TMI Blog2021 (9) TMI 1258X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessing officer made sufficient enquiries. The assessee filed the detailed reply on 4thAugust 2016, explaining elaborately how the assessee satisfies the conditions, as required under section 80 IB - thus it is abundantly clear that the assessing officer while framing the assessment had made an extensive, elaborate and necessary enquiry with a view to find out whether the assessee fulfils the conditions mentioned in section 80IB or not. The reading of the notice and the reply and subsequent notices and replies clearly shows that the assessing Officer was satisfied that the assessee had fulfilled all the conditions necessary for claiming the deduction under section 80 IB. As sufficient, necessary enquiries were made by the assessing officer during the assessment proceedings, therefore the action on the part of the principle CIT cannot be countenanced and the invocation of jurisdiction under section 263 , was devoid of any merit and is liable to be set aside and annulled . As AO at the first instance was holding the view that no addition can be made based on either non-fulfilment of the Commissioner under section 80IB and thereafter he had turned around and proposed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the issues which are already enquired by the Assessing Officer, however, not expressly discussed in the assessment order passed. 6. That the Pr. CIT did not appreciate that the assessment order was passed after making through enquiries and after filing the necessary information as desired and required from time to time. It is pertinent to point out that this was a cases of tax audit. The case of the assessee was taken up several time and queries were raised and were duly complied. The Assessing Officer after considering all the facts and material and after making all the enquiries allowed deduction u/s. 80IB of the IT Act, 1961. As such the reopening by invoking the provisions of section 263 is not all justified and as such the order by the Pr. CIT is liable to be cancelled. 7. That the Ld. C.I.T. has grossly erred in invoking the provisions of section 263 in spite of the fact that all the facts and material were duly discussed and considered by the AO during the course of assessment proceeding . Because the Principal Commissioner of Income-tax takes a different view should not be made the basis for invoking the provisions of section 263. As such the CIT was not justifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as conducted and concluded under the supervision of the Pr.CIT-1, Amritsar as is evident from the observations made by the assessing officer in the assessment order as under : [Refer Page No.14 of the assessment order] 4. The case was discussed with the Worthy Principal Commissioner of Income Tax-1, Amritsar with reference to letter no. 5266 Dated 29.12.2016 of Addl. Commissioner of Income Tax, Range-3, Amritsar. After discussion, the returned income is accepted as directed by the Worthy Principal Commissioner of Income Tax-1, Amritsar. 8. It was the contention of the Ld.AR for the assessee that the same assessing officer had moved the proposal for initiation of the proceeding under section 263 of the income tax act, vide proposal dated 26 October 2017, despite the fact he was transferred from the charge of assessing Officer and new officer had taken of the charge on 5 October 2017. It was also the contention of the Ld.AR that the assessing officer namely Sh. Charan Dass was not assessing officer at time of moving the proposal as new officer had taken the charge of DCIT circle 3 Amritsar on 5.10.2017. 9. The Ld.AR for the assessee had submitted that the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... U/s. 80IB of the Income Tax Act made by the company without verifying, as to whether all conditions of claiming deduction U/s. 80IB(11A) are satisfied or not and II) That for fall in gross profit rate during the year in comparison to the preceding year; the assessing officer has failed to make necessary verification and enquiries. 1. We have been afforded an opportunity to explain as to why the provisions of Section 263 of the Income Tax Act should not be invoked in this case. Our submissions on legal position of applicability of Section 263 and on facts are as under : I) At the outset, it is submitted that said show cause Notice is illegal, based on surmises and not substantiated in law. Section 263 of the Income Tax Act, empowers the Commissioner with the power of revising any order of the assessing officer, where the order is erroneous and error has resulted in prejudice to interest of revenue. The Commissioner must come to a firm conclusion to this point only after proper application of mind. Further the conclusions on which the said order is being proposed to be made should not be based on conjectures and surmises. II) In the case of Malabar Industries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12.2016. 