TMI Blog2012 (6) TMI 702X X X X Extracts X X X X X X X X Extracts X X X X ..... s application of mind and due to this reason there was no question of difference of opinion. - Revision order u/s 263 upheld - decided against assessee. - ITA No. 1193/Ahd/2009, - - - Dated:- 30-9-2011 - G.D. Agarwal, Mukul Kr Shrawat, JJ. M.G. Patel, AR for the Appellant Ravindra Kumar, CIT-DR for the Respondent ORDER Mukul Kr Shrawat, Judicial Member 1. This is an appeal arising from the order of CIT-Gandhinagar passed u/s.263 of the I.T. Act, 1961 dated 17/02/2009. The appellant has challenged the order of the ld.CIT on the following grounds:- 1. The Learned Commissioner of Income Tax, Gandhinagar has erred in law and on facts of the case by invoking the provisions of Section 263 of the Income Tax Act, 1961, and accordingly has cancelled assessment order passed u/s.143(3) of the Income Tax Act, 1961, and set aside after holding the same to be erroneous and prejudicial to the interest of the Revenue with regard to the following issues: (a) Income from other sources of Rs.10,16,010/- wrongly set off against unabsorbed depreciation by the Assessing Officer. (b) Surplus on transfer of assets to NDDB and remission of liabilities requires to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the same. The A.O. had thus made the proposed addition under the head "Other Income" and had also given set off for the unabsorbed depreciation as claimed by the assessee. The final income assessed was thus "NIL". It appears that the A.O. could not understand the nuances of the profit and loss account and balance sheet of the Company. The "other income" was already accounted for in the Profit and Loss Account and adjusted against the brought forward business loss in the statement of total income accompanying the return of income. As such, the assessment order is erroneous and prejudiced to the interest of Revenue." (b) The second objection was in respect of transfer of assets to NDDB and sale consideration was treated as capital reserve as follows:- "5. Scrutiny of the assessment record reveals that the assessee was declared sick by the order of the BIFR dated 29.10.1994. The BIFR has passed a final order on 14.01.2003 setting out to transfer part of its assets to NDDB against their dues from the assessee as per the terms determined in the said order. The assessee is still having the ownership of surplus land of the Dairy at Jamnagar measuring 20405 sq.mt and Ahme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d also in kind in the past. The assessee has been availing of depreciation on all its assets without deduction of the grant/subsidy as per the Income-tax Act. The Auditor's Report, Note No.(iii) of Schedule XV reads as under: "Note A-7: Regarding treatment of grants as against As-12 (Accounting for government grants) issued by ICAI wherein it is provided that amount of grant equal to depreciation of Assets purchased by these grants, should be credited to profit and loss account by debiting capital reserve. But in absence of details of such assets and depreciation, the said entry could not be passed. This has effect of overstating capital reserve and losses". 8.... 9. In view of the above reasons, the assessment order is erroneous and prejudicial to the interest of Revenue. You are, therefore, hereby given on opportunity to show cause as to why the assessment order passed by the Assessing Officer (supra) should not be cancelled u/s.263 of the I.T.Act, 1961 and directed to make fresh assessment as per the law. Your explanation in the matter should reach the undersigned within 7 days of the receipt of this notice." 3. Finally, it was held by ld.Commissioner that the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o lack of enquiry, the total income was not correctly assessed by the AO. 5. Lastly, he has objected that the company had wrongly claimed exemption u/s.115JB of the book profit of Rs.26,19,75,975/-. In the result, the order of the AO was cancelled with a direction to make a fresh assessment after correctly verifying the facts of the case. The appellant has challenged of the said order of the ld.Commissioner. 