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2016 (9) TMI 1045 - ITAT MUMBAI

2016 (9) TMI 1045 - ITAT MUMBAI - TMI - Revision u/s 263 - allowability of additional depreciation on windmill - Held that:- The grounds mentioned by learned CIT in show-cause notice are different and the order passed by learned CIT u/s. 263 is based on another ground and therefore the assessee could not get opportunity to explain the point recorded at the time of passing the final order. Therefore we hold that the order passed by learned CIT u/s. 263 is bad in law and not sustainable in law. Th .....

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manufacture of pigments, HDPE etc. A close reading of the provision brings out that there is no requirement that the windmill should be used in any manufacturing activity. However, a windmill which generates power is itself engaged in the manufacturing of production of an article or thing. We found support from the judgement in the case of Associated Bearing Co. Ltd. vs. Commissioner of Income-tax (2005 (10) TMI 75 - BOMBAY High Court ) and Commissioner of Income Tax vs. Atlas Export Enterprise .....

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present appeal has been filed by the assessee against the order passed by learned CIT u/s. 263 of the I.T. Act on the following grounds:- The Grounds of Appeal raised herein are all without prejudice to one another: 1. The learned CIT was not justified in initiating revision proceedings u/s 263 of the Act. The initiation of the revision proceedings as also the order u/s 263 are illegal and invalid. 2. The learned CIT was not justified in holding that" ... it is clear that if any part of pl .....

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order of the learned AO allowing depreciation to the extent of ₹ 1,65,04,000/- is erroneous insofar as it is prejudicial to the interest of revenue within the meaning of section 263 of the Income-tax Act, 1961. 4. The learned CIT was not justified in holding that considering profit of ₹ 1,15,91,571/- for computation of income u/s 10A without enquiries has resulted in error within the meaning of section 263 and that this has also caused prejudice to the revenue. He has erred in settin .....

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rn was processed u/s. 143(1) of the Act on 2.3.2011. Subsequently the case was selected under CASS and notice u/s. 143(2) was issued on 18.8.2010. Ultimately, after considering the case the assessment order u/s. 143(3) was passed on 20.12.2011. Later on notice u/s. 263 of the Act was issued vide show-cause letter dated 4/2/2013 and reply of the assessee was sought. The assessee filed his reply before learned CIT(A) and learned CIT after considering the submissions of the assessee, passed order u .....

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produced as under: A perusal of records shows that the assesee had claimed and was allowed depreciation of ₹ 11,05,66,720/ - which included additional depreciation of ₹ 1,65,04,000/- on "Windmill". However, this "windmill" was not used in any manufacturing activity. Therefore, this do s not qualify for additional depreciation. Also, the as o e had claimed deduction of profit derived from the Unit Lapiz Digital Services of ₹ 4,74,76,455/- out of which profit .....

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nue because income is under assessed by an amount of ₹ 1,15,91,571/-. Therefore, it is clear that provisions of law as contained u/s 263 of the Income Tax Act,1961 are clearly attracted to the facts of this case. 5. ld. AR further submitted that after receiving the afore mentioned show cause notice, the assessee filed detail reply which is mentioned in page no. 03 to 05 of the paper book and the same is reproduced below for reference. Your Honour has first raised the issue of the allowance .....

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assessee engaged in the business of manufacture or production of any article or thing ... ". It is submitted that the only requirement of the section is that the assessee should be engaged in the business of manufacture or production of any article or thing. This condition is clearly satisfied by the assessee which is engaged in the manufacture of pigments, HOPE, surfactants, etc. A close reading of the provision brings out that there is no requirement that the windmill should be used in a .....

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n of an article or thing. In the light of the above, it is submitted that the' assessee clearly satisfies the conditions of section 32(1)(iia) and is entitled to the said claim of additional depreciation in respect of windmills. Further, Your Honour has stated that the profit of ₹ 1,15,91,5711- comprising of sundry receipts of ₹ 1,08,68,525/- and sundry balances written back of ₹ 7,23,046/- is not derived from export and is therefore, not eligible for deduction U/S 10A. In .....

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opy of the ledger account is enclosed at page 20 of the Paper Book. As far as exchange fluctuation gain is concerned, it is submitted that this is nothing but an accretion to the sales made by the assessee. It is clearly derived from the export of computer software. It at all any support is required in this regard, reliance is placed upon the decision of the Bombay High Court reported in 330 ITR 175, CIT v Gem Plus Jewellery India Ltd. This decision clearly says that foreign exchange fluctuation .....