3. As regards enquiries/verification of our claim for deduction U/s. 80IB (11A); we were asked on four occasions to justify our claim made with reference to the facts of our case and legal position. We submitted in our detailed replies dated 16.07.2015, 1/03/2016 and 04/08/2016. On 13.12.2016, again we were asked to show cause as to why Disallowance of deduction U/s. 80IB of ₹ 35125451/- be not made and why net profit rate be not applied on substantial cash sales. Our said reply dated 13.12.2016 forms part of the assessment order dated 30.12.2016 in which same has been reproduced in verbatim. Copy of our submission dated 13.12.2016 on the above issues which is self explanatory, for your reference is enclosed herewith 4. We explained in detail the provisions of said Section, nature of our business in detail which proved beyond any doubt to the assessing officer that the said deduction of income as has been claimed by us meets the conditions of provision of Section 80IB. That various other issues with regard to our nature of trade, as well as with regard to eligibility of said deduction were also raised from time to time for which were properly replied alon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect. There isn t any doubt about the fact that the assessment has not been made without proper and detailed enquiries/verification and proper application of mind by then assessing officer. Therefore provisions of Section 263 of Income Tax Act cannot be invoked. 13. However Pr.CIT was not convinced with the reply filled by the assessee, and therefore exercised revisionary power under section 263 and order set-aside the assessment order dated 30.12.2016 passed under section 143(3), on the ground that the order was prejudicial to the interests of the Revenue on account of lack of enquiry conducted in the course of the assessment proceedings in respect of the issue of: (a) claim of deduction under section 80IB(11A) of the Act; and (b) gross profit rate declared by the appellant. 14. Feeling aggrieved by the order passed by the principal CIT the assessee is in appeal before us on the ground mentioned hereinabove. 15. At the outset the Ld. AR for the assessee had submitted that during the assessment proceedings, the assessing officer had made elaborate enquiry from the assessee in respect of both the grounds raised by the principal CIT. To buttress his argument the Ld.AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss activity/activities 3. Also submit ROI for A.Y. (Current year and preceding year) alongwith computation of income and notes thereto. .. 9. Please give details and justify the deduction claimed under chap VI-A of Income Tax Act, alongwith appropriate documents and evidence. 11. Please furnish the details in the following format: Financial Year Gross Profit Net Profit Turn Over Ratio (Gp NP) 2009-10 2010-11 2011-12 2012-13 20. Certified true copies of trading, P/L, Balance Sheet alongwith schedules thereto, Tax Audit Report for A.Y. 2013-14, 2012-13 and 2011-12. Reply dated 16.07.2015 [Copy enclosed at pages 11 to 14 of paperbook] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rises; (b) to explain the claim of deduction under section 80IB(11A) of the Act in light of the fact of mutual transactions with sister concerns. Reply dated 01.03.2016 [Copy enclosed at pages 30 to 32 of paperbook] In response to the aforesaid query, the appellant filed elaborate reply justifying its claim of deduction under section 80IB(11A) of the Act. Further, alongwith the aforesaid reply, the appellant also submitted complete details of all items dealt (i.e., purchase/sold)by the appellant and nature of all activities relating to processing, preservation and packaging of said items. Notice dated 19.07.2016 [Copy enclosed at page 33 of paperbook] The assessing officer directed the appellant to furnish details of deduction claimed under section 80IB with relevant report of the auditor and explaining satisfaction of conditions along with documentary evidences. Reply dated 04.08.2016 [Copy enclosed at pages 34 to 36 of paperbook] In response to the aforesaid query, the appellant on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 720000/- for the year). That in the said premises, Bajaj Overseas Impex and Fairways Trading Company also are one of the tenants. These bills are received in the name of Bakewell Industries and are initially paid by either of these Associate Concerns. However at the end of the year, these total electricity expenses are being shared amongst all the associate concerns/tenants namely Bajaj Overseas Impex, Fairways Trading Co. and in the ratio of 70:15:15 respectively. The sharing of the same depends upon the usage of power on estimate basis by these concerns. There is Roasting Unit of the company situated in the said premises. [Annexure No.1469 to 1475] Notice dated 05.12.2016 [Copy enclosed at pages 38 to 40 of paperbook] The assessing officer once again issued detailed show cause notice inquiring about the claim of deduction under section 80IB(11A) of the Act. In the aforesaid show cause notice, the assessing officer required the appellant to explain why the deduction claimed under section 80IB(11A) of the Act should not be