TMI Blog2019 (4) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... d an error in allowing the claim will lose its relevance when it is to be noticed only to the extent of finding out whether the same issue could have been examined in a subsequent revision proceeding under Section 263 of the Act. When in the revision proceedings the CIT accepts during the course of the order that the assessee had claimed deduction under Section 80 IC claiming to be a mineral based industry and in that background when the claim was disallowed by the Assessing Officer but allowed by the CIT(A), the issue would stand concluded and there would be no scope for re-examination in the jurisdiction under Section 263 of the Act as the assessment order has merged in the appellate order. The matter not having been examined in the same manner or to the same extent and depth is immaterial. When the claim for deduction was on that basis, the exception as contained in Clause-(c) to Explanation-1 to sub-section (1) of Section 263 of the Act would not apply nor will the circumstance stated by the Hon’ble Supreme Court in the case of Shri Arbuda Mills Ltd., Ahmedabad [1996 (1) TMI 11 - SUPREME COURT] be relevant to the present fact situation. In that view, the revision proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iated suo-moto. In the notice issued to the assessee, the CIT had indicated that the Assessing Officer had not examined or applied his mind on the basic issue as to whether the assessee is actually a mineral based industry or not. It is in that view, the revision of the assessment was proposed. The assessee had, in their reply, indicated reasons to claim benefit under Section 80 IC(2)(b)(iii) by contending that they are a mineral based industry. The threshold contention raised by the assessee, however, was to question the authority of CIT to initiate a revision under Section 263 of the Act when the said issue had already been concluded on the consideration made by the CIT(A) through its order dated 29.2.2008. It was further contended that the revision under Section 263 is permissible only in respect of an issue which was not considered earlier before the CIT(A) and wherein the order passed by the Assessing Officer is erroneous and it is also prejudicial to the interest of the revenue. It was contended that in the present circumstance when the issue was considered and one of the plausible views is already taken and also when the order of the Assessing Officer has merged in the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f law :- i) Whether the Tribunal is correct in law in cancelling the order passed by the Commissioner by holding that the learned Commissioner had illegally invoked jurisdiction under Section 263 of the Act, 1961 ? ii) Whether the Tribunal has correctly held that allowance of relief under Section 80 IC of the Act to the assessee on the ground that it is a mineral based industry even though it is engaged in the business of refining mineral oil ? iii) Whether the view taken by the Tribunal is not sustainable in law keeping in view the scheme of the Act read with the Union, Concurrent and State Lists of the Constitution of India ? 5. From a perusal of the contentions urged, the sequence of events that have followed and the first substantial question of law raised for consideration being, as to whether the jurisdiction invoked by the CIT under Section 263 of the Act is justified, the said aspect is to be taken note at the outset and the other questions would arise only as a consequence thereto. In that light, since the consideration is common to all these appeals and cross-objections, they are taken up together and considered through this common order. 6. Heard Mr. S.Sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said assessment, the issue as to assessee claiming to be a mineral based industry was also an issue which was raised and taken note of in the proceedings whereunder the deduction was sought. In order to take note of the same, a close scrutiny of the assessment order dated 29.11.2007 would disclose that deduction under Section 80 IC was an issue which had arisen for consideration since the deduction was sought on that basis. The relevant portion of the contention and the reply of the assesee as taken note in the assessment order, is as hereunder :- It is seen that in the return of the income filed on 31.10.2005 deduction u/s 80-IC has been claimed by way of a note in respect of fifty one new wells successfully drilled for production of crude oil (including sixty-eight wells completed in earlier last seven years). The amount of the claim was not quantified and no deduction has been made from the gross total income in the computation of income. Audit report in Form No.10CCB was also not submitted along with the return of income. The amount of deduction claimed u/s 80-IC was subsequently quantified as ₹ 369,60,15,777/- and communicated vide the company s letter dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it became an undertaking or enterprise . . They are not undertakings or enterprises. The assessee s claim for deduction u/s 80-IC by treating these oil/gas wells as undertakings or enterprises is, therefore, not allowable. The requirement of accounts of the undertaking to be audited by an accountant in order to be admissible for deduction u/s 80-IC is also not satisfied. .. For all these reasons discussed above the assessee s claim for deduction u/s 80-IC is disallowed. 