TMI Blog2019 (12) TMI 1033X X X X Extracts X X X X X X X X Extracts X X X X ..... Pr. CIT did not bring on record any material to disprove the assessee s explanations which showed that receipts certified in the TDS Certificates totaling ₹ 972 Lacs were fully accounted in the assessee s books of the relevant year but merely restored the issue for fresh examination by the AO. The order of the Ld. Pr. CIT with reference to issue in clause (a) is therefore set aside. Ground Nos. 3 4 are accordingly allowed. Mismatch in amount paid to related persons u/s 40A (2) (b) reported in Audit report (Form 3CEB) and ITR - HELD THAT:- When the impugned order was passed by the Ld. Pr. CIT, clause (i) of section 92BA of the Act had already been omitted by the Finance Act, 2017 and in that view of the matter the Ld. Pr. CIT could not set aside the order for alleged non-compliance with provision of law which no longer existed in the statute as on the date of order. The Ld. Pr. CIT s direction requiring the AO to consider making a reference to the TPO in the set aside proceedings is also contrary to the view expressed in the foregoing decision of the coordinate bench in M/S. DVC EMTA COAL MINES LTD., M/S. BENGAL EMTA COAL MINES LTD., M/S. PANEM COAL MINES LTD. VERSUS AS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Applying the ratio laid down in the decisions of the Hon ble Delhi High Court in the case of ITO vs DG Housing Projects Ltd [ 2012 (3) TMI 227 - DELHI HIGH COURT] DIT vs Jyoti Foundation [ 2013 (7) TMI 483 - DELHI HIGH COURT] we therefore hold that the order of the ld. Pr. CIT merely setting aside the AO s order without independently dealing with merits of the issue was untenable and therefore the same is set aside. Ground Nos. 13 14 are accordingly allowed. Deduction u/s 80IC on income from other Sources - Rationale behind such claim was not verified by the A.O during the course of assessment proceedings - the preceding four income-tax assessments framed u/s 143(3), the AOs had consistently allowed the deduction u/s 80IC in respect of scrap sales which was accounted in the respective standalone accounts under the head Other Sources . Having regard to these facts and judicial precedents, we do not find merit in the submissions of the ld. CIT, DR that the order of the AO suffered from any error or that the view taken by the AO was unsustainable in law making the AO s order liable for revision u/s 263 of the Act. The Ld. Pr. CIT s order on this issue is therefore h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and in the circumstances of the case, the Principal Commissioner of Income Tax (the CIT) was unjustified in law and on facts in exercising his revisional jurisdiction u/s. 263 of the Income Tax Act for setting aside the assessment order in respect of the issues set out in the SCN even though the assessment order with regard to those Issues was neither erroneous nor prejudicial to the interest of the Revenue. 2) For that on the facts and in the circumstances of the case, the CIT was unjustified in setting aside the assessment order in exercise of his powers u/s 263 with respect to issues set out in the SCN without dealing on merits with the submissions made before him which proved that the assessment order u/s. 143(3) for the A.Y. 2014-15 was neither erroneous nor prejudicial to the interest of the revenue and further the CIT himself having not recorded any specific finding as to in what manner he found the AO's order to be erroneous in so far as it was prejudicial to the interest of the revenue; he was not justified in setting it aside and directing AO to pass the order afresh. 3) For that on the facts and in the circumstances of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case, the appellant having not earned any tax-free dividend during the relevant year for which the AO refrained from making disallowance u/s 14A and in that regard having followed the judicial precedents available on the subject, the CIT was unjustified in law in considering the assessment to be erroneous for the purpose of Sec. 263 of the Act. 10) For that on the facts and in the circumstances of the case, the CIT was unjustified in law in considering the assessment order to be erroneous for the reasons set out in Para 2(d) of the SCN, but failed to appreciate the facts of the appellant's case and applicable legal provision governing sale of Factory building which did not require execution of Conveyance. 11) For that on the facts and in the circumstances of the case, the CIT failed to understand that as per the applicable legal provision sale of Factory building did not require execution of registered Sale Deed, requiring stamp duty payment and further there being no material brought on record which proved that stamp duty value of the factory building was higher than the declared sale consideration the CIT was unjustified in considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the revenue for the said reasons. 