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TMI Blog2012 (10) TMI 1048X X X X Extracts X X X X X X X X Extracts X X X X ..... sed whatsoever briefly about the claim of deduction of the assessee It cannot, therefore, be said that the order passed by him is a reasoned order conforming to the principles of natural justice. Therefore, we are of the considered view that it cannot be said that the AO has allowed the claim of deduction u/s.10A after application of mind as the application of mind is best reflected in the finding recorded in the assessment order. - Decided against assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... om MAT scheme is from the taxable income, which is otherwise the adjusted book profit. The deduction/exemption under section 10A is in that way given out of the gross total income in the cases falling under MAT, which means 10A exemption is to be computed on the basis of adjusted book profit. Assessee placed reliance on the decision of ITAT Mumbai (SB) in the case of DCIT vs. Syncome Formulations (I) Pvt Ltd., 106 ITD 193(Mum), which was decided in the context of section 80 HHC of the Act, wherein, it was held that the deduction under section 80 HHC in a case of MAT assessment is to be worked out on the basis of the adjusted book profit and not on the basis of the profit computed under regular provisions of law applicable to the computation of profit and gains of business or profession. Assessee stated in the said letter that the said decision of ITAT (SB) in the case of Syncome Formulations (I) Pvt Ltd(supra) has been approved by Hon'ble Supreme Court in the case of CIT vs. Bhari Information Tech Systems (P)Ltd., 340 ITR 593 (SC). Assessee also referred to the decision of Hon'ble Supreme Court in the case of Ajanta Pharma Limited vs CIT, 327 ITR 311(SC) and submitted that Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of book profit, there is no separate method prescribed u/s. 115JB. Further, in Form No.56F, the tax auditor of the assessee has certified that ₹ 63,10,165/- as an amount eligible for exemption u/s 10A for the assessment year under consideration and he has not certified any separate amount for working out Book Profit u/s. 115JB. Thus there is no provision in the Act, either u/s l0A or u/s. 115JB to re-compute exemption u/s.10A for computation of the book profit." 8. In view of above, ld CIT has held that AO has not applied his mind and has failed to make enquiry with regards to the allowability of the claim of exemption u/s.10A, while computing book profit u/s.115JB. Hence the assessment order is erroneous and prejudicial to the interest of revenue. Ld CIT has also referred the decision of ITAT Chennai in the case of Rajya Laxmi Mills Ltd., and also the decision of Hon'ble Allahabad High Court in the case of Jagdish Kumar Gulati, 269 ITR 71 and has stated that if the assessment order is made without prior enquiries before accepting the claim of the assessee, the assessment order can be held to be erroneous and prejudicial. Ld CIT has also stated that the assessment order has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t ld CIT failed to consider the cases referred by the assessee in letter dated 13.2.2012. He submitted that order of ld CIT should be quashed as AO has rightly taken a view to allow the claim of the assessee u/s.10A of the Act while computing income under section 115JB of the Act. 10. On the other hand, ld D.R. while supporting the order of ld CIT, submitted that AO did not make any enquiry. He has not taken any view but accepted the claim of the asssessee whatever was claimed in the return filed. He referred assessment order and submitted that the assessment order does not talk about claim of the assessee u/s.10A of the Act in the light of section 115JB of the Act and, therefore, AO did not apply his mind while allowing deduction u/s.10A for computing book profit u/s.115JB of the Act. Ld D.R. submitted that the decisions cited by assessee in its letter dated 13.2.2012 and have also been considered by ld CIT in the impugned order relate to section 80HHC and not section 10A of the Act. Therefore, said decisions are not relevant while exercising the power by ld CIT under section 263 of the Act. Ld D.R. referred para 3 of the notice issued by ld CIT u/s.263 and submitted that ld CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o prejudice is caused to the revenue, ld CIT cannot invoke his jurisdiction u/s.263 of the Act. He submitted that ld CIT while passing the impugned order ignored the said decision of Hon'ble Jurisdictional High Court (supra) and, therefore, the said order is liable to be set aside. 14. Ld A.R. relying on the decision of Hon'ble Gujarat High Court in the case of Garden Silk Mils ltd vs CIT, 221 ITR 861 (Guj) submitted that ld CIT cannot ignore the decision of Hon'ble Jurisdictional High Court as the decisions laid down by Hon'ble Jurisdictional High Court are binding on him. Ld A.R. submitted that there is no loss to the revenue as the entire income of the assessee is eligible for deduction u/s.10A of the Act. 15. Ld A.R. referred to the decision of ITAT Delhi in the case of DCIT vs. Roxy Investments (P) Ltd., 24 SOT 227(Mum) and submitted that it was held that the amount of income which is to be reduced for computing book profit under clause (ii) of Explanation to Section 115JB(2) is the amount which is credited to profit and loss account and not the amount of income which is claimed by the assessee or determined by the Assessing Officer while assessing the income under regular p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any on 26/9/08. Notice u/s 142 (1) along with questionnaire was issued on 9/7/09 & duly served on the Assessee Company on 14/7/09. In response to the above Notice, Mr. Sandeep Chetiwal, CA, from M/s Kalyaniwalla & Mistry, CA's, attended and furnished the details called for from time to time. The main business of the company is to carry on business intelligence service in the field of Customised Research & Analysis, including Financial Modelling & Statistical Analysis, specific technical know-how & analysis tailored to specific needs of the clients. ' Subject to above remarks the total income of the Assessee is computed as under:- Business Income: (Rs.) Net Profit as per P& a/c 7894092 Add: Disallowed / considered separately: 1) Loss on sale of fixed assets: 1361134 2) Amount disallowed u/s 40(a) (1a): 523209 3) Amount disallowed u/s 40 (a) 157890 4) Dep. as per books (considered separately): 4178102 5) Preliminary expenses w/off: 16567 6) Expenses disallowed u/s 43 B: 150000 7) Provision for gratuity disallowed u/s 40 A (7): 150000 6536902 14430994 Less: Allowed / exempt 1) Depreciation as per IT Act: 7966238 2) Preliminary expenses allowed u/s 35 D: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee without any enquiry. Ld CIT noted in that case that ITO had passed the assessment assessment order without application of mind and the Hon'ble High Court had also recorded the finding that the Income-tax Officer failed to apply his mind to the case in all perspective and the order passed by him was erroneous. In the aforesaid facts and circumstances, the Hon'ble Supreme Court has held that "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. Thus, none-reasoned or non- speaking orders passed by the AO as also the orders passed by him mechanically or without making relevant enquiries in accordance with law or without application of mind would fall in the category or orders passed "without applying the principles of natural justice or without application of mind". 20. In Commissioner of Income-tax v. Pushpa Devi,164 ITR 639(Pat), ld CIT set side the assessments and remanded the case to the ITO "with a direction to frame assessments after making a close scrutiny as to the extent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiny. Only a few cases are picked up for scrutiny. The Assessing Officer is therefore, required to act fairly while accepting or rejecting the claim of the assessee in cases of scrutiny assessments. He should be fair not only to the assessee but also to the Public Exchequer. The Assessing Officer has got to protect, on one hand, the interest of the assessee in the sense that he is not subjected to any amount of tax in excess of what is legitimately due from him, and on the other hand, he has a duty to protect the interests of the revenue and to see that no one dodged the revenue and escaped without paying the legitimate tax. The Assessing Officer is not expected to put blinkers on his eyes and mechanically accept what the assessee claims before him. It is his duty to ascertain the truth of the facts stated and the genuineness of the claims made in the return when the circumstances of the case are such as to provoke inquiry. Arbitrariness in either accepting or rejecting the claim has no place. The order passed by the Assessing Officer becomes erroneous because an enquiry has not been made or genuineness of the claim has not been examined where the inquiries ought to have been made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s into a substantial matter like the present one, he must record a finding on the relevant issue giving, howsoever briefly, his reasons therefor. In S.N. Mukherjee v. Union of India AIR 1990 SC 1984, it has been observed by the Hon'ble Supreme Court as follows : '35. Reasons, when recorded by an administrative authority in an order passed by it while exercising quasi-judicial functions, would no doubt facilitate the exercise of its jurisdiction by the appellate or supervisory authority. But the other considerations, referred to above, which have also weighed with this Court in holding that an administrative authority must record reasons for its decision are of no less significance. These considerations show that the recording of reasons by an administrative authority serves a salutary purpose, namely, it excludes chances or arbitrariness and ensures a degree of fairness in the process of decision-making. The said purpose would apply equally to all decisions and its application cannot be confined to decisions which are subject to appeal, revision or judicial review. In our opinion, therefore, the requirement that reasons be recorded should govern the decisions of an administrative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... favour, though he may have sufficiently established his case." 21. Therefore, there is no dispute to the fact that if the AO makes an assessment order without making enquiry into the claim of the assessee and accept whatever is stated by the assessee, which the assessee has stated in the return, in that circumstances, ld CIT is justified to exercise his jurisdiction u/s.263 of the Act. The view taken by the AO should not be a mere view in vacuum but a judicial view. It is well settled that AO being a quasi judicial authority cannot take a view, either against or in favour of assessee/revenue, without making proper enquiries and without proper examination of the claim made by the assessee in the light of the applicable law. Therefore, "adopting" or "taking" possible view in law necessarily requires the AO to consciously analyse and evaluate the facts in the light of the relevant law. "Taking" one view where two or more views are possible necessarily imports the requirement of analyzing the facts in the light of the applicable law. This requires the Assessing officer to take a conscious decision else he would neither be able to "adopt" a course permissible in law nor "take" a view w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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