disallowed. Reply dated 13.12.2016 [Copy e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. AR had further submitted that the assessee is immeasurable eligible for the deduction under 80 IB(11A) of the act as the assessee fulfilled all the three condition cumulatively as provided under the Act. For the above said purposes the assessee had filed the following written submission (a) Cash Claim of deduction under section 80IB(11A) of the Act- ₹ 3,51,25,451 The appellant had, in the previous year relevant to the assessment year 2012-13, set-up an Industrial Undertaking at Industrial Sector, Kundli, Distt. Sonepat and commenced its business of processing, preservation and packaging of fruits and its derivatives etc. In the said undertaking, the appellant had created significant infrastructure for processing, preservation and packaging of fruits, mainly Badam, GiriBadam, Abjosh, Kaju, Kishmish, Pista etc. In the previous year relevant to assessment year 2013-14, in its return of income, the appellant claimed deduction amounting to ₹ 3,51,25,451 under section 80-IB(11A) of the Act in respect of its profits derived exclusively from the business of processing, preservation and packaging of fruits, mainly Badam, GiriBadam. Since the proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction under the said section viz.: (i) processing; (ii) preservation; and (iii) packaging . Further, the section uses the words and which implies that all the 3 aforesaid activities are to be undertaken by the assessee cumulatively and even if one of the said activities is not undertaken, the assessee would not be eligible for deduction under the said section. Before adverting to the legal position, it would be pertinent to first understand the processes undertaken by the appellant in its Industrial Unit for processing, preservation and packaging of fruits mainly BadamGiri. It is submitted that the appellant is engaged in processing, preservation and packaging of various dry fruits which primarily include Almonds. It is pertinent to note that after purchase of dry fruits, the appellant performs a variety of processes. In order to obtain a better understanding, the various processes undertaken by the appellant, on various dry fruits, are elaborately explained in Annexure-I . [Refer Page No.212 213 of the paper-book] It is further relevant to point out that the assessee company also received financial assistance/grant in aid for setting of processing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Incometax Officer is unsustainable in law. It has been held by this court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue . (emphasis supplied).. 19. The Ld. AR for the assessee relied upon the following decisions for the purposes of emphasizing that the order passed by the principal CIT was required to be set aside:- - CIT vs. Max India Limited: 268 ITR 128 (P H) [affirmed in 295 ITR 282 (SC)] - CIT v Kwality Steel Suppliers Complex: 395 ITR 1 (SC) - CIT vs. Amitabh Bachchan: 384 ITR 200 (SC) - CIT v. Vikas Polymers: 341 ITR 537 (Del.) - CIT v. Sunbeam Auto Ltd.: 332 ITR 167 (Del) - Vimgi Investment (P) Limited: 290 ITR 505 (Del) - CIT v. Hindustan Lever Ltd: 343 ITR 161 (Bom.) - CIT vs. Development Credit Bank Ltd: 323 ITR 206 (Bom.) - CIT vs. Gabriel India Limited: 203 ITR 108 (Bom) - CIT v. Ganpat Ram Bishnoi: 296 ITR 292 (Raj) - Hari Iron Trading Co. vs. CIT: 263 ITR 437 (P H) - CIT V. Arvind Jewellers: 259 ITR 502 (Guj.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at if the entire material had been placed by the assessee before the Assessing Officer at the time when the original assessment was made and the Assessing Officer applied his mind to that material and accepted the view canvassed by the assessee, then merely because he did not express this in the assessment order, that by itself would not give him a ground to conclude that income has escaped assessment and, therefore, the assessment needed to be reopened . On the other hand, if the Assessing Officer did not apply his mind and committed a lapse, there is no reason why the assessee should be made to suffer the consequences of that lapse. (emphasis supplied) 22. The decision of the Delhi High Court has been affirmed by the Supreme Court in the case reported as CIT vs. Kelvinator of India Ltd.: 320 ITR 561. To the same effect is the decision of the Delhi High Court in the case of CIT vs. Anil Kumar Sharma: 335 ITR 83, where it was held that though the assessment order did not patently indicate that the issue in question had been considered by the assessing officer, the record showed that the assessing officer had applied his mind and once such application of mind was discer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s hands and was assessable only in the hands of the beneficiaries . The Commissioner having failed to point out any error, no error can be inferred from the orders of the Income-tax Officer for the simple reason that they are bereft of details. If the order is not erroneous, then it cannot be prejudicial to the interest of the Revenue. There is nothing to show in the order