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TMI Blog2018 (10) TMI 917X X X X Extracts X X X X X X X X Extracts X X X X ..... enue. Therefore, no revision under section 263 of the Act is warranted for disallowance under section 14A of the Act. Deletion of assets from block of assets - Held that:- As seen that there is no reference in the assessment order about this issue. The assessee contended before the Ld. PCIT that value of lease hold improvement was completely extinguished or written off by the assessee, therefore, it should not be reduced from the block of assets for the purpose of computation of depreciation. The assessee has not given any explanation regarding the write off of “furniture and fixtures”. As we have noted above there is no reference about the issue in the assessment order, if it was examine by the AO or not, therefore, non consideration of the issue by the AO makes the order erroneous as well as prejudicial to the interest of the revenue. Therefore, the contention of the ld. AR of the assessee on this issue is not acceptable. Interest paid on late deposit of tax - Held that:- We have noted that this issue has not been examined by the Assessing Officer as there is no reference in the assessment order. Therefore, we uphold the order passed by ld. PCIT on this issue. Revised re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and revising assessment order be held ab-initio and / or otherwise void and bad-in-law. WITHOUT PREJUDICE TO GROUND I GROUND II 1. On the facts and circumstances of the case and in law, the Learned Pr.CIT erred in directing the AO to modify the assessment order passed u/s. 143(3) of the Act dated 14 March 2013, to enhance the disallowance u/s. 14A of the Act. 2. The Appellant therefore prays that the direction of the Learned Pr CIT in this regards should be quashed. GROUND III 1. On the facts and circumstances of the case and in law, the Learned Pr CIT erred in directing the AO to modify the assessment order passed u/s. 143(3) of the Act dated 14 March 2013, to make disallowance of the depreciation claimed by the Appellant. 2. The Appellant therefore prays that the direction of the Learned CIT in this regards should be quashed. WITHOUT PREJUDICE TO THE GROUND III, GROUND IV 1. On the facts and circumstances of the case and in law, the Learned Pr CIT erred in making following perverse finding in para 8 of the order despite contrary material on record: No explanation with regard to the similar treatment in respect of write off of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the calculation of disallowances u/s. 14A attached to form 3CD that the assessee is incurring interest on borrowed capital utilized for this investment purpose and calculated a disallowance of ₹ 5,33,856/- on average investment of ₹ 2,51,39,154/-. As discussed vide para 8 of Notes on account, the assessee company has incurred losses of more than its paid up capital and reserves and surplus. Hence, the interest paid corresponding to the above income shall also be disallowance u/s. 14A which works out to ₹ 85,94,573/-. ii) It was also seen from the depreciation schedule as per companies act that an amount of ₹ 2 crores was deleted from the building block (10%) of assets and ₹ 0.29 crore was deleted from furniture and fixtures block(10%) But as per depreciation schedule prepared under IT Act, there is no deletion made from the building block and ₹ 0.116 crore was deleted from furniture and fixture block. This resulted in excess allowance of depreciation to the tune of ₹ 21,74,000/- [ 10% of (2,00,00,000 + 29,00,000 -11,60,000)]; iii) It is seen from the details provided to clause 17(f) of form 3CD that an amount of ₹ 30,17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is forming part of P L A/c. 3. The contention of assessee was not accepted by ld. Pr.CIT. For issue no.1 the ld. Pr. CIT concluded that disallowance made by assessee under section 14A r.w. Rule 8D is allowed by Assessing Officer mechanically and without application of mind. Therefore, the assessment order passed by Assessing Officer is erroneous as well as prejudicial to the interest of revenue. Regarding second issue, the ld. Pr.CIT concluded that the assessee deleted or reduced ₹ 2.00 crore from block of asset building - and ₹ 0.29 Crore from block of furniture and fixtures , however, as per depreciation schedule prepared under the Act no such deletion is made from block of building, whereas a sum of ₹ 0.116 Crore was reduced/deleted from block of furniture and fixture, thereby excess depreciation allowance of ₹ 21,74,000/- [10% of 2,00,00,000 + 29,00,000/- + 11,60,000/-] was claimed and allowed by Assessing Officer. The value of leasehold improvement was completely extinguished or written off by the assessee itself; therefore, it was incorrect on the part of assessee that it should not be reduced from the block of asset for the purpose of computa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m is absent- if the order of ITO is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue recourse cannot be had to section 263 (1 ) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the AO; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of fact 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 principle of natural Justice or without application of mind. The phrase prejudicial to the interest of revenue is not an expression of art and is not defined in the Act. Understood it is ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the act is to levy and collect tax in accordance with the provision of the act and this task is entrusted to the revenue. If due to an erroneous order of the ITO, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interest of revenue. The phrase prejudicial to the interest of revenue has to be read in conjuncti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a case that in the opinion of the CIT the order in question is prejudicial to the interest of revenue. But that by itself would not be enough to vest the CIT with the power to suo moto revision because the 1st requirement, namely that the order is erroneous, is absent. Similarly, if an order is erroneous but not prejudicial to the interest of the revenue, then the power of suo moto revision cannot be exercised. And every erroneous order cannot be subject matter of revision because the 2nd requirement must be fulfilled. There must be some prima facie material on record to show that tax which was lawfully eligible has not been imposed or that by the application of the relevant statue, on an incorrect or incomplete interpretation, a lesser tax than what was just has been imposed. When exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have material on record to satisfy in that regard. If the action of the authorities challenged before the court, it would be open to the courts to examine whether relevant objective factors were label from the records called for and examined by such authority . 5. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rusal of the assessment order reveals that there is no discussion about the disallowance of section 14A in the assessment order. The ld PCIT treated the Assessment order as erroneous and prejudicial to the interest of the Revenue. We have perused the P L Account. The assessee has shown profit on sale on investment of ₹ 3,21,933/- in its statement of computation for assessment year 2011-12. The assessee in its reply to the show cause notice has specifically contended that the assessee has not earned any exempt income during the year. The amount of ₹ 3,21,933/- shown in the computation of income is not exempt income. It has been offered as short term capital gain. Thus, there is no question of apportioning the expenses on exempt income. The Hon'ble Delhi High Court in the case of Chemnivest Ltd. vs. CIT (supra), held that section 14A will not apply if no exempt income is received or receivable during the relevant previous year. Further, the Hon'ble Madras High Court in the case of CIT vs. Chettinad Logistics (P.) Ltd. (supra), also took a similar view that Section 14A cannot be invoked where no exempt income was earned by the assessee. Therefore, in view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. (315 ITR 102)(Kar.); iii) CIT vs. Emilio Ruiz Berdejo (320 ITR 190)(Bom.); iv) DCIT vs. Narayani Ispat Pvt.Ltd. (ITA No.2127/Kol/2014 dtd.30/08/2017); v) Oil and Natural Gas Commission (115 ITD 603)(Abd.) and vi) T.H.E. Makers (P.) Ltd. vs. ITO (14 ITR (Tribunal) 611)(Del.) 12. The DR supported the order of the ld. PCIT. 13. We have considered the rival submission of the parties and have gone through the assessment order and order passed by ld. PCIT. We have noted that this issue has not been examined by the Assessing Officer as there is no reference in the assessment order. Therefore, we uphold the order passed by ld. PCIT on this issue. 14. The fourth issue on which assessment was revised relates to packing material not routed through P L Account. The ld. AR of the assessee submits that closing stock of packing material was routed from P L Account. The same formed part of packaging material head shown in Schedule-17 -operating and administration expenses. On the other hand the ld. DR for the revenue submits that the AO allowed the issue without examining the issue during the assessment proceedings. 15. We have considered the submission of the partie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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