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2015 (11) TMI 300 - ITAT AHMEDABAD

2015 (11) TMI 300 - ITAT AHMEDABAD - TMI - Revision u/s 263 - Held that:- Section 263 has been invoked on 3 grounds namely the claim of deduction on account of amortized value of lease hold land which according to CIT was not allowable, the claim of depreciation at 15% on office equipment and the deduction u/s. 35D of the Act. On the aforesaid 3 issues, it is seen that during the course of assessment proceedings, A.O had raised query on all the aforesaid 3 issues and the same were also replied b .....

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se of CIT vs. Max India Ltd. (2007 (11) TMI 12 - Supreme Court of India) has held that where two views are possible and ITO has taken one view with which CIT does not agree, order of the A.O cannot be considered as erroneous order prejudicial to the interest of Revenue unless the view taken by the A.O is unsustainable in law.

On the merits on the issue of amortization of cost of lease hold land, we find that the claim of Assessee of amortized value of lease hold land development was n .....

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llowed by the A.O in earlier years in the assessment order passed u/s. 143(3) and those orders have attained finality.

As far as the claim of deduction u/s. 35D is concerned it is not the case of the Revenue that the expenses have been incurred in the year under consideration but on the contrary it is assessee’s submission that the same have been incurred in earlier years and the deduction u/s. 35D has also been allowed in earlier years. It is also not a case of the Revenue that on t .....

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s application of legal principles initiating the exercising of revisionary powers u/s. 263. Thus CIT was not justified in resorting to revisionary powers u/s. 263 - Decided in favour of assessee. - ITA No: 1362/AHD/2015 - Dated:- 29-10-2015 - SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER For The Appellant : Shri S.N. Soparkar, AR For The Respondent : Shri R.I. Patel, CIT/ D.R. PER ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. This appeal filed by the Assessee is against .....

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assessment was framed under section 143(3) vide order dated 28.03.2013 and the total income was determined at ₹ 27,74,59,380/-. Subsequently on examination of the case record of assessment, ld. CIT noticed that (i) ₹ 17.08 crore was required to be disallowed u/s. 14A read with Rule 8D of the Act but only an amount of ₹ 6.12 crore was disallowed by the A.O. (ii) Assessee had claimed deduction of ₹ 3,75,48,727/- on account of amortization value of lease hold land which was .....

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ee to show cause as to why appropriate order u/s. 263 be not passed and in response to which Assessee interalia objected to the initiation of proceedings u/s. 263 and submitted that the notice was without jurisdiction. On merits, on the issue of disallowance of disallowance u/s. 14A it was submitted that the issue was subject matter of appeal before ld. CIT(A) and was considered and decided by him in appeal and therefore ld. CIT did not have jurisdiction in terms of clause C of Explanation below .....

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t was submitted that office equipments were in the nature of plant and was covered within the block of asset namely machinery and plant and therefore Assessee has rightly claimed and had been allowed the depreciation. With respect to the deduction claimed and allowed u/s. 35D, it was submitted that the preliminary expenses were incurred before the commencement of business and were deductible under clause 1 of Section 35D (1) and the same were allowable even to business which were not industrial .....

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celled the order dated 28.03.2013 framed u/s. 143(3) of the Act and directed the A.O to make 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 the following grounds:- 1. In law and in the facts and circumstances of the appellant s case, the impugned order is void and deserves to be cancelled for the reason that it has been passed without jurisdiction. The learned CIT ought to have appreciated, int .....

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ant, could only result into enhancement of only such business income of the appellant which was fully exempt u/s. 80-IAB; (b) that it was not open to him to assume jurisdiction u/s. 263 unless the assessment order was both erroneous and prejudicial to the interests of the Revenue; (c) that further, as elaborately explained in the appellants written submission dated 23.3.2015 addressed to him, the assessment order for the present assessment year could not be regarded as erroneous in respect of an .....

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to order, inter alia, for the following reasons: (a) for the reason that, as he had himself noted in the impugned order itself, the assessment order for the present assessment year had already been the subject matter of appeal which had been decided by the learned CIT(A) -VI, Ahmedabad, vide Appellate Order dated 17.10.2014 passed in appeal No. CIT(A)-VI/Addl./R.1/160/13/14; (b) for the reason that when his Notice u/s. 263 had raised only four specific issues [(1) disallowance u/s. 14A read with .....

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llant s total income afresh; (c) for the reason that law was very well settled that provisions stipulating limitation for the time within which assessment for a particular assessment year must be completed had their own sanctity which cannot be violated in the manner he had sought to do by ordering cancellation of the appellant s assessment and by directing the appellant s total income to be computed afresh. 3. Without prejudice to the foregoing Grounds No. 1 and 2, in law and in the facts and c .....

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already decided the appellant s appeal against the assessment order for the present assessment year) raising the issue of quantum of disallowance u/s. 14A read with Rule 8D. He ought to have appreciated, inter alia, that Section 263 did not empower him to issue any such direction which was therefore without jurisdiction and deserved to be cancelled. 5. Without prejudice to the foregoing Grounds No. 1, 2 and 3, in law and in the facts and circumstances of the appellant s case, the learned CIT ha .....

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t be open to him to regard the assessment order as either erroneous or prejudicial to the interests of the Revenue inasmuch as it granted the appellant s claim of deduction @10%. 6. Without prejudice to the foregoing Grounds No. 1, 2 and 3, in law and in the facts and circumstances of the appellant s case, the learned CIT has grossly erred in holding that the learned Assessing Officer s action of granting the appellant s claim for depreciation on Office Equipment @15% applicable to Machinery and .....

