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TMI Blog2012 (4) TMI 454X X X X Extracts X X X X X X X X Extracts X X X X ..... /2007 - - - Dated:- 23-4-2012 - MR. JUSTICE SANJIV KHANNA, MR. JUSTICE R.V.EASWAR, JJ. For Appellant: Mr. S.Ganesh Sr. Advocate with Ms. Surekha Raman and Mr. Anuj Sarma, Advocates. For Respondent: Mr. Sanjeev Sabharwal, sr. standing counsel. O R D E R Having heard learned counsel for the parties in these two appeals, which pertain to the assessment years 1993-94 and 1994-95, we are inclined to frame the following substantial question of law:- Whether the Income Tax Appellate Tribunal was right in holding that the Commissioner of Income Tax had rightly invoked and exercised jurisdiction under Section 263 of the Income Tax Act, 1961? 2. We have heard learned counsel for the parties and proceed to dictate our decision on the aforesaid question of law. 3. The appellant-assessee is a multi state co-operative society engaged in the business of manufacture and sale of Urea and Ammonia at its plant at Hazira, Gujarat. For the two assessment years in question, it had claimed deduction under Section 80 I of the Income Tax Act, 1961 (Act, for short) in respect of its manufacturing activity, which was allowed by the Assessing Officer. While claiming and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove contentions, but do not find any merit in the same. 8. The Commissioner in the order dated 31st March, 1998 has specifically examined and gone into the question whether the order passed by the Assessing Officer including the aforesaid amounts was erroneous and prejudicial to the interest of the Revenue and held that these two amounts cannot be taken into account for computation of the said deduction. Accordingly, he has held that computation of deduction made by the Assessing Officer was wrong and excessive/enhanced deduction contrary to law has been allowed. The exact reasoning given by the Commissioner in the order dated 31st March, 1998, reads as under:- 5. I am not inclined to agree with the arguments of the learned counsel. In this case, the industrial activity in which the company was involved was the manufacturing of Urea Ammonia and not the business of letting out the Ammonia tanks on hire and investing funds to earn interest. None of these activities form an essential part of industrial undertaking nor were they in any manner directly related to the industrial activities of the company. The interest income and tank hire charges had no direct and proximate nexus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by the assessee company cannot be said to be derived from‟ the industrial undertaking. 9. Similarly, for the assessment year 1994-95, the Commissioner in the order dated 30th March, 1999 after considering the case law on the subject and examining the expression derived from , has held as under:- 15. The facts of the assessee‟s case are that the assessee has included interest income earned by it on deposits with different banks and financial institutions and has included the same as eligible profit for calculation of deduction under section 80 I. The facts of the case cited above are identical to the facts of the assessee‟s case since earning of interest income by the assessee has no direct nexus with the activity of the industrial undertaking of the assessee and hence interest income earned cannot be said to be derived from industrial undertaking. The words derived from an industrial undertaking‟ mean that the income has been derived from industrial activity of the undertaking and it does not mean any commercial activity undertaken by the assessee. The words industrial undertaking‟ have to be construed narrowly and cannot be given a wide m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the interest of revenue. I, therefore, set aside the assessment order for asstt. year 1994-95 with the direction to recalculate the deduction u/s 80 I after excluding the interest income of Rs.375882341/- received by the assessee society. 10. A reading of the aforesaid paragraphs clearly elucidates that the Commissioner has not gone into the question whether or not the Assessing Officer had conducted inquiries in the original assessment proceedings and whether it a case of failure of the Assessing Officer to conduct enquiries, which itself makes an assessment order erroneous and prejudicial to the interest of the Revenue. The Commissioner has examined the merits of the claim and then opined that the deduction allowed and the order passed was erroneous and prejudicial. 11. In the order relating to the assessment year 1994-95, the Commissioner may have made a reference that the Assessing Officer should have conducted further inquiries, but the primary and core reasoning and the ground for invoking jurisdiction under Section 263 was that the Assessing Officer had wrongly interpreted the expression derived from and the narrow meaning and interpretation given by the Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore CIT must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. We may notice that the material which the CIT can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record as it stands at the time of examination by the CIT [see CIT vs. Shree Manjunathesware Packing Products, 231 ITR 53 (SC)]. Nothing bars/prohibits the CIT from collecting and relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is erroneous. 18. It is in this context that the Supreme Court in Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax, (2000) 243 ITR 83 (SC), had observed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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