TMI Blog2015 (4) TMI 667X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. With respect to the disallowance u/s. 14A, it is seen that the query was raised during the course of assessment proceedings to which the Assessee had replied and after considering the reply of the Assessee, A.O had considered the disallowance u/s. 14A at ₹ 10,43,772/-. Thus it can be seen that both the issues on which ld. CIT has reported to revisionary proceedings u/s. 263 has been examined by the A.O. We find that Hon’ble Apex Court in the case of Max India Ltd. [2007 (11) TMI 12 - Supreme Court of India] had held that where two views are possible and ITO has taken one view which ld. CIT does not agree the order of A.O cannot be treated as erroneous order prejudicial to the interest of Revenue unless the view taken by the A.O is unsustainable in law. We further find that ld. CIT was of the view that Section 35D was only applicable to an industrial undertaking and activity of the Assessee cannot be regarded as an industrial undertaking and therefore not eligible for deduction u/s. 35D. We find that prior to A.Y. 2009-10, deduction with respect to 35D with respect to certain specified preliminary expenses was available to an industrial undertaking or unit. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 62,65,901/-. He was therefore of the view that the order of the A.O was erroneous and prejudicial to the interest of Revenue. He accordingly issued notice dated 26.09.2013 and called upon the Assessee to show cause as to why appropriate order u/s. 263 be not passed. In response to the aforesaid notice, Assessee interalia objected to the initiation of proceedings u/s. 263 and on merits submitted that no error was committed by the A.O while computing the assessment. The submissions of the Assessee were not found acceptable to the ld. CIT. He was of the view that (i) A.O had erred in allowing deduction of IPO expense of ₹ 61,21,968/- in contravention of provisions of 35D(1) (ii) A.O had also erred in considering the interest expenses of ₹ 41,32,115/- instead of 2,62,65,901/- while quantifying disallowance u/s. 14A. He therefore held the assessment order passed u/s. 143(3) dated 26.12.2011 to be erroneous and prejudicial to the interest of Revenue and accordingly cancelled the assessment framed and directed the A.O to make a fresh assessment of the total income of the Assessee. Aggrieved by the aforesaid order of ld. CIT, Assessee is now in appeal before us and has raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007-08 which has been accepted u/s. 143(1) and no action u/s. 147 or 263 has been taken in A.Y. 2007-08 or in A.Y. 2008-09. He therefore submitted that when the claim has been allowed in initial years and without any change in facts, the claim cannot be rejected in subsequent years and it cannot be subjected to Section 263 in subsequent years. He further submitted that for the year under consideration, a questionnaire was issue by the A.O wherein the A.O had asked to explain as to why the revised claim u/s. 35D not be disallowed in view of the fact that the revised return was filed beyond the time allowed by the Act. He submitted that with respect to the disallowance of expenses u/s. 14A in the questionnaire, the Assessee was also asked to explain as to why Rule 8D not be applied to disallow the expenses u/s. 14A. He pointed to the relevant show cause placed at page 109 of the paper book. In response to the query raised by the A.O ld. A.R. submitted that, Assessee had submitted its reply vide letter dated 13th October, 2011 which is placed at page 115 and 116 of the paper book. He further submitted that the A.O after considering the submissions of the Assessee and the various dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision u/s 263, namely (i) the order is erroneous (ii) by virtue of being erroneous prejudice has been caused to the interests of the Revenue. 9. In the present case, it is seen that Section 263 has been invoked on two grounds namely deduction u/s. 35D and disallowance u/s. 14A. With respect to deduction u/s. 35D it is an undisputed fact that the expenses were incurred by the Assessee in the year ending 31st March, 2007 relevant to assessment year 2007-08 and the first year of claim was A.Y. 2007-08 and in that year the claim of the Assessee has been accepted u/s. 143(1) and no action u/s. 147 or 263 has been taken in for A.Y. 2007-08. For the year under consideration, from the query of the A.O raised during the course of assessment proceedings, it is seen that Assessee in the revised return had claimed higher deduction from that claimed in the original return. The claim of Assessee in the revised return, after considering the submissions of the Assessee, was not found acceptable to the A.O and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erroneous but not prejudicial to the interest of the Revenue, then also the power of suo motu revision cannot be exercised. Any and every erroneous order cannot be subject-matter of revision because the second requirement also must be fulfilled. 10. We find that Hon ble Apex Court in the case of CIT vs. Max India Ltd. 295 ITR 282 (SC) had held that where two views are possible and ITO has taken one view which ld. CIT does not agree the order of A.O cannot be treated as erroneous order prejudicial to the interest of Revenue unless the view taken by the A.O is unsustainable in law. We further find that ld. CIT was of the view that Section 35D was only applicable to an industrial undertaking and activity of the Assessee cannot be regarded as an industrial undertaking and therefore not eligible for deduction u/s. 35D. We find that prior to A.Y. 2009-10, deduction with respect to 35D with respect to certain specified preliminary expenses was available to an industrial undertaking or unit. However, the word industrial were omitted by Finance Act, 2008 with effect from 01.04.2009. The explanatory notes to the provisions of Finance Act, 2008 explaining the amendment states as under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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