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TMI Blog2018 (10) TMI 1443X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee that proceedings had merged with proceedings pending before the ld.CIT(A) relating to computation of deduction admissible under section 80IA/IC is concerned, we are of the view that both the issues are separate issues. The eligible profit for grant of deduction under section 80IA/80IC could have many components viz. rental income, interest income, scrap sales, job charges whose exclusion or inclusion would lead to a controversy, which might be pending before CIT(A). How, the resolving of that controversy would give an idea to the ld.CIT that the issue of depreciation deserves to be examined and certain depreciation has to be disallowed to the assessee. This is a peripheral issue, not directly linked which could be construed as merged in that proceeding. No merit in this fold of contentions. Perusal of the show cause issued under section 263 does not indicate that it was issued on the instructions of audit report. It was issued on application of independent mind upon the record. The auditor could be an informer. Had it been treated as gospel truth and action under section 263 is being taken, then, the assessee would be justified. But where on an information of the au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner formed an opinion that the assessment order is erroneous and prejudicial to the interest of Revenue. Hence, action under section 263 of the Act required to be taken against the assessee. He issued show cause notice dated 26.3.2018. Copy of the show cause notice is available at page no.231 of the paper book. It reads as under: OFFICE OF THE PR.COMMISSIONER OF INCOME-TAX -2, AHMEDABAD 1s' Floor, Navjeevan Trust Building, B/H Gujarat Vidyapith, Ahmedabad- 380 014, Telefax-079-27542603 No.Pr.CIT- 2/ABD/Tech/263/17-18 Date: 26.3.2018 To, The Principal Officer Gujarat Ambuja Exports Ltd Opp. Memnagar Fire Station Navrangpura, Ahmedabad Sir/Madam, Sub : Notice u/s 263 of the I. T. Act 1961 A.Y. 2013-14 Kindly refer to the assessment order for AY 2013-14-passed on 21.01.2016. On perusal of the case records, I find that the said assessment order is liable to be rectified u/s 263 of the Act for the following reasons: 1) That said assessment order has been framed by the AO without application Of his mind and making due enquiries and verification in respect of the nature and qualities of assets to which depreciatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee raised multi fold of objections before the ld.Commissioner viz. that the assessee is entitled for deduction under section 80IA/80IC. In case depreciation is disallowed, then its eligible profit would increase and it will get higher deduction under section 80IA/80IC. There is no prejudice to the Revenue because this exercise will be revenue neutral. On the one hand, disallowance will be made out the depreciation, on the other hand, deduction under section 80IA/80IC would be granted. Somehow, the ld.Commissioner dealt with the issue in para 3.2, but failed to record any logical finding. The finding recorded by the ld.CIT on this aspect reads as under: 3.2 The contention of the assessee that that as the twin conditions of invoking the provisions of Section 263 are not satisfied, is without any basis. Whether the reduction in depreciation would decrease the deduction u/s 80IA/80C of the IT Act or not is not relevant in the present context as the said order has been passed without application of mind and/or without making due enquiries and verification which in term of Explanation 2 appended to Section 263, deems the said order to be erroneous and prejudicial to the intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is next fold of contentions, he submitted, the ld.AO has conducted proper inquiry, and thereafter took one of the possible views, therefore, no action under section 263 ought to be taken. For buttressing his contentions, he took us through copy of show cause notice issued by the AO under section 142(1) of the Act. He specifically drew our attention towards page no.80 of the paper book wherein at serial no.5 of the show cause notice, the ld.AO has called for following information: 5. Complete details of additions made to fixed assets, including work in progress during the financial year 2012-13 along with the copies of bills/vouchers exceeding ₹ 1 lakh for such additions. Also furnish complete details of all the deletions made to fixed assets and its treatment given in the books of account and whether any capital gain is leviable on such transactions. 10. He contended that the assessee has submitted complete details, and the AO has gone through these details. Therefore, it cannot be said that the AO has not carried out any inquiry. 11. In the last fold of submissions, he contended that revisionary proceedings have been initiated at the instance of audit objecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner or Director General or Commissioner authorized by the Board in this behalf under section 120; ( b) record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner; ( c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this subsection shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. ( 2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. ( 3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i, 101 TTJ 1095, analyzed in detail various authoritative pronouncements including the decision of Hon ble Supreme Court in the case of Malabar Industries 243 ITR 83 and has propounded the following broader principle to judge the action of CIT taken under section 263. (i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree. If cannot be treated as an erroneous order, unless the view taken by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 99. He agreed to sell the said property under the agreement dated 9-9-2000 in unfinished condition. Under the terms of agreement, the assessee should complete the construction of the building before execution of sale deed with the help of the funds provided by the purchaser. On 22-11- 2000 the assessee executed a sale deed in favour of the purchaser for a consideration of ₹ 1,38,00,000/-. The assessee received a sum of ₹ 40,00,000/- at the time of agreement. The total cost of construction was ₹ 1,04,30,425/-. Thereafter, the assessee purchased another property at Koramangala. The Assessing Officer computed the income from the long term capital gains at ₹ 22,17,940/- for the sale of the property. However, the assessee was exempted from paying tax since the fund was utilized fully towards purchase of another property at Koramangala. The Commissioner of Income Tax issued notice under Section 263 of the Act stating that the Assessing Officer was not justified in treating the sale as long term capital gain and according to him, it should have been treated as short term capital gain. The assessee filed his reply to the show cause notice. Thereafter, the Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and the assessee filing reply to the said notice and then review authority feels that it is a matter to be readjudicated by the Assessing Authority and therefore, the matter was remanded for fresh consideration. This is not the way, the revisional authority should exercise their power under Section 263 of the Act. The order of revisional authority should indicate the error committed by the Assessing Authority and consequential prejudice caused to the revenue because of the erroneous order. Unless these two conditions exist, the revisional authority does not get jurisdiction to pass any order under Section 263 of the Act. Once these two conditions are set out in the order, then it is open to the revisional authority to consider the case on merits and pass final order or in its view, requires some adjudication or enquiry, the matter can be remanded to Assessing Authority. But such remand should be only after setting out the facts which show erroneous nature of the order and the consequential prejudice to the revenue which confer jurisdiction on the revisional authority. Seen from that angle, in the impugned order though we could make out what is the error committed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inable on this issue. The assessee has raised specific plea before the ld.Commissioner also, but without recording any logical finding the ld.Commssioner just simply ignored it. He observed that it was not relevant in the present context, whereas, fulfillment of one of the conditions, which was very much relevant. 20. As far other folds of contentions are concerned, we do not see any necessity to devote more energy towards them. No doubt the AO has issued a questionnaire inviting explanation of the assessee with regard to the details of the assets added in the block of assets. But he failed to conduct an inquiry whether the plant was put to use or not installed in the first half for granting of depreciation. 21. As far as contentions of the assessee that proceedings had merged with proceedings pending before the ld.CIT(A) relating to computation of deduction admissible under section 80IA/IC is concerned, we are of the view that both the issues are separate issues. The eligible profit for grant of deduction under section 80IA/80IC could have many components viz. rental income, interest income, scrap sales, job charges whose exclusion or inclusion would lead to a controversy, w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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