The Commissioner Of Income-Tax -I,Coimbatore v. M/S. Shiva Distilleries Limited

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 03.07.2019 THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMand THE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN The Commissioner of Income-Tax -I,Coimbatore. .. Appellant Vs. M/s. Shiva Distilleries Limited,1212, Trichy Road, Coimbatore -641 018. .. Respondent Prayer :Tax Case Appeal filed under Section 260-A of theIncome Tax Act, 1961, against the order of the Income TaxAppellate Tribunal Chennai 'A' Bench, Chennai, dated 27.02.2009in I.T.A.No.1172/Mds/2008 for the Assessment Year 2001-02 andagainst the order of the Commissioner of Income Tax I, IncomeTax Department, Coimbatore, dated 10.03.2008, made in C.No.120(6)/07-08/CIT -I/CBE and against the order of the Asst.Commissioner of Income Tax Income Tax Department, Company CircleI(2) (i/c), Coimbatore-18, dated 27.01.2006, made in PAN No. /S-53. JUDGMENT [Judgment of the Court was delivered by T.S.Sivagnanam, J.] This appeal filed by the revenue under Section 260-A ofthe Income Tax Act, 1961 (hereinafter referred to as ‘the Act’)is directed against the order dated 27.02.2009 passed by theIncome Tax Appellate Tribunal Chennai 'A' Bench inI.T.A.No.1172/Mds/2008 for the Assessment Year 2001-02.2. The appeal was admitted on 10.11.2009 on thefollowing substantial questions of law: https://hcservices.ecourts.gov.in/hcservices/ “(i) Whether on the facts and in thecircumstances of the case, the Income TaxAppellate Tribunal was right in law in quashingthe order passed by the Commissioner of Income-tax under Section 263 of the Income-tax Act,even though the order passed by the assessingofficer is erroneous and prejudicial to theinterest of the revenue and failed to apply hismind to the case in all its perspectives of thecase? And (ii) Whether on the facts and in thecircumstances of the case the Income TaxAppellate Tribunal was right in law in holdingSection 50B was not applicable to the facts ofthis case, even though the transfer of the business undertaking as awhole by itself is a property within the meaningof Section 2(47) it may be subject to capitalgains by virtue of the provision of Section 50of the Income Tax Act, 1961?” 3. We have heard Ms.K.G.Usharani, learned counsel JuniorStanding Counsel for the appellant/revenue and Mr.VikramVijayaraghavan,learnedcounselappearingforrespondent/assessee. 4. The validity of the proceedings initiated by theCommissioner of Income Tax under Section 263 of the Act is thesubject issue in this appeal. 5. The Tribunal accepted the case of the assessee andheld that Section 263 of the Act could not have been invoked asit amounts to clear change of opinion. We concur with thefindings of the Tribunal. 6. Section 263 of the Act deals with revision of order'prejudicial to revenue' Sub-Section (1) states that thePrinciple Commissioner or Commissioner may call for and examinethe records of any proceeding under this Act, and if heconsiders that any order passed therein by the Assessing Officeris erroneous, in so far as it is prejudicial to the interests ofthe revenue, he may, after giving the assessee an opportunity ofbeing heard and after making or causing to be made such inquiryas he deems necessary, pass such order thereon as thecircumstances of the case justify, including an order enhancingor modifying the assessment, or cancelling the assessment anddirecting a fresh assessment. 7. In Malabar Industrial Co. Ltd Vs. CIT reported in(2000) 159 CTR (1) (SC) = (2000) 243 ITR 83 (SC), the Court had https://hcservices.ecourts.gov.in/hcservices/ 7. In Malabar Industrial Co. Ltd Vs. CIT reported in(2000) 159 CTR (1) (SC) = (2000) 243 ITR 83 (SC), the Court had https://hcservices.ecourts.gov.in/hcservices/ pointed out that the phrase “prejudicial to the interest of therevenue” under Section 263 of the Act has to be read inconjunction with the expression “erroneous” order passed by theAssessing Officer. It was further pointed out that every loss ofrevenue as a consequence of an order of the Assessing Officercannot be treated as prejudicial to the interest of the revenue.An illustration was pointed out stating that when the ITOadopted one of the courses permissible in law and it hasresulted in loss of revenue; or where two views are possible andthe ITO has taken one view with which the CIT does not agree, itcannot be treated as an erroneous order prejudicial to theinterest of the revenue, unless the view taken by the ITO isunsustainable in law. This decision was followed in Commissionerof Income Tax Vs. Max India Ltd. reported in (2007) 295 ITR0282. 