affidavit filed in support of the petition and we find sufficient cause has been shown for not preferring the appeal within the period of limitation. Accordingly, the application is allowed and the delay in filing the appeal is condoned.

This appeal is filed under Section 260A of the Income Tax Act, 1961 (the Act) is directed against the order dated July 19, 2022 passed by the Income Tax Appellate Tribunal, “B” Bench, Kolkata in ITA No. 520/Kol/2021 both relating to the Assessment Year 2017-2018.

The revenue has raised the following substantial questions of law for consideration :-

• (a)   WHETHER on the facts and in the circumstances of the case the Learned Income Tax Appellate Tribunal has erred in law in quashing the order passed by the Pr. CIT-1 under Section 263 of the Income Tax Act, 1961 without considering the fact that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of revenue ?

• (b)   WHETHER on the facts and in the circumstances of the case the Learned Income Tax Appellate Tribunal has erred in law in disposing the appeal without considering that air conditioner expenses its capital in nature and is not allowable as expenses ?

• (c)   WHETHER on the facts and in the circumstances of the case the Learned Income Tax Appellate Tribunal has erred in law in disposing the case without considering that delay in payment of employees contribution to P.F. & other welfare funds under Section 36(1)(va) of the Income Tax Act, 1961 is not an allowable expense if the contribution deposited beyond the due date of next month in the light of the judgment of  the  Hon’ble Supreme Court in Civil Appeal No. 2833 of 2016 in the case of Chekmate Services P. Ltd. Vs.CIT ?

The first issue to be considered in the instant case is whether the Principal Commissioner of Income Tax was justified in invoking his jurisdiction  under  Section 263 of the Act. The assessment under Section 143(3) of the Act was completed by order dated 19.11.2019. The PCIT initiated proceedings under Section 263 of the Act stating that the provisions for doubtful debts amounting to Rs.1,05,24,671/- was not disallowed at the time of assessment since provision for expenses is not allowable under Section 37(1) of the Act. Secondly the PF contribution received from the employees was not deposited to concerned account in due date and the amount should  have  been added to the total income of the assessee under Section 36(1)(va) of the Act. Further an amount was debited to the profit and loss account under the head “Air Conditioner Expenses” which being capital in nature is not allowable expenses and are required  to be added back to the total income of the assessee. Therefore, the PCIT was of the view that the assessment was erroneous in so far as it was prejudicial to the interest of revenue. The assessee submitted the reply to the show-cause notice on 23.9.2021. The PCIT rejected the explanation offered and confirmed the proposal in the show-cause notice, set aside the order of assessment and directed the assessing officer to pass a fresh assessment order after considering the issues mentioned in the order dated 8th November, 2021.

Aggrieved by the same, the assessee preferred appeal before the Tribunal. As pointed out earlier, the PCIT invoked his jurisdiction under Section 263 of the Act on three issues namely, provisions for doubtful debts, employees’ contribution of provident fund and air-conditioner expenses.

Before we go into  the  three  heads,  under  which  action  was  initiated  under Section 263 of the Act, we have to first examine as to whether the  assumption  of jurisdiction by the PCIT under Section 263 was just and proper. With regard to the first and third issues, the assessing officer had issued  notice  under  section  142(1) on  1st of May, 2019 and issued a questionnaire form and the  assessee  had  submitted  all  the relevant details which have been noted by  the  Tribunal.  Further,  there  is  another question with regard to the details of expenses head-wise, where assessee had deducted tax at source. The Tribunal on going through the assessment records found that the questionnaire on the issues raised by the assessing officer  called  for  the  details  of expenses appearing in the audited P &  L  Account  and  various  replies  filed  by  the assessee and  the  Tribunal  found  that  the  assessing  officer  has  specifically  carried  out an enquiry regarding provisions for doubtful debts and air-conditioner expenses and the specific reply given by the assessee was also taken note of. With regard to the issues regarding the provisions for  doubtful debts,  the Tribunal noted  that the  assessee during the regular course of business as claimed to have  been  shown  sales,  in  the  preceding years of which, some sales turned bad and the same has been written off in the books of accounts as bad debts which the assessee is entitled for and, therefore, found the claim to be admissible. Similarly, for air-conditioner charges the assessee had filed complete details along with tax deducted on the charges paid and the bills were also placed in the form of a paper book which the Tribunal perused and found the same to be  acceptable. Thus, the Tribunal concluded that on both these issues, namely with regard to  the provisions for doubtful debts and air-conditioner expenses, the assessing officer had conducted a detailed enquiry and thereafter completed the assessment. Secondly, it was held that the PCIT had erred in invoking the revisional jurisdiction under Section 263 of the Act. The law on the subject is  well  settled,  that  if  it  is  found,  that  the  assessing officer has in fact conducted an enquiry, merely  because  the  PCIT  is  of  a  different opinion, it would not justify action under Section 263 of the Act. The  other  issue  with regard to the provident fund  contribution,  as  mentioned,  the  assessment  order  was  of the year 2017-18  and  on  the  date,  when  the  assessing  officer  completed  the assessment, the law on  the  subject  as  laid  down  by  the  jurisdictional  High  Court, namely this Court is in the case of  Commissioner  of  Income  Tax  Circle  –  1,  Kolkata  Vs. Vijay Shree Ltd. [2014] 43 taxmann.com 396 (Calcutta). Thus the assessing officer had followed the decision of this Court in the said case and  had  completed  the  assessment. Thus the assessing officer having followed the decision of the Jurisdictional High  Court which held the field, at the relevant point of time, the assessment cannot be held to be prejudicial to the interest of revenue.

Thus, we are of the view that the learned Tribunal had rightly granted relief to the respondent/assessee.

In the result, the appeal fails and is dismissed. The substantial questions of law are answered against the revenue.

(T.S. SIVAGNANAM)

ACTING  CHIEF  JUSTICE)

(HIRANMAY BHATTACHARYYA, J.)

The copy of the order is as under :

1682333811631