18) For that the appellant craves leave to file additional grounds and/or amend or alter the grounds already taken either before or at the time of hearing of the appeal. 3. Brief facts of the case are that for the AY 2014-15 the assessee had filed return of income declaring total income of ₹ 12,10,19,584/-. Later the case was selected for scrutiny through CASS on the following parameters: 1. Large deduction claimed under Chapter VI A 2. Large refund claimed out of advance tax 3. High ratio of refund to TDS 4. Large other expenses claimed in the Profit Loss A/c 5. Large any other deduction claimed in such BP creating a loss without any income in Profit Loss a/c 6. Depreciation claimed at higher rates/Higher additional depreciation claimed 7. Large value sale of consideration of property in ITR is less than sale consideration of property reported in TDS return under section 194IA 8. Mismatch in sales turnover reported in Audit Report and ITR 9. Mismatch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view the circular No. 5/2014 (F.No. 225/182/2013-ITA.II) dated 11-02-2014 as well as provisions laid down in the Act. (d) It is seen from clause 17 of TAR that the assesse did not take valuation of properly sold as per provisions of section 50C of the Act. However, large value sale of consideration of property reported in TDS return under section 194IA was one of the criteria for selection of the case in scrutiny. The same was not properly verified by the A.O. (e) It is further seen that write off of fixed asset of ₹ 42,93,049/- as per clause 21(a) of TAR was not added back by the A.O during the course of assessment. (f) It is seen that the assesse claimed deduction u/s 801C of the Act on income from other Sources amounting to ₹ 34, 61,750/-. Rationale behind such claim was not verified by the A.O during the course of assessment proceedings. (g) One of the criteria for selection in scrutiny was large other expenses in P L account, even headwise break up of miscellaneous expenses of ₹ 21.56 crores was not called for by the A.O. 5. In response to the later SCN, the assessee submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pr. CIT and consequent to which the prejudice had been caused to the Revenue. He further claimed that since the Ld. Pr. CIT did not himself record any adverse finding nor had given specific direction for making additions/disallowances but had merely set aside the assessment, requiring the AO to pass the assessment afresh after conducting proper enquiries and after giving opportunity of being heard, no prejudice was caused to the assessee at this stage and therefore there was no merit in the appeal preferred by the appellant. He therefore urged that the order of the Ld. Pr. CIT should not be interfered with. 8. Having heard both the parties, and on a careful consideration of the facts and circumstances , we find that in the case in hand the Ld. Pr. CIT invoked jurisdiction u/s 263 of the Act principally on the broad allegation that there was failure to conduct enquiries which the facts of the case required the AO to make. According to Ld. Pr. CIT assessment order suffered from lack of enquiry application of mind to the facts as also by incorrect application of applicable legal provisions to the facts of the case. As a result, in the opinion of Ld. Pr. CIT, AO s ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r cannot be treated as prejudicial to the interest of the revenue. It was further observed that when the Assessing Officer adopts one of the course permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the Ld. CIT does not agree, it cannot be treated as an order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law . In the circumstances it was necessary for the Ld. Pr. CIT to show in the impugned order that the AO s order was erroneous because the view followed by him in respect of each of the reason set out in clauses (a) to (g) of SCN was unsustainable in law and therefore the order was liable for revision u/s 263 of the Act. 9. We also note that both in the reasons set out in SCN as well as in the impugned order, the Ld. Pr. CIT observed that in respect of issues set out in clauses (a), (b), (d), (f) and (g), proper enquiry was not conducted by the AO which the circumstances of the case demanded and for absence of proper enquiry, the assessment order was considered by the Ld. Pr. CIT to be erroneous and prej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith law, he was under no obligation to justify as to why was he satisfied. On the top of that the Assessing Officer by his order dated 28th March, 2008 did not adversely affect any right of the assessee nor was any civil right of the assessee prejudiced. He was as such under no obligation in law to give reasons. 