of the Commissioner that the Income-tax Officer would have reached a different conclusion had he passed a detailed order. So, the conclusion of the Commissioner that the orders of the Income-tax Officer are erroneous and prejudicial to the interest of the Revenue are based merely on suspicion and surmises in the absence of any enquiry having been made by him. In the income-tax assessments, all questions boil down to this, whether income has been properly determined and whether the correct rate of tax has been applied. The Commissioner does not say that the income was higher or that it was assessed on a wrong entity or at a low rate or that any exemption was wrongly allowed. In the absence of such a finding, the assessment orders cannot be said to be erroneous and prejudicial to the interest of the Revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis and in view of the directions of erstwhile Pr. CIT. This view finds support from the decision of Calcutta High Court in the case of Hastings Property reported in 233 ITR Page 124 in which it was held that the assessment order cannot be said to be erroneous and prejudicial to the interest of revenue. This view also finds support from the decision of Jurisdictional High Court (P H) in the case of Hari Iron Trading Co vs. CIT reported in 131 Taxman Page 535 . This view further finds support from the decision of Madras High Court in the case of Festo Elgi (P) Ltd vs. CIT reported in (2002) 123 Taxman 537. Again this view finds support from the decision of Madras High Court in the case of R. Srinivasan vs. ACIT reported in (2013) 29 taxmann.com 279 (Madras). He relied upon the decision of ITAT, Amritsar Bench, Amritsar in the case of Ambey Construction Company, Bathinda in ITA No. 208/Asr/2017, order dated 07/05/2019 relating to Assessment Year 2012-13 and also in the case of Ambey Construtech (P) Ltd, Bathinda in ITA No. 209/Asr/2017 344/Asr/2019, order dated 24/08/2021 relating to Assessment Year 2012-13. 28. The Ld.AR had further submitted that similar notice u/s 26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing officer wherein it was categorically mentioned that the assessing officer had passed the order on the direction of the PCIT, and there is no application of mind by the assessing officer to the facts of the case. It was also the contention of the Ld. DR that, it is the case of no enquiry and non application of mind by the assessing officer as the whole assessment order was passed on the direction of the P CIT. In fact, the same officer had made the request for initiation of proceedings under section 263 vide his letter dated 4 October 2017 sent on 26 October 2017. In the letter he had also to produce the draft assessment order as sought by the PCIT in a communication dated 5 January 2017. It was the contention of the Ld.AR that it is a classic case of non application of mind by the assessing officer, the same assessing officer is admitting that there was no application of mind at his end further it was submitted by the Ld DR that further enquiries were required to be made by the DR, but for the direction of the P CIT the same was not carried out by the assessing officer and the assessment was framed on his instructions. The Ld. DR rely upon the record of the assessing officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT hinges around, that the assessing officer had failed to make necessary enquiry/verification of the issues referred to in paragraph 4 and 5 of the show cause notice. For the purposes of the finding of whether the assessing officer had made necessary enquiry/verification in respect to claim of the assessee under section 80IB( 11A) and fall of in comparison to the preceding the year etc, we are required to examine whether the assessing officer had raised questions on these two issues or not. And further, we have to find out whether enquiries/ verification made by the assessing officer were sufficient or not. 35. The assessment record produced before us, clearly shows that the assessing officer and made various enquiries/ verification from the assessee, and the assessee gave the reply to the said enquiries/ verification during the assessment proceedings. We are tabulating the multiple questions/enquiry made by the assessing officer and the response given by the assessee to that during the assessment proceedings, the same is as under:- Details of notice/ reply Description/ particulars of notice/ enqiry by AO and reply thereto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the business of processing, preservation and packaging of fruits viz. Badam, Girl Badam, Abjosh, Kaju, Kishmish, Pista etc. Sec 80IB(11A) provides that in case of an industrial undertaking deriving profit (on or after first day of April 2001) from such business, shall be entitled to deduction of 100% of its profits gains derived from such undertaking for five assessment years beginning with an initial assessment year and thereafter 30% of the profits derived from such business, in a manner that total period of deduction does not exceed 10 consecutive years, subject to the fulfillment