TMI Blog2016 (5) TMI 340X X X X Extracts X X X X X X X X Extracts X X X X ..... ble, in the year of the claim of deduction. However, in so far as the year under consideration is concerned, we do not find any reason in making the assessment order erroneous and prejudicial to the interest of the revenue. We accordingly set aside the order of the Commissioner made u/s. 263 of the Act and restore that of the A.O made u/s. 143(3) of the Act. - Decided in favour of assessee - ITA. No: 1402/AHD/2014, ITA. No: 1419/AHD/2015 - - - Dated:- 31-3-2016 - SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER For The Appellant : Shri Sanjay R. Shah, A.R. For The Respondent : Shri R.I. Patel, CIT/DR PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. These two appeals by the assessee are directed against two different orders of the Commissioner of Income Tax-I, Baroda dated 11.03.2014 and 31.03.2015 made u/s. 263 of the Act. 2. In both these appeals, the assessee has challenged the jurisdiction of the Commissioner. The grievance of the assessee is that the Commissioner grossly erred in invoking the powers conferred upon him by the provisions of Section 263 of the Act. 3. Both these appeals were heard together and are disposed of by thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(3) of the Act was neither erroneous nor prejudicial to the interest of revenue. It was explained that the assessee was very much entitled for claim of additional depreciation as per the provisions of law. It was further explained that the claim of depreciation has been examined at length by the A.O during the course of the assessment proceedings. Reliance was placed on the decision of the Hon ble High Court of Madras in the case of VTM Ltd. 319 ITR 336 in support of the claim of additional depreciation. 7. On the issue of allowability of obsolete stores written off, it was explained that the A.O has specifically called for details and after verifying the details and also the company policy and accounting treatment of obsolete stores, the A.O allowed the claim. 8. The detailed submissions/explanations of the assessee did not find favour with the Commissioner who was of the firm belief that the assessment order made u/s. 143(3) of the Act is not only erroneous but also prejudicial to the interest of the revenue for the following reasons:- (a) The A.O had not considered the implications of the amendment brought in Section 32(1)(iia) while allowing the claim of additional d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reading of section. 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under ii, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent-if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous hut is prejudicial to the Revenue- recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous 14. Now, let us see in the light of the above ratio, whether the assessment has been made on an incorrect assumption of facts or an incorrect application of law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on specific query made by the A.O, vide letter dated 21.10.2011 which is placed at pages 53 to 59 of the paper book supported by annexures from pages 60 to 82 of the paper book, the assessee explained at point no. 12, the obsolete spares and write off which was supported by a complete detail which are exhibited at pages 60 to 82 of the paper book. At point no. 7, the assessee has explained the company policy and accounting treatment for obsolete stores written off. The relevant portion read as under:- Note: MCU/Audit/07-08 April 19, 2007 Subject: Amendment in Write Off/Disposal Policy 1. At present we have management approved policy for write-off/ disposal of nonmoving Spares, N-(Non-regular) A-B-C Class of items as approved vide our Note Ref. DGM(MM)/INV/2004, dated 28-05-2004 (FLAG-A). 2. As per the policy, every year we take up the exercise of write-off of non-moving items, and circulate list of items which have not moved since last 5 years. Based on the replies received from various users, MCU of MM Department compiles the replies and puts up the final list of the items to be written-off for Management approval After receiving write-off approva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the observation of the Commissioner read as under:- 4. The next issue involved is claim of writing off of stores and spares worked at ₹ 92,66,211/-. It has been stated by the assessee that it has not debited these items of stores at the time of purchase. As per the consistent policy of the assessee, items of stores and spares having individual value of ₹ 10,000/- or less were debited only at the time of consumption and, therefore, there is no double claim of deduction on these items. 4.1. The contention of the assessee needs detailed examination which was not done by the Assessing Officer at the time of assessment proceedings. Apparently, the Assessing Officer had not made any effort to tally the quantitative detail and examine the accounting policy in respect of these stores and spares of particular denomination. The order passed, therefore, was erroneous as well as prejudicial to the interest of Revenue. 21. In the case of Ashish Rajpal 320 ITR 674 Hon ble Delhi High Court has the occasion to consider the issue where the notice issued by the ld. Commissioner referred to four issues whereas the order of revision referred to nine issues, the Hon ble High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 20.12.2012 deserves to be upheld. We, therefore, set aside the order of the ld. CIT and restore that of the A.O, appeal filed by the assessee is accordingly allowed. ITA No. 1419/Ahd/2015 for A.Y. 2010-11 25. In this year, the assessment order dated 08.02.2013 made u/s. 143(3) of the Act was considered by the Commissioner u/s. 263 of the Act and after considering the records, the Commissioner was of the view that the assessment order u/s. 143(3) of the Act passed by the A.O on 08.02.2013 is to be considered as erroneous and prejudicial to the interest of the revenue for the following reasons. 2.1 It is noticed that as per P L account, Schedule-16 (Personal Expenses), assessee has debited an amount of ₹ 4058.56 lakh towards Contribution to Provident, Gratuity and Superannuation (Pension) Funds (including provisions) . It was noticed from the Auditor's Certificate in Form 3CD that vide item No. 17(1) -Annexure 11, the Auditors had stated that provision for payment of gratuity amounting to ₹ 13,01,07,557/- was not allowable u/s 40A(7) of the IT Act. Therefore, this amount was required to be disallowed while computation of total income. 2.2 It was f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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