TMI Blog2016 (5) TMI 1308X X X X Extracts X X X X X X X X Extracts X X X X ..... an assessee, but that fact, even if correct, does not mean that those Assessing Officer who did not discover this misadventure were acting in a manner leading to their orders being rendered erroneous and prejudicial to the interest of the revenue. The action of the Assessing Officer was bonafide and correct and the conclusions arrived at by him were appropriate vis-à-vis material before him. The fact that he did not visit the assessee, that he did not visually examine the lock to find out when was in use or not, and put all the averments of the assessee on scanner cannot be put against him today. His order may not have discussed these aspects in great detail but then as is the settled legal position the mere fact that the Assessing Officer has not written a detailed order on an issue, even though the details have been called for and are on record, the order cannot be treated as erroneous for the purpose of Section 263 - Decided in favour of assessee - I.T.A. Nos.: 870 and 1234/Ahd/14 - - - Dated:- 20-5-2016 - Pramod Kumar AM and Kul Bharat JM S N Soparkar for the appellant Jagdish for the respondent O R D E R Per Pramod Kumar, AM: 1. By way of this a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d out from material on record, are like this. The assessee had filed his return of income on 26th September 2009 declaring, after claiming exemption of ₹ 66,02,994 under section 10A, a total income of ₹ 21,59,890. This income tax return was subjected to scrutiny assessment proceedings under section 143(2), and the resultant assessment, under section 143(3), was finalized on 18th October 2011. The matter, however, did not rest there. On 10th February, 2014, learned Commissioner issued a notice to the assessee requiring him to show cause as to why the assessment so completed not be subjected to revision under section 263, and, accordingly exemption under section 10A amounting to ₹ 66,02,994 not be withdrawn. This show cause notice, inter alia, stated as follows: In this case, the Return of Income was filed on 26/09/2009 declaring therein total income of ₹ 21,59,890/-. Thereafter the case was selected for scrutiny under CASS and the assessment was finalized u/s.143(3) of the IT Act on 18/10/2011 determining the total income at ₹ 21.59.890/-. The main source of income of the assessee is consultancy income, income from house property (both SOP and let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , assessee was already showing income from foreign consultancy during the previous years relevant to Assessment Years 2004-05 to 2006-07 i.e. prior to the setting up of the SEZ Unit at Surat. Hence, the business claimed to have been conducted an earning income from such foreign consultancy was already in existence and hence squarely covered under the provisions of Section 10AA(4)(ii) of the Act which lays down that it applies to any undertaking being unit not formed by splitting up or reconstruction of business already in existence . Further, it has been detected that the consultancy services are being provided by assessee in his personal capacity without involvement of any infrastructure at the Surat SEZ Unit. Since, assessee did not carry out any manufacturing activity nor provided the Consulting Services in the field of Lean Manufacturing Management at his SEZ Unit, the alleged receipts and income of the said M/s. O.S. Process Consulting from overseas cannot be considered to be from assessee's unit at SEZ, - Surat, on which he has claimed exemption u/s.10AA of the I.T. Act. 4. The Assessing Officer concluded while finalizing the course of assessment proceedings for A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson along with documents and evidence justifying your submission. You may, if you so desire, submit your contentions in writing or through an authorized representative also . 3. The assessee did explain that the original assessment order passed by the Assessing Officer was not erroneous or prejudicial to the interest of the assessee, inasmuch as the assessee had given all the requisite information at the assessment stage, in response to the requisitions of the Assessing Officer, and that the Assessing Officer had duly examined the same. It was submitted that the return filed by the assessee was duly accompanied by the copies of audited accounts, tax audit report and further audit certificate in form 56F, which is specifically for the purposes of exemption under section 10AA. It was also submitted that when scrutiny assessment proceedings commenced, vide point no. 12 of the notice dated 17th January 2011, the assessee was specifically required to furnish all relevant supporting evidences in respect of deductions and exemptions. The assessee duly complied with the requisition It was also submitted that further to the discussions, during the course of hearing on 1st March 2011, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -vis facts of assessee's case for the year under consideration various legal pronouncements to decide the issues involved as discussed hereunder: (i) Assessee files the Returns of Income in individual capacity and is an engineer doing professional management consultancy services in the field of manufacturing domain specifically related to 'lean manufacturing management'. He is also founding member Director (along with Mr. Vinod Grover and Mr. Hamilton Cox) of M/s. Kaizen Institute (India) Pvt. Limited and Kaizen Institute- Africa, the other founding member, M/s. Kaizen Institute is a global management consulting firm, headquartered at Switzerland. It is also seen that assessee is also providing consultancy services to this global entity. (ii) It is seen that assessee had claimed the deduction u/s 10AA of the Act in respect of income of his proprietorship concern in the name of M/s O.S. Process Consulting claimed to be carrying on the professional management consultancy services from the unit in SEZ Surat. (ii) Details collected during the course of assessment proceedings for A.Y. 2011-12 in respect of existence, operation and functioning of assessee's S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. 