of the conditions as laid in the section. We have also fulfilled all other conditions as laid out in section in 80-IB and for this purpose the company has obtained a separate Audit Report dated 29.11.2013 in Form No.10CCB (Rule18BBB) . Reply dated 09.10.15 [Copy enclosed at pages 15 to 22 of paperbook] Explanation regarding Gross Profit and Net Profit and reasons for fall in GP Rate/NP Rate along-with other relevant details. Reply dated 17.11.2015 [Copy enclosed at pages 23 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book] (i) We have also furnished the item-wise GP in respect of all items dealt in by Company. We again state that we have maintained proper stock record and all our purchases sales are duly verified. (ii) Copy of cash book for the period 01/04/2012 to 31/03/2013 is enclosed herewith. (iii) The details of all specified persons with ratio of share in all the firms and companies in which they are interested is enclosed. Reply dated 10.10.2016 [Copy enclosed at pages 220 to 222 of paperbook] (i) The item-wise stock tally in value and quantity of both raw material and finished goods for the year ended 31/03/2013 are enclosed herewith vide Annexure No.1442 1443. (ii) The item-wise account of raw material, complete details of opening stock, purchase, issue and closing stock in weight as well as in value are enclosed herewith. (iii) The item-wise trading account of finished goods along-with details of opening stock, purchase, issue and closing stock of 26 items are enclosed herewith. Reply dated 13.10.2016 [Copy enclosed at pages 22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e/ enqiry by AO and reply thereto Notice dated 16.06.2015 [Copy enclosed at pages 8 to 10 of paperbook] The assessing officer vide the said notice, inter-alia required the appellant to justify the claim of deduction made under Chapter-VI-A of the Act and also directed to file details of gross profit declared in the past assessment year(s). The relevant extracts of the notice is re-produced hereunder: 1. A note on business activity/activities 3. Also submit ROI for A.Y. (Current year and preceding year) alongwith computation of income and notes thereto. .. 9. Please give details and justify the deduction claimed under chap VI-A of Income Tax Act, alongwith appropriate documents and evidence. 11. Please furnish the details in the following format: Financial Year Gross Profit Net Profit Turn Over Ratio (Gp NP) 2009-10 2010-11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s own Factory Building was under construction. The company s Factory Building and its main Plant Machinery was put to use became operational during the year 31.03.2013. The company s own Cold Storage was still under construction as at 31.3.13. 3. The comparison chart of all items dealt in by company during this year as well as last year showing the itemized value of sale, gross profit in value, gross profit rate along with the similar information for last year is enclosed herewith vide Annexure No.770 to 775. It is thus submitted that we are dealing in highly volatile items and gross profit rate(s) depend upon the market conditions prevailing at that time. 4. Our all sales and purchases are completely vouched. Complete stock tally has been maintained. It is therefore requested that no adverse inference can be drawn. Reply dated 12.09.16 [Copy enclosed at pages 214 215 of paperbook] The necessary details with regard to cash sales and credit sales and other details were filed along-with annexures. Reply dated 03.10.16 [Copy enclosed at pages 218 219 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the business of processing, preservation and packaging---- .The AO has also failed to examine as to whether the year under consideration was the initial assessment Year of the assessment company claiming the deduction Us 80IB(11A) of the I.T. Act. In a nutshell, the deduction is allowable only if all the conditions are satisfied otherwise, it cannot be allowed 38. In other words, the objection of the Ld. PCIT can be summarised as under AO failed to make necessary enquiries/verification and he has failed to apply his mind that as to whether all the conditions of sub-section (11A) of section 80 IB of the Income Tax Act,1961 are satisfied or not The Assessing Officer has failed to examine as to whether dry fruits are to be treated as fruits for the purpose of section 80IB (11A) He has also failed verify as to whether the assessee company is engaged in the business of processing, preservation and packaging. The AO has also failed to examine as to whether the year under consideration was the initial assessment Year of the assessment company claiming the deduction Us 80IB(11A) of the I.T. Act 39. In first notice dated 16 June 2015, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the State Government or the local authority for carrying on the eligible business. 42. Form 10CCB provides as under :- FORM NO. 10CCB [ See rule 18BBB] Audit report under section 80-I(7)/ 80-IA(7)/80-IB/80-IC 1. Name of the assessee : ..................... 2. [ Permanent Account Number or Aadhaar Number ] : ..................... 