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TMI Blog1999 (8) TMI 983X X X X Extracts X X X X X X X X Extracts X X X X ..... ar under consideration. The assessee-company, besides running a chain of hotels, also has a flight kitchen unit which supplies food to various airlines, both domestic as well as international. With regard to its supplies to foreign airlines, assessee had claimed deduction under s. 80HHC of the Act to the tune of ₹ 7.32 lacs. While finalising the assessment, the total assessed income stood enhanced on account of various additions and disallowances. Accordingly, the AO revised the claim under s. 80HHC to ₹ 15 lacs and finally the total assessed income stood at ₹ 4,29,44,560. 2. The CIT issued notice under s. 263 seeking explanation from the assessee as to why the assessment order passed under s. 143(3) should not be set aside as being erroneous and prejudicial to the interests of the Revenue on the following grounds : (1) The AO has erred in allowing the deduction under s. 80HHC of ₹ 15,00,000 without verifying the fact that whatever sales made to airlines are within India and cannot be considered as export sales. (2) Deduction on account of incremental liability in respect of purchase of a capital asset is wrongly allowed as a revenue expenditure. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the chargeability had been filed. The fact that, Shri Vyas contended, AO has discussed this issue in his order, coupled with assessee's claim under s. 80HHC, amply shows that there was application of mind while granting deduction under s. 80HHC. Application of mind is further proved by the fact that though assessee had claimed deduction of ₹ 7.32 lacs, AO enhanced it to ₹ 15 lacs when the income was assessed at a higher figure. With regard to the denial of deduction in asst. yr. 1988-89, it was pointed out that the same has been subsequently allowed by the CIT(A). Thus, in the view of the learned counsel the observations of the learned CIT did not survive at all. He relied on the decisions in CIT vs. Gabriel India Ltd. (1993) 114 CTR (Bom) 81: (1993) 203 ITR 108(Bom), Hindustan Marketing Advertising Co. Ltd. vs. ITO (1989) 28 ITD 231(Del) and Nirfabrics Ltd. vs. Dy. CIT (1994) 50 ITD 336(Bom). 6. The learned Departmental Representative, referring to Expln. (aa), contended that whether custom clearance as contemplated in the said explanation was there or not, was not clear from the certificate placed on record. It was submitted that the certificate did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not consider the issue in all its remifications, can be considered together. 9. In this connection, we would wholly like to fall back upon the authoritative pronouncement of the Mumbai High Court in the case of CIT vs. Gabriel India Ltd. (supra), because, in our opinion, the principles laid down in the said decision are on such facts and circumstances which are much akin to those obtaining in the present case. As per the said decision, an erroneous order is one which is not in accordance with law or which has been passed by the AO without making any enquiry in undue haste. The point for consideration is, whether, in the present case, the AO made any enquiry or not. In the case of Gabriel (supra), the AO raised a specific query with regard to the expenditure in question and the assessee gave a detailed explanation in that regard by a letter in writing. In the present case, no doubt, there is nothing on record to suggest of a positive act of enquiry undertaken by the AO. However, the term 'enquiry' does not merely mean an enquiry into an offence, or a judicial enquiry in its restricted sense or examining a witness. Its meaning is considerably wider. It also means considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee had not accepted this liability inasmuch as that it had filed a writ petition against the very chargeability of sales-tax on sales through the flight kitchen on the ground that these were export sales and no sales-tax was payable on exports. In the present appeal, we are not concerned about the merits or demerits of the issue. But the point we are emphasising is that the AO has discussed this issue in these very words in his assessment order. Thus it is highly improbable that AO must have allowed the deduction under s. 80HHC in a mechanical manner. If the two issues, i.e. (a) sales-tax on flight kitchen sales, and (b) s. 80HHC deduction on the same sales would have figured in separate assessment years, then perhaps, there would have been some scope for arguing that the AO could not have been expected to consider another issue while dealing with one. But here, both the issues figure in the same assessment year, hence it is quite unfair to the AO to say that he did not consider the issue of deduction under s. 80HHC in all its remifications. 13. Thus, we have given above three indicators, which in our opinion, are strong enough to conclude that the AO did consider the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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