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ion, it could be regarded as covered by the block of assets Furniture and fittings . 7. Without prejudice to the foregoing Grounds No. 1, 2 and 3, in law and in the facts and circumstances of the appellant s case, the learned CIT has grossly erred in holding that the action of the learned Assessing Officer of granting the appellant s claim of deduction of ₹ 14,74,336 u/s. 35D was erroneous and prejudicial to the interests of the Revenue. He ought to have appreciated that for the reasons el .....

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e requisite conditions specified u/s. 263 of the Act were not satisfied and therefore the proceedings u/s. 263 lacks jurisdiction and are bad in law. He submitted that ld. CIT can revise an order passed by the A.O only on the satisfaction of twin conditions namely (i) the order is erroneous and (ii) it is prejudicial to the interest of Revenue. He further submitted that the error envisaged to Section 263 is not one which depends on possibility or guesswork but it should have an actual error eith .....

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of assessment proceedings, A.O had raised specific queries on the aforesaid three issues and in response to the query raised by the A.O., Assessee had furnished the reply. He submitted that vide letter dated 21.03.2013 had submitted the justification with respect the claim of depreciation of lease hold land development along with other details. With respect to the claim of deduction made u/s. 35D, Assessee vide letter dated 08.01.2013 had filed the necessary details along with the chart showing .....

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refore submitted that after considering the submissions of Assessee and on being satisfied with the replies given by the Assessee no addition was made by the A.O. He therefore submitted that when the A.O has taken one view with which ld. CIT does not agree, the order of A.O cannot be treated as erroneous order pre-judicial to the interest of Revenue unless the view taken by the A.O is unsustainable in law. With respect to the amortization of lease hold land ld. A.R. further submitted that Assess .....

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ed at page 31 & 32 of the paper book. He pointed out that similar addition to assets were made in earlier years and the claim of depreciation at 15% was allowed by the A.O in scrutiny assessment meaning thereby that it was accepted by the Revenue department that Assessee was right in claiming the depreciation at 15%. He therefore submitted that in the absence of any change in facts, a different view could not be taken by ld. CIT. With respect to the claim of deduction u/s. 35D, he submitted .....

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at High Court in the case of Gujarat Narmada Valley Corporation vs. D.C.I.T. (2014) 369 ITR 763 (Guj.). He further submitted that where two views are possible and the A.O has taken one view on the basis of evidence produced with which the Commissioner does not agree, then in that case the order passed by A.O cannot be treated as erroneous and prejudicial to the interest of Revenue, unless the view taken by the A.O is unsustainable in law and for this proposition he relied on the decision of Hon .....

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and in that sense also, the order of A.O cannot be considered to be prejudicial to the interest of Revenue. He therefore submitted that the order of ld. CIT deserves to be quashed both on merits and legally. 7. The ld. D.R. on the other hand supported the order of ld. CIT and further submitted that when A.O has allowed the claim of the Assessee without any discussion, the order passed by the A.O was erroneous and prejudicial interest of Revenue. With respect to the claim of amortization of lease .....

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the claim made by the Assessee was not as per law. With respect to the claim of deduction u/s. 35D, he submitted that Assessee was not an industrial undertaking and therefore as envisaged in Section 35D of the Act as it had not started its business on or after 01,04,2009 and that the Section has been amended from that date and the amended Section therefore does not apply to the Assessee. With respect to the A.R s contention that even if the disallowances were made the same would go to increase .....

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IT vs. Ahsok Logani 11 Taxman.com 208 (Del) and Gee Vee Enterprises vs. Additional CIT 99 ITR 375 (Del). He thus supported the order of ld. CIT(A). 8. We have heard the rival submissions and perused the material on record. The issue in the present case is about the invoking the provisions of Section 263 by ld. CIT. 9. S. 263(1) of the Act, the powers under which ld. CIT has assumed power for revision reads as under: The Commissioner may call for and examine the record of any proceeding under thi .....

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provisions makes it very clear that the power of suo motu revision u/s 263(1) is in the nature 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. 11. Interpretation of Section 263 has been subject matter of consideration .....

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ill satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. 12. In the case of CIT vs. Gabriel India Ltd. (1999) 203 ITR 108, the Hon ble High Court while interpreting Section 263 has held that an order passed by the Assessing Officer cannot be termed as erroneous unless it is not in accordance with law. It further held that section does not visualize the case of substitution .....

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ons cited hereinabove, in the present case, it is seen that Section 263 has been invoked on 3 grounds namely the claim of deduction of ₹ 3,75,48,727/- on account of amortized value of lease hold land which according to CIT was not allowable, the claim of depreciation at 15% on office equipment and the deduction of ₹ 14,74,336/- claimed u/s. 35D of the Act. On the aforesaid 3 issues, it is seen that during the course of assessment proceedings, A.O had raised query on all the aforesaid .....

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at the Hon ble Apex Court in the case of CIT vs. Max India Ltd. (2007) 295 ITR 282 (SC) has held that where two views are possible and ITO has taken one view with which CIT does not agree, order of the A.O cannot be considered 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 Hon ble Bombay High Court in the case of Idea Cellular Ltd. vs. DCIT reported in (2008) 301 ITR 407 (Bom) has held that if a query is ra .....

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order has held that the claim of Assessee was u/s. 35D and therefore in such a situation, A.O s order on that issue cannot be considered to be erroneous more so because there was no such claim u/s. 35D by Assessee. As far as the claim of depreciation on office equipments @ 15% is concerned, it is Assessee s submission that the claim of depreciation at 15% on the office equipment which comprises of similar items as are in the present year, has been allowed by the A.O in earlier years in the asses .....

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