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t provisions written back qualify for deduction u/s 10A. A copy of the synopsis of this decision is enclosed at pages 24 to 26 of the Paper Book. 5. After referring the aforementioned facts, learned AR submitted that in the show-cause notice learned CIT has mentioned that the assessee had claimed and was allowed depreciation of ₹ 11,05,66,720/- which includes additional depreciation of ₹ 1,65,04,000/- on windmill . However as per learned CIT this windmill was not used in any manufact .....

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e. Therefore no deduction is allowable on these incomes u/s. 10A of the Act. Whereas, in the order passed by learned CIT on 15.2.2013 it has been mentioned that no inquiry was conducted by the Assessing Officer therefore the Assessing Officer was directed to examine the issue which was the subject matter of notice u/s. 263 and direction was given to conduct the required inquiry on the facts and circumstances of the case. In this respect the learned AR submitted that in case notice is given by le .....

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technical services outside India have not been reduced from export turnover and total turnover- However, revision done on the ground that the matter needs to be examined-In any case, the CIT has not given any findings against the assesse at all and yet he has proceeded to direct the AO to examine the issue again -Revision was not therefore sustainable. The show-cause notice is issued on the ground that the computation is incorrect but the revision is exercised on the ground that the matter was n .....

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gally sustainable on this issue, i.e., the notice is issued on the ground of inadmissibility of deduction, and the revision is done on the ground that he matter needs to be examined even as there are no findings about shortcomings in the proceedings before the AO. 2. B.S. Sangwan vs. ITO A revisional order can only be passed on ground on which assessee has been given reasonable opportunity of being heard, and it is not open to Commissioner to set out one reason for revising order but actually re .....

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oposing to make certain disallowances and addition, he could not pass impugned order under section 263 on ground of lack of proper enquiries made by Assessing Officer in course of assessment - Held, yes. [Para 10] [In favour of assessee] 3. Vesuvius India Ltd. vs. Commissioner of Income Tax Section 263 of the Income Tax Act,1961-Revision -Of orders prejudicial to interest of revenue-Assessment Year 2002-03-Whether when revision order is passed on ground other than grounds for which revision proc .....

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foresaid legal position mentioned above, impugned revisional order was not sustainable- Held, yes [in favour of assessee] The impugned revision order is indeed not sustainable in law for the very elementary reason that the grounds on which order was subjected to revision are different, vis-à-vis the grounds on which revision proceedings were actually initiated. A plain reading of impugned revision order clearly shows that the conclusions drawn in the revision proceedings are materially di .....

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sulted in error within the meaning of Section 263 of the I.T. Act,1961; this error has differently caused prejudice to the revenue because of allowance of excess depreciation to the extent of ₹ 1,65,04,000/-. Accordingly, it is held that order of the AO in this regard is erroneous insofar as it is prejudicial to the interest of revenue within the meaning of section 263 of I.T. Act,1961. 7. In respect of other items viz. profit of ₹ 1,15,91,571/-, the AO has allowed deduction u/s 10A .....

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re prima-facie warranted on the facts and circumstances of this case. It is trite law that lack of enquiry results in error within the meaning of Sec.263 of the I.T. Act,1961. It is a fact that considering profit of ₹ 1,15,91,571/- for computation of income u/s.10A without enquiries has resulted in error within the meaning of section 263 of the I.T. Act,1961. This has also caused prejudice to the revenue inasmuchas it has resulted in granting exemption without enquiries warranted on facts .....

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ce u/s.263 afresh and take decision as per law. From the perusal of both show-cause notice as well as findings recorded by learned CIT while passing the order u/s. 263, we have noticed that the grounds taken by learned CIT while issuing show-cause notice is with regard to the disallowance but in the final order passed u/s. 263, the learned CIT has categorically mentioned that the Assessing Officer has not carried out any inquiry therefore direction was given to carry out necessary inquiry in thi .....

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t was held that if a ground of revision is not mentioned in the show-cause notice, then it cannot be made the basis of the order for the reason that assessee would have had no opportunity to meet the point. Hon ble ITAT Delhi Bench in the case of B.S. Sangwan vs. ITO (supra) has also categorically held that the commissioner started by pointing out, that he saw as, glaring illegalities in the assessment order, which was subjected to revision proceedings, but what he concluded was that the said as .....

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ounds mentioned by learned CIT in show-cause notice are different and the order passed by learned CIT u/s. 263 is based on another ground and therefore the assessee could not get opportunity to explain the point recorded at the time of passing the final order. Therefore, respectfully following the judgments which are based on the facts which are similar to the facts of the present case, we hold that the order passed by learned CIT u/s. 263 is bad in law and not sustainable in law. Therefore the .....

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