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TMI Blog2013 (11) TMI 173X X X X Extracts X X X X X X X X Extracts X X X X ..... ,40,778/-. In response, the assessee attributed the same to reduction of interest due to deposits closure and penal interest charged by the bank. The Assessing Officer verified the same and finalized assessment vide order dated 16.12.2009 under section 143(3) of the "Act" by adding back an amount of Rs.3,38,815/- [offered by the assessee itself]. Accordingly, the assessee's total income stood computed to Rs.1,47,97,830/-. 4. As it emanates from the record that on 15.03.2012, the CIT issued a notice under section 263 of the "Act" to the assessee terming the assessment finalized on 16.12.2009 as 'erroneous causing prejudice to the interest of the Revenue' for the following reasons: "2. The case records relating to the assessments were perused. The company was earlier in the business of providing and maintaining Automatic Teller Machines to Financial Institutions. For the Assessment year 2007-08, the company filed return of income electronically on 29- 10-2007 followed by revised return on 3-3-2008 and further followed by re-revised return on 29-1-2009 showing an income of Rs.1,44,59,015. As already mentioned, assessment was made u/s. 143(3) of the Income Tax Act determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation charges. 6. The earn out income is under the contingent payment payable under Clause 2.1.5 of the Business Transfer Agreement dated 31-3- 2005. The said agreement does not speak about hardware up-gradation charges to be payable, or borne by the company. Therefore these charges cannot be removed from the earn out income. Moreover as the entire business has been sold by the assessee company and the earn out income is to be assessed under the head "Income from Other Sources", the hardware up-gradation charges cannot be set-off against the earn out income. On the same principle all other claims of Expenditure viz., Employee costs, Operating and Administrative expenses and Depreciation cannot be allowed against income assessable under the head Income from Other Sources. The Assessing Officer failed to examine the correctness of the claim before allowing the same. 7. Your company has claimed a sum of Rs 48,73,528 as depreciation on software licence fee. However as the entire business has been sold, the depreciation on a non existing asset cannot be allowed. The Assessing Officer has erroneously allowed the same. 8. Your company has also cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above context, the assessment of income under the head 'business' made by the Assessing officer is erroneous. This issue is set aside with direction to Assessing Officer to examine the real nature of the income and to determine afresh the head under which the same is to be assessee. Assessing Officer also did not examine the allowability of the claim of various expenses in the nature of employee cost, administrative and other expenses which were claimed under the head business. These expenses are liable to be examined to determine whether the same are eligible to be allowed. This will depend on the head under which the income is assessed. 6.1) So far as the expenses claimed from such earn out income, it was admitted that such expenditure was only on account of a provision for 'upgradation' of hardware of ATM business which were already transferred. The BTA agreement did not specify that the assessee company was expected to incur such expenditure on upgradation of the hardware. The relevant clause in the BTA does not also clearly stipulate the liability of the assessee company. The Assessing Officer did not examine whether such provision for hardware upgradation was e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e us. 6. In the course of hearing, the AR on behalf of the assessee has submitted that the CIT has wrongly invoked proceedings under section 263 of the "Act". It has been further argued that the CIT has erred in holding that the Assessing Officer had not conducted proper enquiry before finalising assessment under section 143(3) of the "Act". The AR has drawn our attention to the operative part of the CIT's order and contended that nowhere it has been held that the assessment is 'erroneous causing prejudice to the interest of the Revenue' as the settled position of law is that not only, the assessment finalised should be erroneous, but, also it must cause prejudice to the Revenue; whereas, there are no such findings. To buttress his submissions above said, he also placed on record following case law: i) CIT vs. Gabriel India Ltd. [1993] 203 ITR 108 (Bom). ii) ITO vs. DG Housing Projects Ltd. [2012] 343 ITR 329 (Delhi) iii) CIT vs. Bojraj Textiles Mills Ltd. 2012-TIOL-381-HC-MAD-IT iv) M/s. Rotork Controls India (P) Ltd. vs. CIT Civil Appeal Nos. 3506- 3510 of 2009 (SC) and stated that even if the Assessing Officer does not co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice to the assessee under section 142(1) of the "Act" seeking following particulars of the receipt in question: "In connection with your Scrutiny Asst. For the Asst. Year 07-08, You are requested to furnish / produce the following details:- 1. Brief writeup on the nature of Business carried by the Company during the relevant period. 2. & 3. xxxxxxxxxxxxxxx 4. Complete details of all the establishments maintained by the company including Head Office, branches etc. 5. to 13 xxxxxxxxxxxxx 14. During the period under reference you have shown a receipt of Rs. 6,97,22,850/- from 'Hardware upgradation charges'. In this connection you are requested to furnish details of the service rendered and the basis of calculation of the charges along with supporting details. You are further requested to furnish party wise receipt from 'Hardware upgradation charges' in the following format:- Name & Address Opening balance Accrued during Payments Closing balance the year 15. Details of the following expenses: i) Salaries and incentives (Employee wise lis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not conduct an enquiry, it itself renders the assessment order 'erroneous and prejudicial' to the interest of the Revenue. We deem it proper to reproduce the relevant para of judgment as under: "19. In the present case, the findings recorded by the Tribunal are correct as the CIT has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the CIT is that "order passed by the Assessing Officer may be erroneous". The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent s computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment order is "erroneous". The said finding will be correct, if the CIT had examined and verified the said transaction himself and given a f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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