89. The fact, that all requisite papers were summoned and thereafter the matter was heard from time to time coupled with the fact that the view taken by him is not shown by the revenue to be erroneous and was also considered both by the Tribunal as also by us to be a possible view, strengthens the presumption under Clause (e) of Section 114 of the Evidence Act. A prima facie evidence, on the basis of the aforesaid presumption, is thus converted into a conclusive proof of the fact the order was passed by the assessing officer after due application of mind. 90. The judgments cited by Mr. Nizamuddin do not really support his contention. The judgment in the case of Meerut Roller Flour Mills (P.) Ltd. (supra) does not apply because the High court in that case was satisfied that the assessment order was passed without enquiry. 91 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo contesting parties cannot be made applicable to the proceedings before an Assessing Officer. 97. Mr. Nizamuddin contended the judgments cited by Mr. Poddar indicate that the Assessing Officer is not required to write an elaborate judgment. He contended that the assessing officer may not have any such obligation but it cannot be said, according to him, that the Assessing Officer is under no obligation to record anything in his assessment order. It is not in the first place a fact that he has not recorded anything. From the assessment order, the following facts and circumstances appear:-- Return was filed on 29/11/06 showing total income of ₹ 3,80,66,940/-. In response to notices u/s. 143(2) and 142(1) of the I. T. Act, 1961, Sri P. R. Kothari, A/r appeared from time to time and explained the return. Necessary details and particulars were filed. The business of the assessee is manufacturing and trading of cosmetics and dental care products as in earlier years. In view of above total income is computed is under: 98. Unless the aforesaid recital is factually incorrect or the computation is legally wrong, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law on this aspect was discussed in the following manner : . . . From a reading of sub-section (1) of section, it is clear that the power of suomotu revision can be exercised by the Commissioner only if, on examina-tion of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is 'erroneous insofar as it is prejudicial to the interests of the revenue'. It is not an arbitrary or unchartered power. It can be exercised only on fulfilment of the requirements laid down in sub-section (1). The consideration of the Commissioner as to whether an order is erroneous insofar as it is prejudicial to the interests of the revenue must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation on that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be erroneous simply because in his order he did not make an elaborate discussion in that regard . . . (pp. 113-117) 13. When we examine the matter in the light of the aforesaid principle, we find that the Assessing Officer had called for explanation on this very items, from the assessee and the assessee had furnished his explanation vide letter dated 26-9-2002. This fact is even taken note of by the Commissioner himself in Para 3 of his order dated 3-11-2004. This order also reproduces the reply of the respondent in Para 3 of the order in the following manner : The tools and dies have a very short life and can produce up to maximum 1 lakh permissible shorts and have to be replaced thereafter to retain the accuracy. Most of the parts manufactured are for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner or Commissioner cannot be read in isolation. It has to be kept in mind that Explanation cannot over-ride the substantive provision of the law which the Explanation only tries to explain/clarify. 12. Before we advert further, let us look at Section 263 of the Act, which is reproduced as under:- 263. (1) The Principal Commissioner or] 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 Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, 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. [Explanation 1.]-For the removal of doubts, it is hereby declared that, for the purposes of this subsection,- (a) an order passed [on or before or after the 1st day of June, 1988] by the Assessing Officer shall include- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, [National Tax Tribunal,] the High Court or the Supreme Court. Explanation.-In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded. 13. From bare reading of Section 263 of the Act and the Explanation thereto introduced through the Finance Act, 2015, w.e.f. 01.06. 