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2015 (10) TMI 2013

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..... en reflected specifically in the assessment order. If the ld.Commissioner has a different opinion on this issue, then it would become a debatable one. According to the assessee, in various judgements, it has been held that the software expense is to be allowed as revenue expenditure. Considering the nature of its debatable-ness, we are of the view that the assessment order cannot be branded as an erroneous order on this issue. The assessee as an entity ought to be engaged in the manufacturing activity. It ought to have installed plant & machinery. It is not necessary that new machinery should be part of the manufacturing activity. The additional deprecation will be admissible. This also to be termed as debatable issue and the ld.AO has taken a view of this aspect, which could not be subject to action under section 263. The AO has invited the explanation of the assessee, gone through the details submitted by it, and thereafter, allowed the depreciation including additional depreciation as per law. His view may not get approval from the point of view of the ld.Commissioner, but, the opinion of the AO is also a possible view, and therefore, no action under section 263 can be justif .....

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..... AO has completed the assessment without appreciating the provisions of section 32 of the Act. 2. It is further seen that the assessee has claimed additional depreciation of ₹ 23.35 la on fire safety equipments, weight scale, printer, storage tank etc. It appears that the AO has completed the assessment without appreciating the provisions of section 32(1)(iia) of the Act. 2. In view of the above, it appears to the undersigned that the order dated 30.3.2013 passed under section 143(3) of the I.T. Act, 1961 by the DCIT, Circle-1, Ahmedabad is erroneous and prejudicial to the interest of Revenue within the meaning of section 263(1) of the I.T.Act, 1961. 3. You are, therefore, requested to show cause as to why appropriate order under section 263(1)of the I.T.Act, 1961 be not passed in your case to eliminate the above errors. For this purpose, the hearing in your case is fixed on 20/3/2015 at 3.30PM at the above address. You may attend personally or through an authorized representative on the scheduled date and time or submit your written reply within supporting evidences. In case nothing is heard from you by the said date, it shall be presumed that you have no .....

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..... d that the deprecation on computer and computer peripherals is admissible at the rate of 60%. 2. In present case, the assessee has capitalized software expenses, UPS and claimed depreciation @ 60% as same are integral part of computer and cannot run independently and/or installed to work efficiently and smoothly. Reliance placed on: Sr.NO. Name of case law Citation Ratio 1. BSES Yamuna Power Ltd. 358 ITR 47 (Del.) Depreciation @ 60% on computer peripherals such as printers, scanners, 2. Navneet Publications (I) Ltd ITA # 1137/Mum/2010 Depreciation @ 60% on SAP software. 3. Ushodaya Enterprises Ltd. 41 taxmann.com 304 (Hyd.) Depreciation @ 60% on computer peripherals such as printers, scanners, software, modems, switches, hubs, cable/cards etc. 4. Macwber Engineering System (I) (P.) Ltd. 33 taxmann.com 587 (Mum.) .....

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..... o use those particular assets actively in the manufacturing activity. 9. We have duly considered the rival contentions and gone through the record carefully. Section 263 has a direct bearing on the controversy, therefore, it is pertinent to take note of this section. It reads as under:- 263(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. [Explanation.- For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-ta .....

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..... icer on culmination of any proceedings or during the pendency of those proceedings. On an analysis of the record and of the order passed by the Assessing Officer, he formed an opinion that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. By this stage the learned Commissioner was not required the assistance of the assessee. Thereafter the third stage would come. The learned Commissioner would issue a show cause notice pointing out the reasons for the formation of his belief that action u/s 263 is required on a particular order of the Assessing Officer. At this stage the opportunity to the assessee would be given. The learned Commissioner has to conduct an inquiry as he may deem fit. After hearing the assessee, he will pass the order. This is the 4th compartment of this section. The learned Commissioner may annul the order of the Assessing Officer. He may enhance the assessed income by modifying the order. He may set aside the order and direct the Assessing Officer to pass a fresh order. Explanation-1 has been substituted by the Finance Act 1998 (26 of 1988). It threw a light to some extent the scheme of the Act. Under clause (a) of the Expl .....

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..... with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not fee stratified with the conclusion. (viii) The CIT, before exercising his jurisdiction under s. 263 must have material on record to arrive at a satisfaction. (ix) If the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows the claim on being satisfied with the explanation of the assessee, the decision of the AO cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard. 11. Apart from the above principles, we deem it appropriate to make reference to the decision of the Hon'ble Delhi High Court in the case of CIT vs. Sun Beam Auto reported in 227 CTR 113 referred by ld. Counsel for the assessee, and Gee Vee Enterprises Ltd vs. Addl. Commissioner of Income Tax (99 ITR 375) . In the case of Sun Beam Auto, the Hon'ble High Court has pointed out a distinction between lack of inquiry and inadequate inquiry. If there is a lack of enquiry, then the assessment order can be brande .....

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..... function of the Income-tax Officer is very diffident from that of a civil court. The statement made in a pleading proved by the minimum amount of evidence may be adopted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income-tax Officer is not only on adjudicator but also an investigator. He cannot remain passive in the face of the return which is apparently in order but called for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would made such an inquiry prudent that the word erroneous' in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. 13. The light of the above, let us examine the facts of the present case. As far as the .....

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..... the outset, it is required to be noted that the assessee claimed the deduction under Section 32(1)(iia) of the Income-tax Act with respect to the cost incurred by it for installation of the Wind Electric Generator. The Assessing Officer disallowed the same and made the addition of ₹ 1,17,98,030/- by observing that as the assessee is not in the business of generation and distribution of power, the assessee shall not be entitled to deduction under Section 32(1)(iia) of the Income-tax Act of ₹ 1,17,98,030/-. The said addition has been deleted by the CIT(A) relying upon the decisions of the Madras High Court in the case of VTM Ltd (Supra) and in the case of Hi Tech Arai Ltd. (Supra). In both the aforesaid decisions, the Madras High Court had an occasion to consider the similar issue and it is held that while claiming the deduction under Section 32(1)(iia) of the Income-tax Act setting up wind-mill has nothing to do with the power industry and what is required to be satisfied in order to claim additional depreciation is that the setting up of new machinery or plant should have been acquired and installed by an assessee, who was already engaged in the business of manufacture .....

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