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TMI Blog2017 (11) TMI 588X X X X Extracts X X X X X X X X Extracts X X X X ..... , if in his opinion, they are erroneous, despite the assessee’s appeal on that or some other aspect. This Court is of the opinion that the revisional order, to the extent that it did not provide any pre-decisional opportunity to address the issues it dealt with, could not be sustained; the ITAT has granted relief of a limited nature on that score. However, we do not agree that those issues were incapable of consideration as they were gone into by the AO. Accordingly, the CIT, in exercise of his power under Section 263 will proceed to consider the assessee’s submissions only on those two aspects, before making his order. All questions framed are, therefore, answered in the negative, against the assessee. - ITA 387/2017 - - - Dated:- 8-11-2017 - MR. S. RAVINDRA BHAT MR. SANJEEV SACHDEVA JJ. Appellant Through: Mr. Ajay Vohra, Sr. Advocate with Mr. Rohit Jain, Advocate. Respondents Through: Mr. Zoheb Hossain, Sr. Standing Counsel for Revenue. S. RAVINDRA BHAT, J. 1. The following questions of law arise for consideration: (a) Whether on facts and in the circumstances of the case, the Tribunal erred in law in not holding that order dated 31.03.2016 pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.2014. The CIT (A) decided the issue with respect to disallowance of depreciation of ₹66,27,782 on capitalization of reinstallation costs of fixed assets and disallowance in respect of transactions with group concerns in favour of the assesse. The CIT (A), further, granted partial relief to the assessee in respect of disallowance made under Section 40(a) (ia) of the Act. 4. A show cause notice under Section 263, on 16.03.2016, was issued by the Commissioner, alleging that there was variation in cost of fixed assets, which aspect had not been verified or examined by the AO while framing assessment under section 143(3) of the Act. In response to the show-cause notice issued under Section 263 of the Act, the assessee filed its replies, resisting the move to revise the completed assessments; the appellant also pointed that since the original order of the AO had merged with that of the CIT (A), after the disposal of appeal, the re-appraisal under Section 263 was unwarranted. Later, the CIT (A) made an order on 31.03.2016 under Section 263, setting aside the original assessment order framed under section 143(3) of the Act, holding the same to be erroneous and prejudicial to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the CIT (A). Thus, if there was any concern with respect to the AO s order, that stood addressed and became final upon application of mind at the appellate stage. Particular notice of the court was drawn to the following observations of the CIT (A): 5.5.7. Therefore, I am of the opinion that expenditure incurred by the appellant, including inter alia, the installation cost, borrowing cost and other charges etc, were relating directly or indirectly to the installation of the transformers and are therefore, eligible to be included in the actual cost of the relevant block of fixed assets and therefore, the AO is hereby directed to allow depreciation on the cost of recapitalized assets. 8. It was submitted that as regards addition of `94,20,842/- under Section 40A(2)(b) of the Act, the CIT (A) ruled on this issue too. Counsel relied on the following extract of the CIT (A) s order: Considering the peculiar facts of the case and material on records, I am of the view that the AO has added on an ad hoc basis ₹ 38.58 crores on account of lack of arms length price in appellants transaction with M/s RETL as regard power purchase without a valid legal and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en inadequate, that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of lack of inquiry , that such a course of action would be open. 10. Counsel argued that the order of the CIT under Section 263 could not be upheld under any circumstance and the ITAT, in refusing to set it aside, compounded the error. It was particularly stressed that the issues in addition to the one relating to depreciation were not part of the show cause notice and could not have been made the subject matter of revision; furthermore, no opportunity of hearing was granted by the Commissioner. 11. Mr. Vohra submitted that each of the three points on which revisional jurisdiction was exercised, had been inquired into during the original assessment; the appellate order had dealt with those aspects. Consequently, it could not be held that such a view was erroneous, even if another view was possible. It was argued that courts have held that once relevant details/ documents are available on record pertaining to original assessment, and if on the basis of material available on record, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ratilal Bacharilal Sons (2006) 282 ITR 457; Commissioner of Income Tax v Aruba Mills 1998 (231) ITR 50 (SC) where the position was clarified as follows: The consequence of the said amendment made with retrospective effect is that the powers under Section 263 of the CIT shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in an appeal. Accordingly, even in respect of the aforesaid three items, the powers of the CIT under Section 263 shall extend and shall be deemed always to have extended to them because the same had not been considered and decided in the appeal filed by the assessee. In Ratilal (supra) following Aruba (supra), the Bombay High Court ruled as follows: 20. The consequence of the aforesaid Clause (c) introduced with retrospective effect, is that the powers under Section 263 of the CIT shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in the order passed in appeal on or before or after 1st June, 1988. The very fact that Expln. (c) was given retrospective effect by using the words on or before or after itself denotes that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) is decisive; it upholds the power of the Commissioner to consider all aspects which were the subject matter of the AO s order, if in his opinion, they are erroneous, despite the assessee s appeal on that or some other aspect. The Court held that: Reverting to the specific provisions of Section 263 of the Act what has to be seen is that a satisfaction that an order passed by the Authority under the Act is erroneous and prejudicial to the interest of the Revenue is the basic pre-condition for exercise of jurisdiction under Section 263 of the Act. Both are twin conditions that have to be conjointly present. Once such satisfaction is reached, jurisdiction to exercise the power would be available subject to observance of the principles of natural justice which is implicit in the requirement cast by the Section to give the assessee an opportunity of being heard. It is in the context of the above position that this Court has repeatedly held that unlike the power of reopening an assessment under Section 147 of the Act, the power of revision under Section 263 is not contingent on the giving of a notice to show cause. In fact, Section 263 has been understood not to requir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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