2015, we note that Explanation -2, is a deeming provision. The well settled position of law is that while construing a deeming provision, it has to be strictly interpreted and that the legal fiction should not be stretched beyond the purpose for which it is enacted and should not extend that legitimate field (Raymond Vs. State of Chattisgarh AIR 20-07 SC 2854). It shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s stipulated under Explanation-2 clauses (a) to (d) . it is only in the event that any one of the situation is satisfied and there is a finding of fact by the Ld. CIT to that effect in his revision order, then only the deeming provision of Explanation-2 can be pressed into service for rendering an assessment order as erroneous, insofar as prejudicial to the Revenue, which is the jurisdictional fact law required for the ld. Pr. CIT/CIT to invoke revisional jurisdiction u/s 263 of the Act. 15. Coming to the expression in Explanation -2 in the opinion of the Ld. CIT ,it must be the considered opinion of the CIT which is based on the correct facts and in accordance with the principles of law. It cannot be an arbitrary opinion bereft of facts or law. The aforesaid clause only provides for situation where inquiries or verifications should be made by reasonable and prudent officer in the context of the case. Such clause cannot be read to authorize or give unfettered powers to the Commissioner to revise each and every assessment order. The applicability of the clause is thus essentially contextual. It has to be the opinion of a prudent person properly instructed in law. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Pr. CIT detailed explanations supported by tangible documentary evidence to prove that the SCN had proceeded on assumption of some incorrect facts and wrong interpretation of applicable legal provisions. The assessee also explained with cogent material that before completion of assessment, the AO had indeed made enquiries with reference to specific issues raised in the SCN and the order u/s 143(3) of the Act was passed only after considering the outcome of the enquiry. According to Ld. AR, on receipt of the objections from the assessee, the Ld. Pr. CIT ought to have examined the assessment records and conducted his own enquiry and thereafter should have recorded his own finding proving that the explanations furnished by the assessee suffered from any factual or legal infirmity and because of which he found that the view adopted by the AO was unsustainable in law making his order as erroneous within the meaning of Section 263 of the Act. In our opinion, once the ld. CIT initiates the proceedings u/s 263 of the Act for specific reasons and these reasons are met by the assessee, then it is incumbent upon the ld. CIT to himself independently deal with the objections and record his ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not. 17. The above view is also supported by the following decisions: - DIT vs Jyoti Foundation reported in 357 ITR 388 (Del) - CIT vs Ashish Rajpal reported in 320 ITR 674 (Del) - CIT vs R.K. Construction Co. reported in 313 ITR 65 (Guj) 18. Having broadly discussed and set out above the settled judicial principles for usurpation of jurisdiction u/s 263 of the Act, we now proceed to examine whether for the reasons set out in clauses (a) to (g) of the SCN, the Ld. Pr. CIT was able to justify his finding in the impugned order that the AO s order was indeed erroneous and prejudicial to the interests of the Revenue necessitating his interference u/s 263 of the Act with reference to each of the seven issues set out in the SCN. 19. In Ground Nos. 3 4 the assessee objected to Ld. Pr. CIT s finding with reference to reasons set out in Clause 3(a) of the SCN which read as under: One of the reasons for selection of scrutiny was mismatch in turnover. It is noticed from reply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was deducted at source only from the receipts, reported in the appellant s P L A/c under the head Other Income and no tax was deducted from receipts reported under other accounting heads in the P L A/c. On the contrary, we find that in the course of assessment the assessee was specifically required by the AO to reconcile the receipts reported in Statement 26AS with the amounts certified in the TDS certificates as also with receipts reported in the audited accounts for the relevant year. In response, a statement of reconciliation was provided to the AO under the cover of assessee s letter dated 16.12.2016 which finds place at Pages 40 to 41 of the paper book. We therefore find that the relevant aspect was not only examined by the AO but being satisfied with the fact that the receipts reported in Statement 26AS fully reconciled with the receipts reported in the audited accounts, the AO had passed the assessment order u/s 143(3) of the Act. We further find that in response to the SCN, the assessee had filed a statement, reconciling receipts which suffered tax deduction at source during the relevant year with receipts accounted under respective accounting heads and wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40A (2) (b) reported in Audit report and ITR . We note that with reference to this CASS reason the assessee was required to provide its explanation about the alleged mismatch of the figures reported in terms of Section 40A(2)(b) in ITR and Tax Audit Report. We note that explanation in that regard was furnished vide Para 9 of assessee s letter dated 09.12.2016 [ Page109 of paper book]. It was explained before the lower authorities as also before us that in