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2016 (6) TMI 1076

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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sitating the exercising of revisionary power u/s.263 of the Act. In view of the aforesaid facts, we are of the view that in the present case Ld.CIT was not justified in resorting to revisionary powers u/s.263 of the Act - Decided in favour of assessee - ITA No. 809/Ahd/2015 - Dated:- 3-6-2016 - SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER For The Assessee : Shri Sunil Talati, CA For The Revenue : Shri Jagdish, CIT-DR ORDER PER ANIL CHATURVEDI, ACCOUNTANT MEMBER: .....

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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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therefore erroneous and prejudicial to the interest of the Revenue and accordingly cancelled the assessment order passed u/s.143(3) dated 01/02/2013 and directed the AO to make afresh assessment. Aggrieved by the aforesaid order of the ld.CIT, assessee is now in appeal before us and has raised the following grounds:- 1. The learned Pr. C.I.T. has erred in passing order u/s 263 without jurisdiction and appropriate powers available under the Act. It is submitted that the order passed u/s 263 is b .....

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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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VAT credit u/s.145A of the Act, he submitted that the assessee was following Exclusive Method of accounting under which the excise duty paid on the purchase on raw-materials and components was held as advance, i.e. as MODVAT credit. The excise duty receivable was adjusted against excise duty payable at the time of clearance of finished goods manufactured by assessee and this MODVAT credit did not form part of cost of purchase. He further submitted that since the valuation of the stock was at cos .....

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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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, 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. 6. The reading of the above 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 .....

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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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gh Court has held as under:- An order cannot be termed as erroneous unless it is not in accordance with law. If an ITO acting in accordance with law makes certain assessment, the same cannot be branded as erroneous by the Commissioner simply because according to him the order should have been written more elaborately. This section does not visualise a case of substitution of judgment of the Commissioner for that of the ITO, who passed the order, unless the decision is held to be erroneous. Cases .....

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al to the interest of the Revenue. But that by itself will not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, namely, the order is erroneous, is absent. Similarly if an order is erroneous but not prejudicial to the interest of the Revenue, then also the power of suo motu revision cannot be exercised. Any and every erroneous order cannot be subject-matter of revision because the second requirement also must be fulfilled. 9. Further on the iss .....

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