TMI Blog2012 (4) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... e-D annexed with the Audit Report for the year relevant to AY 2000-01, it was seen that the assessee company has changed its accounting method with respect to writing off of the production expenses. This has resulted in deferment of production expenses and under assessment of profits to the extent of ₹ 157.96 lacs. ii) It is further observed that the assessee company has been allowed deduction of ₹ 79,79,314/- u/s 35D of I.T. Act, 1961, wherein the assessee has increased the capital from ₹ 500 lakhs to ₹ 841 lakhs during the relevant assessment year. It is also observed from Schedule M that ₹ 28203/- is preliminary expenses and balance is amortized expenditure incurred towards increase of capital base and not for setting up a new industrial undertaking, hence, amount of ₹ 79,51,111/- (79,79,314 28,203) has escaped income. iii) The deduction u/s 80HHF has been calculated on the net profit of ₹ 17,95,406/- as per P L A/c. against the income computed under the head business income as per the provisions of IT Act of ₹ 16,71,56,063/-. Further the AO has reduced total turnover by ₹ 44,55,66,915/- being the amount not realize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the light of the same, Learned DR stated that the Learned CIT had not only dropped the proceedings, but also observed that the said order was without prejudice to any action may be taken u/s 147. Learned DR has also taken us to page no.79 i.e., notice issued by Learned CIT (A) u/s 263 proceedings. By referring to the same, Ld. DR stated that there are altogether different reasons in issuance of notice u/s 263 and u/s 147 of the Act. The same cannot be read in consonance with each other as the Assessing Officer and Ld. CIT exercise their jurisdiction which is altogether different. 7. Further more, in support of the contention the Ld. DR has also relied on case laws i.e., 197 Taxman 415 as well as 202 Taxman 625 (Ker). 8. Replying to the arguments, Ld. AR before us has also referred to page no.93 i.e., the order of dropping sec. 263 proceedings passed by Ld. CIT. Stated that in the instant case, all the material was there before the Ld. CIT (A). Also drew our attention to the notice u/s 263 proceedings at page no.79 of the paper book. Submitted that the material relied upon by the Ld. CIT (A) in sec. 263 as well as the reasons contained in reopening are same. Accordingly, Ld. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts of the case are that during the assessment proceedings, the assessee had duly intimated the Assessing Officer about the income and other details in furtherance to the show cause notice with all clarifications i.e., page nos. 44 to 48 (supra). Thereafter, the assessment was finalized. Further, even in 263 notice (supra) the Learned CIT called for the same very particulars. Notice in this regard before us is at page no.79. This ultimately led to dropping of 263 proceedings vide order of the Ld. CIT dated 29.3.2005 which reads as under: The proceedings initiated u/s 263 of the I.T. Act in the above case are dropped. This is without prejudice to any action may be taken u/s 147 in this case. 13. In our opinion, once the Ld. CIT has dropped the proceedings u/s 263, then it can always be safely presumed that the assessment order has been passed without any error causing prejudice to revenue and is in accordance with law. So, the second portion of the order loses significance in view of the fact that reasons of reopening as reproduced hereinabove also stood duly clarified by the assessee during the assessment proceedings. Thus, reopening in question is based on a mere cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 14.18 lakhs disallowance u/s 14A investment which fetched exempted income. 16. In appeal, the Ld. CIT (A) vide impugned order deleted the disallowance made by the Assessing Officer u/s 35D of the Act. Held in para no.5 that claim in hand raised by the assessee pertained to the earlier assessment years and not the assessment year under consideration. 17. Similarly, regarding sec. 14A disallowance also, the Ld. CIT held that the assessee did not have any expenditure relatable to exempt income for the year under consideration. In view of the said finding, he held that application of sec.14A in the assessment order was not based on material facts. In view thereof, Ld. CIT (A) deleted both additions made by the Assessing Officer i.e., u/s 35D as well as u/s 14A of the Act. Hence, the revenue has filed the instant appeal before us. 18. In the instant appeal, there are 4 grounds. Ground no.3 4 are general in nature. Ground no.1 pertains to disallowance u/s 35D. Ground No.2 is regarding disallowance u/s 14A. Our findings are as under. 19. Ground No.1:- This ground is regarding applicability of sec. 35D. The Ld. DR has relied on Brooke Bond India Limited vs. CIT (su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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