clause 9A of Part A- OI of the Income-tax Return in ITR-6, the assessee was required to specify the quantum of the amounts debited to the Profit Loss Account ,to the extent disallowable u/s 40A, to the persons specified in Section 40A(2)(b) of the Act. In other words in the ITR the assessee was expected to specify the amount which was disallowable in terms of Section 40A(2)(b)of the Act. On the other hand, in Clause 23 of the TAR read with Annexure IX thereto, the auditor had reported the payments actually made by the assessee to the persons specified in Section 40A(2)(b) of the Act. It was explained that the tax auditor, while giving his report in conformity with the form prescribed by the Board u/s 44AB of the Act, was req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid parameter constituted transfer pricing risk parameter so as to warrant mandatory reference u/s 92CA of the Act in terms of the Para 3.2 of CBDT Instruction No. 3 of 2016 and failure to make TP reference made the assessment order erroneous. We further find that once the incorrect presumption on Ld. Pr. CIT s part was highlighted by the assessee in it s submission then in the impugned order the Ld. Pr.CIT himself completely digressed from the reason set out in the SCN but none the less justified his action on the ground that the reference to TPO was necessary because the assessee s case was selected for scrutiny under the category of complete scrutiny . We are however unable to accept an altogether new case made out by the Ld. Pr. CIT while passing the impugned order, justifying his interference that for not making reference to the TPO, order of assessment was erroneous in terms of Section 263 of the Act. In the first instance, we note that the Ld. Pr. CIT himself gave up the reason set out in SCN viz., that one of the CASS reason for selection of scrutiny assessment was a transfer pricing risk parameter. Once it is established that the transfer pricing risk parameter was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO comes to know that the taxpayer has entered into international transactions or specified domestic transactions or both but the taxpayer has either not filed the Accountant's report under section 92E at all or has not disclosed the said transactions in the Accountant's report filed; (b) where there has been a transfer pricing adjustment of ₹ 10 Crore or more in an earlier assessment year and such adjustment has been upheld by the judicial authorities or is pending in appeal; and (c) where search and seizure or survey operations have been carried out under the provisions of the Income-tax Act and findings regarding transfer pricing issues in respect of international transactions or specified domestic transactions or both have been recorded by the Investigation Wing or the AO. 28. From perusal of the above, it is noted that none of the conditions prescribed in these Paras necessitating mandatory reference to TPO were satisfied in the instant case. In fact, we find that in the impugned order, Ld. Pr. CIT himself did not to make out a case that the assessee s case fell under any of the situations prescribed in Paras 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f corporate guarantee fees and interest on loan to AEs which were not actually charged. We therefore find that it was not even a case where the order of the AO suffered from the charge of failure to conduct enquiry into the relevant issue as alleged by the Ld. Pr. CIT in the impugned order. 30. Lastly, as pointed out by the ld. AR, in the SCN, the Ld. Pr. CIT had justified invocation of power u/s 263 with reference to assessee s transactions with persons specified in Section 40A(2)(b) of the Act. In other words in CIT s opinion assessee s specified domestic transactions coming within the ambit of Section 92BA(i) of the Act should have been referred for transfer pricing scrutiny. We however note that the relevant provisions of Section 92BA were amended by Finance Act, 2017w.e.f. 01.04.2017 whereby clause (i) of sec. 92BA relating to any expenditure in respect of which payment have been made or is to be made to a person referred to clause (b) of sub- section (2) of section 40A of the Act was omitted. Now the question arises whether after the omission of clause (i) from the statute, the CIT can justifiably set aside the order of assessment for not making a reference to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as provisions laid down in the Act. 33. From the assessment order as also from the facts on record it appeared that during the relevant year the appellant did not earn any dividend from it s investments made in shares of other bodies corporate. We also note that barring investment of about ₹ 5 lacs, the investments held by the appellant were in foreign subsidiaries from which no exempt dividend could have been earned. We also note that in the course of assessment the AO had specifically required the assessee to explain why disallowance u/s 14A of the Act should