3. Status : ..................... 4. Ownership status of the undertaking/enterprise : (a) Fully owned by assessee Yes No (b) Partly owned by assessee Yes No If yes, please specify the percentage of ownership : ..................... 5. Address : ..................... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry fruit items. 46. The assessing officer had not stopped here, he had further issued the notice on 19 July 2016, and in the said notice, the assessing officer made a specific enquiry/documents from the assessee pertaining to 2. Details of deduction claimed under section 80IB with relevant report of the auditor and explaining satisfaction of conditions along with documentary evidences . 47. The assessee filed the detailed reply on 4thAugust 2016, explaining elaborately how the assessee satisfies the conditions, as required under section 80 IB. In the reply, it was mentioned as under:- It is stated that the Company has during the year also claimed deduction of income U/s.80-IB(11A) of the Income Tax Act,1961. That the Company has established an undertaking and is deriving profit exclusively from the business of processing, preservation and packaging of fruits viz. Badam, GiriBadam, Abjosh, Kaju, Kishmish, Pista etc. Section 80-IB(11A) provides that in case of an undertaking deriving profit (on or after first day of April 2001) from such business, shall be entitled to deduction of 100% of its profits gains derived from such undertaking for five assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee). 49. The assessee vide reply dated 13.12. 2016 had explained its position and submitted that the assessee is entitled to deduction under section 80 IB of the Act. page 41 to 54 of PB).The assessing officer was also provided the copy of the opinion given by Shri T. N. Pandey Ex-Chairman CBDT dated 28/2/2013 section 80 IB in the assessee's case to the assessing officer during the assessment proceedings. Beside that the opinion of T. U. COMPANY Dated 13.2.2013 on the applicability of section 80 IB was also provided to the assessing officer. 50. From the reading of the contention of various notices / note sheet enquiries, it is abundantly clear that the assessing officer while framing the assessment had made an extensive, elaborate and necessary enquiry with a view to find out whether the assessee fulfils the conditions mentioned in section 80IB or not. The reading of the notice and the reply and subsequent notices and replies clearly shows that the assessing Officer was satisfied that the assessee had fulfilled all the conditions necessary for claiming the deduction under section 80 IB. 51. Thus the finding recorded by the principal CIT in paragraph 6.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scrutiny when the Ld. Assessing Officer proposed charging the interest amount received to tax, the very same explanation was offered by the assessee and was accepted by the Assessing Officer. We are, therefore, of the considered opinion that it is not a case of no enquiry and as a matter of fact, it was specifically brought to the notice of the Ld. Assessing Officer that the interest earned was adjusted against the project expenditure. 13. Further, it is an admitted fact that in this case, the business of the assessee was commenced in this case, unlike the facts in the case of M/s. Tuticorin Alkali Chemicals and Fertilizers Ltd.(supra). The Mumbai Bench of Tribunal while noticing the decision of jurisdictional High Court in the case of CIT vs. Sunbeam Auto Ltd, 332 ITR 167 and the case of Nagesh knitwear Pvt. Ltd., 355 ITR 135 observed that the Explanation-2 to section 263 inserted by Finance Act, 2015 w.e.f. 01.04.2015 would not impact the assessment earlier to 2014-15 and such a decision was followed by the Delhi Bench of Tribunal in the case of Arun Kumar Garg (HUF) vs. PCIT in ITA No. 3391/Del/2018 for the assessment year 2014-15 and by order dated 08.01.2019 held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiry and perceived inadequacy in enquiry. Inadequacy in conduct of enquiry cannot be the reason based on which powers under Section 263 of the Act can be invoked to interdict an assessment order. The observations made in this behalf, by the Division Bench of this Court, in Commissioner of Income-tax vs. Sunbeam Auto Ltd., [2010] 189 Taxman 436 (Delhi)/[2011] 332 ITR 167 (Delhi) being apposite, are extracted hereafter. 