8. In the instant case, the assessment was completed forthe year under consideration, 2001-02 by order dated 27.01.2006,after which notice was issued under Section 148 of the Act. TheAssessing Officer issued the notice for reopening the assessmenton the ground that the holding company ceased to hold whole ofthe share capital of the subsidiary company, the exemptiongranted has to be withdrawn as per provision of Section 47A ofthe Act. It is further stated that the original sale of thetextile unit has to be treated as transfer and net worthamounting to Rs.6,15,97,000/- has to be subjected to capitalgains treating this transactions as a slump sales as perprovisions of Section 50B of the Act. 9. The assessee submitted their reply stating that theassets were transferred at their book value and the liabilitiesof the Division was also taken at book value i.e., at values asreflected in the books of accounts of the assessee, thetransferor. It was further stated that the excess of the assetsover liabilities was the net consideration received by theassessee from Shiva Texyarn Limited (STYL), the transferreecompany. Further it was stated that the value of individualassets was identified with reference to the book value of suchassets, being Written Down Value of the assets, which weresubject to depreciation and the remaining assets, which were notsubject to depreciation, were transferred at book value beingcost to the assessee. The details as to how the value of theassets adopted for the purpose of transfer was also indicated.With regard to the proposal made by the Assessing Officer forreopening the assessment by proposing to invoke Section 50B ofthe Act, the assessee stated that as per Section 2(42C) of theAct “Slump Sale” has to be defined to mean the transfer of oneor more undertaking as a result of the sale for lumpsum salewithout values being assigned to the individual assets andliabilities in such sales. It was further stated that in theassessee's case, the transfer price was based on the individual assets and liabilities of the undertaking transferred and thesale would not qualify as “Slump Sale” as per Section 2(42C) ofthe Act. This explanation offered by the Association wasaccepted by the Assessing Offer and the assessment wascompleted. 10. For the very same reasons, the Commissioner hasinvoked the power under Section 263 of the Act. In the orderpassed by the Commissioner of Income-Tax-I, Coimbatore dated10.03.2008, there is no reference to the reopening made by theAssessing Officer, notice issued by him, reply given by theassessee and how the assessment was completed. assets and liabilities of the undertaking transferred and thesale would not qualify as “Slump Sale” as per Section 2(42C) ofthe Act. This explanation offered by the Association wasaccepted by the Assessing Offer and the assessment wascompleted. 10. For the very same reasons, the Commissioner hasinvoked the power under Section 263 of the Act. In the orderpassed by the Commissioner of Income-Tax-I, Coimbatore dated10.03.2008, there is no reference to the reopening made by theAssessing Officer, notice issued by him, reply given by theassessee and how the assessment was completed. 11. Considering this fact, the Tribunal held that thepower under Section 263 of the Act could not have been invokedby the Commissioner. The Tribunal rightly took note of thedecision in Max India Ltd. (supra). Thus, revenue has not madeany ground to interfere with the order passed by the Tribunal . 12. In the result, the appeal filed by the revenue isdismissed and the substantial questions of law are answeredagainst the revenue. No costs. Sd/- Assistant Registrar(CCC) mp/ska //True Copy// Sub Assistant Registrar To: 1.The Commissioner of Income Tax-I, Coimbatore. Coimbatore. 2.The Income Tax Appellate Tribunal 'A' Bench, Chennai. 'A' Bench, Chennai. 3.The Assistant Commissioner of Income Tax, Income Tax Department Companay, Company Cirlce -I(2) (i/c), Coimbatore. +1cc to Mr.T.R.Senthilkumar, Advocate, S.R.No.55853 +1cc to Mr.Subbaraya Aiyar, Advocate, S.R.No.55568 BR(CO) Tax Case Appeal No.1124 of 2009 RRS(22/08/2019)