6. From the side of the appellant, ld.AR Mr.M.G.Patel appeared and from the side of the Revenue ld.DR Mr.Ravindra Kumar CIT appeared. Ld.AR has informed that while passing the order u/s.143(3), the AO has issued a show-cause notice dated 09/08/2007 and asked as to why the interest income of Rs.10,16,010/- should not be taxed under the head income "from other sources". On verification of the accounts of the assessee, it was noted by the AO that it was evident that the interest income was taxable u/s.56 of the I.T. Act, and not as business income u/s.28 of the I.T. Act. The AO has, therefore, held that the said interest income was to be added to the total income of the assessee, under the head "other sources". To that extent the unabsorbed depreciation was granted and tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of mind, therefore, the said order was not an erroneous order. For this legal proposition, he has placed reliance on CIT vs. Arvind Jewellers 259 ITR 502(Guj), CIT vs. Development Credit Bank Ltd. 323 ITR 206 (Bom) and CIT vs. R.K. Construction Co. 313 ITR 65 (Guj). 7. From the side of the Revenue, Ld. CIT(DR) Mr. Ravindra Kumar has supported the order of the AO. His first objection was that in respect of gain earned by the assessee on transfer of assets to NDDB was not at all enquired upon by the AO. Likewise AO has not applied his mind in respect of the applicability of the provisions of Section 115JB on a sick industrial unit. Since there is no enquiry at all made by the AO, therefore, that assessment order was prejudicial to the interest of the Revenue. For this legal proposition ld.DR Mr.Ravindra Kumar has placed reliance on the decision of Rajesh Jhaveri Stock Broker (P) Ltd 291 ITR 500 (SC). Ld.DR has also placed reliance on paragraph No.11 of the order in question reproduced below for ready reference:- "11. From the aforesaid facts and circumstances, reasons given, a fortiori, it becomes evident and palpably manifest that the assessment order dated 3-9-2007 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is concerned, the decision cited before the ld.Commissioner were as follows:- i) ITO vs. Selchem Engineers (P) Ltd. [272 ITR 10(Del)] ii) ACIT vs. Poddar projects Ltd. [275 ITR 1 (Kol)] iii) CIT vs. Jaipuria China Mines (P) Ltd. [59 ITR 555 (SC)] iv) CIT vs. Deepak Textile Industries Ltd. [168 ITR 773(Guj)] v) CIT vs. Virmani Industries P.Ltd. [216 ITR 607 (SC)] The decision of Hon'ble Jurisdictional High Court, pronounced in the case of Deepak Textile Industries Ltd. 168 ITR 773(Guj) says that the unabsorbed depreciation is to be allowed to be carried forward and set off against assessable income of a subsequent year notwithstanding the fact that the business in respect of which it arose ceased to exist in the year of such set off. The Hon'ble Court has also said that the receipt of income during the relevant previous year is not a sine-qua-non for the deduction of allowances like depreciation. Upto this extent, once the AO had made requisite enquiry and on investigation he was of the view that the set off of depreciation against the interest income was legally sustainable following Hon'ble Gujarat High Court decision of Deepak Textile Industries Ltd.(supra), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the ld.Commissioner as erroneous or prejudicial to the interest of the Revenue. Once the AO had made an enquiry and a response came from the assessee and thereafter a view was adopted by the AO then the Hon'ble Bombay High Court has held that there was no justification for invocation of the provisions of section 263 of the I.T. Act. As against that, in the present case, an enquiry was lacking and requisite information was not called for therefore ld.Commisisoner has power to invoke the provisions of section 263 of I.T. Act. Ld.AR has also cited CIT vs. Arvind Jewellers 259 ITR 502 (Guj), but the facts were that the assessee had produced relevant material and offered an explanation in pursuant to certain notices and after considering the material as also the explanation the Hon'ble Court had found that the ITO had come to a definite conclusion. After considering those facts, it was held by the Court that mere fact that a different view was taken, then that should not be the basis for an action u/s.263 of I.T. Act. 7.3. Ld.AR has also cited a decision of Hon'ble Supreme Court pronounced in the case of Indian Shaving Products Ltd. vs. Board of Industrial and Financial Recon ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