12. We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Signature Not Verified Digitally Signed By:VIPIN KUMAR RAI Signing Date:06.07.2021 10:30:10 Income-tax Act. As noted above, the submission of learned counsel for the revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d quasi-judicial controversies as it must in other spheres of human activity. [See : Parashuram Pottery Works Co. Ltd. v. ITO[1977] 106 ITR 1 (SC) at page 10]. ****** From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a 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 the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income-tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income Signature Not Verified Digitally Signed By:VIPIN KUMAR RAI Signing Date:06.07.2021 10:30:10 either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Max India Ltd., (2007) 295 ITR 282 (SC)] Signature Not Verified Digitally Signed By:VIPIN KUMAR RAI Signing Date:06.07.2021 10:30:10 11.1. Therefore, the error should be one that is not debatable or a plausible view. Section 263 of the Act invests a power of revision in a superior officer and therefore, by the very nature of the power, does not allow for supplanting or substituting the view of the AO. The appreciation of material placed before the AO is, exclusively within his domain which cannot be interdicted by a superior officer while exercising powers under Section 263 of the Act only on the ground that if he had appraised the said material, he would have come to a different conclusion. [See Parashuram Pottery Works Co. Ltd. v. ITO, [1977] 106 ITR 1 (SC)] Respectfully following the decision of Delhi High Court in the matter of Brahma Centre Development Private Limited, ITA No.116 of 2021 be quash order passed under Section 263 in the case of the Assessee 54 There is yet another interesting and peculiar aspect in this matter. In this case, after making the elaborate and necessary enquiry in the matter, the assessing officer had passed the assessment order. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not based on facts. If you have prepared any draft assessment order other than the assessment order passed by you, it may be known when it was brought to my knowledge? (b) Please explain why the observations have been made in the body of assessment order. Why it was not kept in office note? (c) This order was also required to be discussed with the Addl.CIT, Range-3,f Amritsar also. Please state whether this case was discussed with him. If it was not discussed with the additional CIT then how you are claiming that the case was discussed with the undersigned 5. Your explanation should raise this office within seven days from the date of receipt of this letter. If no explanation is received on the receipt of this letter it will be presumed that you have nothing to say in the matter stated above. 55 We have also called upon the revenue to produce the letter written by the revisional Commissioner. Reference No. 5266 dated 29 December 2016 and accordingly directed the Ld. DR to produce the complete assessment record including the matter dated 29th of December 2016 written by additional Commissioner of income tax Range -3 Amritsar. However, on verification of the rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment on 30 December 2016. However, at the time of sending the proposal, the assessing officer had changed his stand and send the proposal for issuing the notice under section 263 and had given the reasons in the proposal dated 26 October 2017. 60 In the proposal dated 26 October 2017, the earlier assessing officer, in the proposal act mentioned that the assessment order was passed under section 143 (3) dated 30 December 2016 of as per one direction of the Commissioner of income tax-1 Amritsar. The Commissioner of income tax-1Amritsar vide letter no 5832 dated 17.1.2017 asked for explanation as to why order has been passed as above mentioned as per his direction when he did not issue any directions and neither case discussed in detail by furnishing draft assessment order and asked draft order, which was furnished as under 61 Interestingly the draft assessment order was sought by the principal CIT vide letter dated 5 January 2017 and two weeks time was given to AO however the assessing officer in the letter dated 26 October 2017, had stated that the assessment order was passed on 30.12.2016, on the verbal instructions of the Commissioner of income tax-1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA no ITA No.208(Asr)/ 2017 decided on 5.5.2019 wherein in identical facts, the tribunal had quashed the 263 order passed by the PCIT. 64 As mentioned hereinabove, the assessing officer at the first instance was holding the view that no addition can be made based on either non-fulfilment of the Commissioner under section 80IB and thereafter he had turned around and proposed that additions are required to be made on account of non-fulfilment of the conditions of section 80 IB and non-verification of the GP ratio of the assessee. Similarly, If we believe the assessing officer, that the order section was given by the Commissioner income tax framing the assessment and making the additions again the assessee at the time of passing the assessment order, the Commissioner was holding a view and was also simultaneously discussing the matter with the assessing officer, however quite contrary to this he chooses to issue the show-cause notice based on the proposal given by the assessing officer and pass the order under section 263, thus substantially both the officers were having two views for deleting the additions in making the addition. The law is reasonably settled when two views ..... X X X X Extracts X X X X X X X X Extracts X X X X
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