11. It is against such conclusion of the Assessing Officer in not allowing the deduction which was claimed under Section 80 IC, the assessee was before the CIT (A). The CIT (A) took note of the claim for deduction as provided in Section 80 IC and, in that light, having considered each oil well as an enterprise, has given the benefit of the deduction as claimed under Section 80 IC, by concluding as hereunder : Applying the above tests, each oil well appears to satisfy the test of undertaking for the purpose of Section 80IB/80IC of the Act. Each oil well is a distinct, separate and integrate unit for which capital is separately employed and the expenses inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the order of the Assessing Officer has merged in the order in appeal, has relied on the decision in the cases of :- (1) Oil India Limited Vs. Commissioner of Income-tax, 138 ITR 836 (Calcutta), wherein while considering the claim of the assessee regarding depreciation on bungalows, which was disallowed by the Assessing Officer, and on appeal, the appellate authority allowed the appeal, but had not given any direction as to the quantum of depreciation and when the Commissioner subsequently issued a show cause notice under Section 263 inviting the assessee s objection to his proposal to set aside the assessment order insofar as it was prejudicial to the interest of the Revenue, an issue arose as to whether the order passed by the Commissioner under Section 263 of the Act was sustainable. In that context, it was held that in an appeal preferred before the appellate authority, the whole assessment is open for review and when the matter raised in the appeal is the subject matter before the Commissioner in the revision, the Commissioner has no jurisdiction to issue the notice under Section 263 of the Act and to pass any order. As such, it was held that where an appeal is preferre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of those three items, the CIT exercised his powers under Section 263. It is in that context, it was held that in respect of the said three items, there was no merger. 14. From the decisions cited on either side, the law as enunciated would be clear that in order to consider the position as to whether the order of the Assessing Officer had merged in the order of CIT (A) and, in that context, whether the subject matter which was the issue in the assessment proceedings as also in the appellate proceedings before the CIT (A), and that in the revision proceedings before the CIT is the same, the facts involved in each case will have to be taken note so as to arrive at a conclusion whether the invocation of the power under Section 263 of the Act to revise such assessment order is in respect of the same subject matter and the issue which had concluded in the assessment as also the appellate proceedings. In that background, the present facts will have to be noticed. 15. The extracted portion supra relating to the contention and consideration of the assessment proceedings leading to the Assessment Order dated 29.11.2007 will disclose that the claim for deduction as contemplated under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A), the issue would stand concluded and there would be no scope for re-examination in the jurisdiction under Section 263 of the Act as the assessment order has merged in the appellate order. The matter not having been examined in the same manner or to the same extent and depth is immaterial. When the claim for deduction was on that basis, the exception as contained in Clause-(c) to Explanation-1 to sub-section (1) of Section 263 of the Act would not apply nor will the circumstance stated by the Hon ble Supreme Court in the case of Shri Arbuda Mills Ltd., Ahmedabad (supra) be relevant to the present fact situation. In that view, the revision proceedings under Section 263 of the Act in the present context was not sustainable. 17. The contention urged on behalf of the assessee is also that the ITAT has appropriately decided the issue of proceeding under Section 263 of the Act not being maintainable and it is contended that it does not satisfy the twin test of the Assessment order being erroneous and also being prejudicial to the interest of revenue. The learned Senior Advocate for the assessee has relied on the decision of the Hon ble Supreme Court in the case of Malaba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Dawjee Dadabhoy Co. V. S.P. Jain, the High Court of Karnataka in CIT v. T. Narayana Pai, the High Court of Bombay in CIT v. Gabriel India Ltd. and the High Court of Gujarat in CIT v. Minalben S. Parikh treated loss of tax as prejudicial to the interests of the Revenue. 9. Mr. Abraham relied on the judgment of the Division Bench of the High Court of Madras in Venkatakrishna Rice Co. v. CIT interpreting prejudicial to the interests of the Revenue . The High Court held : in this context, (it must) be regarded as involving a conception of acts or orders which are subversive of the administration of revenue. There must be some grievous error in the order passed by the Income Tax Officer, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the Commissioner might think to be prejudicial to the interests of the Revenue Administration. In our view this interpretation is too narrow to merit acceptance. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income Tax Officer, the Revenue is losing tax lawf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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