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Aksharchem (India) Ltd. Versus Principal Commissioner of Income-tax-1, Ahmedabad

2016 (6) TMI 1076 - ITAT AHMEDABAD

Revision u/s 263 - non-inclusion of MODVAT credit to the closing stock - Held that:- AO had raised specific query in the notice issued u/s.142(1) of the Act. The queries raised by the AO were replied by the assessee and these details also formed part of the tax Audit Report that were filed by the assessee before AO. Thus, it can be seen that after making the necessary queries with respect to the issues under consideration and on receiving replies from the assessee, the AO was satisfied with the .....

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sidering MODVAT credit as income, we find that the Hon’ble Apex Court in the case of CIT vs. Indo Nippon Chemicals Co.Ltd.(2003 (1) TMI 8 - SUPREME Court ) has held that unavailed MODVAT credit cannot be construed as income and there is no liability to pay tax on such MODVAT credit. - Before us, Revenue has not brought any material record to demonstrate that the view taken by the AO was an impermissible view and was contrary to law or was upon erroneous applications of legal principles neces .....

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This appeal filed by the assessee is directed against the order of the Principal Commissioner of Income-tax-1, Ahmedabad dated 02.03.2015 passed u/s.263 of the Act for Assessment Year 2010-11. 2. Facts of the case for AY as culled out from the relevant material are as under:- 2.1. Assessee is a company stated to be engaged in the business of manufacturing of Dyes and Pigments and filed its return of income for AY 2010-11 on 28/09/2010 declaring total income at Rs.NIL. The case was selected for s .....

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y of interest which was not disallowed as per section 14A of the Act r.w.Rule 8D of the IT Rules, 1962. He was, therefore, of the view that the assessment order passed by AO u/s.143(3) of the Act was erroneous and prejudicial to the interest of Revenue. He, Accordingly, issued a notice dated 09/02/2015 and called upon the assessee to show cause as to why appropriate order u/s.263 of the Act not be passed. In response to the aforesaid note, assessee inter-alia objected to the initiation of the pr .....

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With respect to disallowance u/s.14A of the Act r.w. Rule 8D, he was of the view that while working out the disallowance, the assessee has considered interestexpenditure at ₹ 1,17,42,953/- as against ₹ 1,20,43,086/-. He was of the view that the AO has simply accepted the submissions of the assessee and failed to make any enquiry which was required to be made by him. He was, therefore, of the view that the order passed by the AO was without any proper enquiry and investigation and was .....

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ad in law, void ab initio and the same be deleted. 2. Without prejudice to the above, it is submitted that the order passed u/s 263 of the I.T. Act is not correct on facts and in law inasmuch as the original order passed u/s 143(3) was neither prejudiced to the interest of revenue nor it was erroneous. It is submitted that the finding given by the learned C.I.T. is not correct on the facts and far from truth. It be so held now. 3. The learned Pr. C.I.T. has erred in holding that assessee company .....

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.O. as erroneous and prejudicial to the interest of Revenue is incorrect and illegal and accordingly the direction to set aside the original assessment order and passing the fresh assessment order be cancelled. It be so held now. 4. The learned Pr. C.I.T. has erred in holding that assessee company has not worked out the correct disallowance as per section 14A of the Act r.w.r. 8D of the IT Rules. It is submitted that the view so taken of holding the assessment order passed by A.O. as erroneous a .....

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at the outset submitted that the issue in the present appeal is invoking of revisionary proceedings u/s.263 of the Act as the required conditions are not fulfilled. Before us, ld.AR reiterated the submissions made before the ld.CIT and submitted that in the present case the pre-requisite conditions specified u/s.263 of the Act were not fulfilled and, therefore, the proceedings u/s.263 of the Act lacks jurisdiction and are bad in law. With respect to the non-inclusion of unutilized balance of CEN .....

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t, the effect of MODVAT credit which is not a part of cost was not included in the said stock. He further placed reliance on the decision of Hon ble Apex Court in the case of CIT vs. Indo Nippon Chemicals Co.Ltd. reported at (2003) 261 ITR 275 (SC) and submitted that MODVAT credit cannot be considered as income of the assessee. With respect to the disallowance u/s.14A of the Act, he submitted that the assessee had considered the net interest for the purpose of disallowance. He further submitted .....

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ged by section 263 of the Act should be an actual error either of facts or of a law and when two views are possible and AO has taken one view with which CIT does not agree, the order of the AO cannot be treated as erroneous and to the prejudicial to the interests of Revenue unless the view taken by the AO is unsustainable in law and for this proposition he relied on the decision of Hon ble Apex Court in the case of Malabar Industrial Co.Ltd. vs. CIT reported at (2000) 243 ITR 83 (SC). He also pl .....

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CIT. 4. We have heard the rival submissions and perused the material on record. The issue in the present case is above the invoking of provisions of Section 263 by CIT. 5. S. 263(1) of the Act, the powers under which CIT has assumed power for revision reads as under: 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 ITO is erroneous in so far as it is prejudicial to the interests of the Revenue, he may .....

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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. 7. H ble Apex Court in the case of Malabar Industrial Co Ltd Vs CIT (2000) 243 ITR 83 (SC) has held that CIT has to be satisfied of twin conditions, namely, (i) the order of the AO sought to be revised is erroneous; and (ii) i .....

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ssible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the ITO is unsustainable in law. 8. In the present case, it is seen that section 263 of the Act has been invoked on two grounds; namely, (i) non-inclusion of MODVAT credit to the closing stock and (ii) the disallowance u/s.14A r.w.Rule 8-D of I.T. Rules, 1962. On these issues, we find that the AO had raised specif .....

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rt in the case of CIT vs. Max India Ltd. reported at (2007) 295 ITR 282(SC) has held that where two views are possible and the ITO has taken one view with which CIT does not agree, the order of the AO cannot be treated as erroneous order prejudicial to the interests of the Revenue, unless the view taken by the ITO is sustainable in law. We also like to refer to the decision of Hon ble Bombay High Court in the case of CIT vs. Gabrial India Ltd. reported at (1993) 203 ITR 108 (Bom), wherein the Hi .....

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may be visualised where ITO while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimates himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and, left to the Commissioner, he would have estimated the income at a higher figure than the one determined by .....

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