not be made. The assessee vide its letter dated 14.12.2016 had explained before the AO that no disallowance u/s 14A was warranted since during the relevant year it did not earn any tax free dividend. The relevant letter is available at Page 23 of the paper book. After considering the submissions of the assessee, the assessment order was passed u/s 143(3) of the Act in which no disallowance u/s 14A was made. We thus find that it was not a case where the aspect of disallowance u/s 14A was not enquired into by the AO prior to completion of assessment. We also find that the view entertained by the AO for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot have computed the income arising from it s sale. He further opined that the AO s order lacked enquiry as also lacked interpretation of facts because the AO summarily accepted the explanations filed by the assessee and did not dwell into the matter as per the criteria for selection of scrutiny under CASS. 37. It is noted from the CASS reasons that assessee s case was selected for scrutiny on the ground that large value of sale consideration of property in ITR was less than sale consideration of property reported in TDS return u/s 194IA of the Act . We find that with reference to this CASS reason, the AO had specifically required the assessee to furnish it s explanation. In response, the assessee by its letter dated 09.12.2016 had furnished before the AO the relevant explanation together with supporting documentary evidences. It was explained that during the relevant year the assessee sold fixed assets of its tea packet factory located at Chaupara Tea Estate to M/s Mcleod Russell India Ltd ( MRIL ) for lumpsum consideration of ₹ 1200 lacs. After deducting incidental expenses, the net consideration realized was ₹ 11,99,60,849/-. Since the fixed assets we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the reasons set out in the clause 3(d) of SCN, the AO s order cannot be said to be erroneous and prejudicial to the interests of the Revenue. 39. As regards the Ld. Pr. CIT s finding in the impugned order holding the order as erroneous for not making reference to the registered valuer, for determination of the market value of factory building, the ld. AR submitted that the impugned order is silent with regard to the relevant provision of the Act in terms of which reference to registered valuer was necessary for determination of taxable income. Although in the CASS reason, reference to Section 50C of the Act is made, in the impugned order the Ld. Pr. CIT did not make any specific reference to the said provision though he emphasized on the fact that under the Indian Registration Act, 1908, the sale of factory building required registration and in that context it was necessary to obtain stamp duty valuation. The ld. AR however pointed out that the issue of stamp duty valuation of the immovable property would have been relevant only if income arising on sale of fixed assets of packet tea factory was assessed under the head Capital Gains . Drawing attention to provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from sale of fixed assets of packet tea factory was assessed under the head Capital Gains . We note that in terms of Section 32, 43(6)(c) read with Section 41(4) of the Act, the consideration received on transfer of depreciable assets was reduced from the opening WDV of the respective block of assets. After such reduction, none of the blocks ceased to exist and therefore only with reference to the resultant reduced WDV, the assessee was granted depreciation u/s 32 of the Act. In particular, our attention was drawn to Page 190 of the paper book, which contained Schedule of depreciation allowance u/s 32 of the Act, certified by the tax auditor. We find that WDV of the non-residential building block at the beginning of the relevant year, was ₹ 26,35,55,506/- from which the sale consideration of ₹ 8,03,94,934/- was reduced and the resultant reduced WDV was ₹ 18,36,16,633/- against which depreciation at the rate of 10% was allowed by the AO. We therefore find that in respect of sale of factory building, no income under the head Capital Gain was assessed. We also find merit in the ld. AR s submission that for computing the WDV in terms of Section 43(6)(c) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ff of fixed asset of ₹ 42,93,049/- as per clause 21(a) of TAR was not added back by the A.O during the course of assessment. 