142(1) was issued on 25/8/2011 wherein there is no query raised with respect to assessee's claim of deduction u/s. 10AA of the Act. In response to the same, vide reply dated 06/09/2011 vide SI. No.7, it is submitted that during the year, increase in capital was ₹ 1,17,99,783/- including profit for the year amounting to ₹ 1,15,13,731/-. Details given in Annexure - 3. The said Annexure - 3 filed is found to be containing details of increase in capital during the year and does not contain any clue as to the exempt income claimed u/s. 10AA of the Act. In fact, the computation of income filed with this submission under the head Income from business and profession' shows exempt income of ₹ 99,24,054/- for which no other details are available in the said computation, although the exempt income under the head capital gain is specifically mentioned in the computation of income. The next submission filed by the assessee is dated 20/01/2012 and was in continuation of their submission against notice u/s. 142(1) of the Act dated 25/08/2011. This submission contained only details of capital credited in assessee's capital account and confirmations of unsecured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the taxable income. 9. Therefore, the assessment order has been passed by the Assessing Officer without carrying out any inquiry and cross verification and thereby making wrong assumption of facts and incorrect application of law as well as without due application of mind. Hence, the above assessment order is erroneous in so far as it is 'prejudicial to the interest of Revenue'. In this regard reliance is placed on the judgment of the Supreme Court in the case of Malabar Industrial Co. Ltd. Vs. CIT(SC) 243 ITR 83. I, therefore, propose to revise the said order u/s. 263 of the Act. 10. Therefore, I set aside the order dated 30/10/2012 passed u/s. 143 (3) of the Act by the Assessing Officer DCIT, Circle - 9, Ahmedabad with a direction to - (i) Make inquiries with respect to assessee's activities in the SEZ unit, to verify genuineness of the claim on the points mentioned in para 6[i) to 6(iv) and to verify on claim that the foreign exchange receipts pertained to business conducted from the SEZ unit during the year under consideration. (ii) To disallow the claim of the assessee u/s.10AA of the Act for the year under consideration in case, it is found on inq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... research of the assessee or personally visits the office premises from which services are said to have been rendered. The Assessing Officer may or may not have reached the right conclusion but then he cannot be said to have acted in an inappropriate manner for not visiting assessee s premises and not doing web research on him- whatever may be the worth and legal implications of output of such a research either. Lets not forget that right now we are only concerned with the question as to whether the Assessing Officer s action of conducting the adequate inquiries, and not conclusion, was erroneous or prejudicial to the interest of the revenue. That is not even the case of the learned Commissioner that the conclusion were incorrect. His case is confined to the adequacy of inquiries having been conducted, as is evident from the directions given by him in the revision order. Of course, there can be situations in which Assessing Officer remains passive on facts which, on the very face of it, must call for further inquiry, and in such situation, even inertia of the Assessing Officer may vitiate the order rendering it to be erroneous and prejudicial to the interest of the revenue. That, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been called for and are on record, the order cannot be treated as erroneous for the purpose of Section 263. In the case of CIT VS Gabriel Co Ltd [(1993) 203 ITR 188 (Bom)], it was held that The ITO in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the ITO on being satisfied with the explanation of the assessee. Such decision of the ITO cannot be held to be erroneous simply because in his order he did not make an elaborate discussion in that regard . Once all the information was before the Assessing Officer, he duly considered the same and reached a conclusion, without pointing out any fault in the action of the Assessing Officer- beyond vague observations about not examining the matter in more detail, the assessment order cannot be subject to revision. We are not, and cannot be, sitting in judgment over what the Assessing Officer has done in the assessment year 2011-12. Suffice to say that these findings, whatever be their worth and legal sustainability, cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. If we do something today, we do it keeping in view the law of today and in force and not tomorrow s backward adjustment of it. Our belief in the nature of the law is founded on the bed rock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit: law looks forward not backward. As was observed in Phillips vs. Eyre3, a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law. The obvious basis of the principle against retrospectivity is the principle of 'fairness , which must be the basis of every legal rule as was observed in the decision reported in L Office Cherifien des Phosphates v. Yamashita- Shinnihon Steamship Co.Ltd4. Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n only be prospective . As held by a Full Court decision of Hon ble AP High Court, in the case of CIT vs B R Constructions [(1993) 202 ITR 222 (AP)], a judicial precedent ceases to be a binding precedent when it is passed per incurium i.e. in ignorance of a previous decision of its own or of a co-ordinate jurisdiction which covered the issue. The amendments made to Section 263 by the Finance Act 2015 will, therefore, hold good only in respect of the revision orders on or after 1st June 2015, whereas the impugned revision order was passed on 11th March 2014. As for the law in force at the relevant point of time, for the detailed reasons set out earlier, the cases of inadequate inquiry, even if that be so, will continue to be outside the ambit of scope of section 263. 7. In view of these discussions, as also bearing in mind entirety of the case, we are of the considered view that it was not a fit case for the learned Commissioner to exercise his powers under section 263 and setting aside the assessment for fresh inquiries on the lines directed. As we hold so, we make it clear that nothing stated herein should be construed as an observation on merit or on correctness of other alt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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