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2023 (8) TMI 369 - AT - Income TaxRevision u/s 263 - Various grounds of revision - Directions issued by the CIT to verify the tranactios - Difference in stock reporting - HELD THAT:- With reference to the assessee’s tax audit report in Form 3CD reflecting the quantitative details as to consumption, production, and yield, it was shown to us by Sh. Nair that there is no inconsistency in, nor any excess, stock. There is, on the contrary, loss in manufacturing, which, at 1%, was normal and minimal. Further, while the raw materials, i.e., copper and PVC, are measured by weight (in kg.), the finished product, viz. stabilizers, pumps, water heaters, electrical fans, Digital UPS, are in individualized units, i.e., in numbers. The assessee’s reply stands perused for the purpose. It’s case is clearly borne out by it’s return of income for the year, of which Form 3CD is a part. We find no substance in the Revenue’s claim, nor any case for revision; the ld. Pr. CIT in his final observation only reiterates what stands stated by the assessee. Claim for Additional Depreciation - Depreciation had been correctly claimed at 50% of the normal depreciation for the assets put to use for less than 180 days. The confusion arose as, due to large number of additions in the second half of the year, these were stated as made and, accordingly, put to use, on one date (31/3/2016). The matter stands looked into by the AO. Now, the difference in depreciation, if any, for AY 2015-16, could in our view be rectified, pursuing a remedial course, only for that year, even if by way of rectification u/s. 154. The depreciation claimed and allowed for that year would be irrespective of the extent unabsorbed entitled to be carry-forward for this year, forming part of the current year’s depreciation, reducing the open written down value (WDV) thereby. No issue therefore, in our view, arises for being considered by the AO. The Revenue has no case, with the ld. Pr. CIT having himself not made any adverse comment in the matter. Non-consideration of expenses disallowed, u/s. 115-JB - Non consideration of certain claims of expenditure for computation of book-profit., assessee in reply, admits to the said deficiency, though claims that it would be of no consequence as the tax liability u/s. 115JB, even after considering all the adjustments referred to while that under the normal provisions of the Act , and toward which Shri Nair would take use through the relevant working. As assessee’s stand is that the impugned order, even if erroneous on that account, is not prejudicial and, therefore, not liable to be subject to revision on that score. We agree, both in principle as well as on facts. This is as even if the assessee agitates the said additions/disallowance made in regular assessment, the tax liability u/s. 115JB would be lower than that on the returned income. Again, we observe no adverse remark by the Pr. CIT in the matter (para 6.1). Non-charge of interest to MSME units - CIT, while recording this clarification by the assessee, states it to have not clarified the position (para 6.2). What, pray, we wonder, does that mean, and what further clarification the Revenue seeks we are unable to understand. Once the expenditure has not been claimed, the question of it’s disallowance for the relevant year cannot arise, so that there is no prejudice per the impugned order to the Revenue. Sure, there is non-observance of the said Act, but that is outside the domain of the Act. No case for revision is made out. Provision for warranty expenses - The basis for the provision of warranty, claimed to be on empirical evidence, generated by past data, would have to be examined by him, even if on a test-check basis, arriving at a satisfaction before accepting the same, as explained in Malabar Industrial Co. Ltd. [2000 (2) TMI 10 - SUPREME COURT] - The invocation of s. 263 in its respect is thus valid. Claim in respect of ‘employee stock option scheme - As the time of expenditure assumes relevance only where it is, firstly, regarded as so; and only seek to highlight the different issues arising for determination. They may accordingly not be construed as our final findings, though shall be taken into account, and the assessee required to meet the same, by the assessing authority, before whom the matter is at large. The assessee has also relied on the decision in Radhasoami Satsang [1991 (11) TMI 2 - SUPREME COURT] We may though clarify that the same has to in any case satisfy the test of s. 37(1) Ram Bahadur Thakur Ltd. v. CIT [2003 (1) TMI 66 - KERALA HIGH COURT], and that the same cannot be compromised on the ground of consistency refer CIT v. British Paints India Ltd [1990 (12) TMI 2 - SUPREME COURT], qua which there is though no finding by the AO. Why, such a contention could be raised only where there is a finding in assessment in an earlier year, even as the principle of res judicata is not applicable to the proceedings under the Act. AO shall decide on merits in accordance with law, issuing definite findings of fact, per a speaking order after hearing the assessee. We decide accordingly. Non-verification of huge claims for expenditure - As nothing on record to indicate any enquiry, much less verification, made by the AO in the matter, which was also the admitted position before us. The same would per se render the order erroneous and prejudicial to the interests of the Revenue. It is well settled that once the AO assumes jurisdiction to assess or reassess, he is duty bound to assess the total income for the relevant assessment year. Each of the expenditure referred to by the ld. Pr. CIT is material in relation to the returned income of Rs. 16314 lacs, with the AO having not made an iota of enquiry on the relevant aspects. Explanation 2(a) is clearly attracted under the circumstances. We find no reason to interfere. Assessee’s appeal is partly allowed.
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