42. In the impugned order the Ld. Pr. CIT admitted that the assessee had filed explanations to counter these reasons but in his opinion order was erroneous on the ground of non-enquiry because the issue in question was not raised by the AO and assessee did not furnish the explanation in the course of assessment. On the other hand, in the course of hearing, the ld. AR of the assessee drew our attention to the audited accounts for the relevant FY 2013-14 to show that the sum of ₹ 42,93,049/- being the cost of assets written off was never debited as a separate line item to its Profit Loss Account nor any deduction there for was claimed in the computation filed with the return. In the circumstances it was submitted that when the assessee neither debited such amount to P L A/c nor claimed any deduction in the return of income separately, the question of there being any prejudice caused to the interests of the Revenue on account of such non-existing deduction, did not arise. The ld. AR of the assessee also drew attention to the cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Pr. CIT merely setting aside the AO s order without independently dealing with merits of the issue was untenable and therefore the same is set aside. Ground Nos. 13 14 are accordingly allowed. 44. In Ground Nos. 15 and 16 the assessee has objected to Ld. Pr. CIT s finding with reference to reasons set out in Para 3(f) of the SCN which read as follows: It is seen that the assesse claimed deduction u/s 801C of the Act on income from other Sources amounting to ₹ 34, 61,750/-. Rationale behind such claim was not verified by the A.O during the course of assessment proceedings. 45. In the impugned order the Ld. Pr. CIT admitted that the assessee had filed explanation negating the reasons set out in the SCN but he found that the issue raised in the SCN was never addressed by the AO before completion of assessment nor the assessee had furnished specific calculation by submitting the relevant evidence during the course of assessment. For this reason alone, the Ld. Pr. CIT considered the AO s order to be erroneous and prejudicial to the interests of the Revenue. 46. After hearing the rival submissions and on perusal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness and such action was not interfered with by the Ld. Pr. CIT in his order u/s 263. In the circumstances we note that no infirmity was committed by the AO when the deduction u/s 80IC was allowed in respect of income derived from scrap sale which the AO had assessed under the head Business . We find that the AO s order allowing deduction u/s 80IC in respect of income from scrap sales is in conformity with the decision of the Hon ble jurisdictional Calcutta High Court in the case of Reckitt Benckiser India Ltd Vs ACIT (231 Taxman 585). This view is also supported by the judgment of the Hon ble Madras High Court in the case of Fenner India Ltd Vs ACIT (125 Taxman 386), Hon ble Delhi High Court in the case of CIT Vs Sadhu Forgings Ltd (11 taxmann.com 322). We also note from the comparative chart placed at Pages 197 to 208 of the paper book that in all the preceding four income-tax assessments framed u/s 143(3), the AOs had consistently allowed the deduction u/s 80IC in respect of scrap sales which was accounted in the respective standalone accounts under the head Other Sources . Having regard to these facts and judicial precedents, we do not find merit in the submissions of the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowances were made out of other expenses , the AO had accepted the explanation put forth by the assessee. The ld. AR further pointed out that Miscellaneous Expenses debited in the Profit Loss Account totaled ₹ 21.56 crores and in response the SCN of the Ld. Pr. CIT the assessee had furnished its complete break-up before him and copy of which is placed at Page 79 of the paper book. The ld. AR argued that having furnished the complete break-up of the expenses debited under the head Miscellaneous Expenses, the Ld. Pr. CIT himself did not point out any specific infirmity nor he was able to point out even one specific instance where the item of expenditure was found disallowable or it was excessive or unreasonable. He further submitted that the appellant was a listed public company having turnover in excess of ₹ 1153 crores and carried diverse business activities on pan India basis. Its accounts were subjected to internal audit, statutory audit, cost audit, tax audit etc. and in the reports furnished, no adverse comments were made by any of the auditors. He further pointed out that the nature of business and nature of expenses incurred by the assessee in the prior yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnished the break-up of the expenses before the Ld. Pr. CIT, he did not point out any specific instance of the expenditure being excessive or not permissible but simply set aside this issue to the file of the AO. We however find from the chart furnished before us that in fact the expenditure debited under the head Miscellaneous Expenses during the year under consideration was substantially lower than the expenditure incurred in the prior years. This fact can be verified from the following chart: Particulars AY 2011-12 AY 2012-13 AY 2013-14 AY 2014-15 Turnover as per P L Account 9504232206 9803015000 10353267000 11534070000 Misc. Expenses as reported in P L Account 138297344 287340000 327981262 215639429 Net profit / ..... X X X X Extracts X X X X X X X X Extracts X X X X
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