TMI Blog2016 (11) TMI 1700X X X X Extracts X X X X X X X X Extracts X X X X ..... rder. As in a situation in which the revision order is passed on the ground other than the grounds for which revision proceedings are initiated, the same cannot be sustainable in law. That apart, in the impugned order we have also noticed that the learned Commissioner has not faulted the explanation given by the assessee and has merely remitted the matter to the file of Assessing Officer for verification of factual elements embedded in explanation as given by the assessee. This approach is also not sustainable in law in view of the law laid down by the Hon'ble Bombay High Court in the case of CIT -vs.- Gabriel India Limited [ 1993 (4) TMI 55 - BOMBAY HIGH COURT] In the present case, proceedings were not initiated on the grounds that adequate enquiries were not carried out. The Commissioner has not alleged in the show cause notice that adequate enquiries were not carried out, and again, it is elementary that no person can be condemned unheard, and therefore, the assessee not having been heard on the question whether or not adequate enquiries were carried out, learned Commissioner could not have subjected the assessment order to revision proceedings on the ground that adeq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n order. In similar facts circumstances we have already held in Para 8(a) of this order that the order of the AO is not erroneous and prejudicial to the interest of Revenue. Following the same we reverse the order of ld. CIT and the ground raised by the assessee is allowed. The assessee gets the relief, accordingly - Assessee appeal allowed. - ITA No. 1189/Kol/2016 - - - Dated:- 4-11-2016 - Shri Waseem Ahmed, Accountant Member and Shri S.S. Viswanethra Ravi, Judicial Member For the Appellant : Shri D.S. Damle, FCA. For the Respondent : Shri G. Mallikarjun, CIT-DR. ORDER Per Waseem Ahmed, Accountant Member:- The assessee has filed this appeal disputing the order of Principal Commissioner of Income Tax-2, Kolkata Vide No. Pr.CIT-2/Kol/Revision/15- 16/263/Kesoram/11-12/9430-32 dated 29.03.2016 passed u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as the Act ) by which the Ld. CIT set aside the assessment order dated 28.03.2014 u/s 143(3) of the Act with a direction to redo the assessment in respect of the issue mentioned therein. Shri D.S. Damle, Ld. Authorized Representative appeared on behalf of assessee and Shri G.M Mallikrjun Ld. De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit and loss a/c is net of trade discount. Therefore, the assessee has claimed double deduction of the trade discount in working out the taxable profit. 4) The assessee in its tax audit report as per clause-13(d) has shown gain under the head foreign exchange amounting to ₹2,17,92,210/- on account of buyers credit for the import of capital goods. Ld. CIT observed that such gain has not been adjusted in the written down value of the relevant block of asset. Therefore, assessee on such amount has claimed excessive depreciation for ₹76,27,273/-. In view of above, Ld. CIT issued show cause notice vide No. Pr. CIT- 2/Kol/Revision/15-16/263/Kesoram/11-12/9430-32 Dated 29.03.2016 for seeking clarification of the defects as observed hereinabove. 4. The reply of the assessee in response to the notice issued u/s 263 of the Act stand as under : 1) The reconciliation statement for the difference of ₹1,10,26,959/- between audited financial statements and tax audited report was submitted as under : a) Reconciliation of addition to fixed assets Amount (INR) Addition to fixed assets as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of account. Therefore, there is no question of claiming double deduction for the trade discount. d) The assessee submitted that unrelied foreign exchange gain has not been adjusted with the written down value of assets in terms of provision of Sec. 43A of the Act. As per the provision of Sec. 43A of the Act any increase or reduction in the value of liability in foreign currency on account of currency fluctuation pertaining to capital assets is to be adjusted with the corresponding cost of the asset at the time of actual payment of such loan liability. Therefore as such no excess depreciation has been claimed by the assessee. 5. In addition to above, the assessee also submitted that the order passed under section 143(3) is also not erroneous and prejudicial to the interest of Revenue even on the technical grounds. In the instant case the AO has conducted necessary enquiries, facts of the case and submission of the assessee before framing the assessment under section 143(3) of the Act. The assessee has relied in the following order : (i) Malabar Industrial Co. Ltd. Vs. CIT 243 ITR 83,87 (ii) CIT Vs. Gabriel India Limited 203 ITR 108, 115 (iii) Nabha Investment Pvt. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same was not adjusted with the WDV of assets in view of the express provisions of Section 43A itself which state that any increase or reduction in the value of liability at the time of payment is to be adjusted with the corresponding cost of asses. They have not given me the date as to when the same was actually realized and how the same was treated in the Accounts and how the Revenue had, if at all, responded to the same. Nothing was examined by the AO and more importantly, this issue had never been raised only by the AO. 9. The other issue was the computation of Disallowance u/s. 14A. It was seen that the AO had considered net interest expenses after reducing an amount of ₹ 6,33,17,105 being interest earned by the assessee during the relevant financial year. The Assessee had earned the said figure as interest income. But it had spent R.239.82 core as interest and had earned a dividend of ₹ 5.32 core of Dividend. It had disallowed an amount of ₹ 116,731 (but as per the AO at page 11of his Order ₹ 1,20,000) as an amount disallowable us. 14A. On the other hand, the AO had netted off the interest paid and earned and considered the differential amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me facie not allowable. Now before me the A/Rs have come up with a plea that there had been various other kinds of Discounts which the Assessee was obliged to do. I am convinced that this aspect had neither been questioned nor examined. Therefore, I restore the matter to the AO who shall examine in detail this new claim presented. 12. Besides, the A/Rs have raised the technical issues regarding the competency of the undersigned to initiate the present 263 proceedings. I have very carefully considered their arguments and the case laws that they have relied on. I must mention here that, the A/Rs have not established that the AO had questioned all the issues that have been raised now. Secondly, they themselves are holding now that the Assessing Officer's computation of the disallowance us. 14A is not judicially acceptable. Moreover, they have conceded on the issue of claim of unpaid Leave Encashment expenses and do not wish to litigate further. This means the amount had escaped taxation. The Addition to fixed assets are claimed now to be related to the unrealized Foreign Exchange Gain and also related to non-depreciable assets, which had not been examined. The Discount issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice issued under section 142(1) of the Act for invoking the provisions of section 14A of the Act. With regard to the disallowance of interest as per rule 8D(2)(ii) of Income Tax Rules, the AO has taken one of the possible view. Therefore the order of the AO cannot be held erroneous. The reply of the assessee is placed on page 99 to 101 and the AO passed the order after conducting the detailed enquiry as evident from the order of the AO which is placed on pages 134 to 140 of the paper book. iii) The ld. CIT did not point out any defect in the explanation furnished by the assessee. The ld. CIT failed to bring any adverse finding for holding that claim of discount is rendering the order of AO as erroneous. iv) In this case also the ld. CIT failed to bring reasons for holding the order of the AO as erroneous prejudicial to the interest of Revenue. On the other hand, the argument of Ld. DR stands as under : 1) It was submitted that no details were furnished by assessee about the assets purchased from outside India out of the borrowed fund in foreign currency. Therefore, Ld. CIT directed the AO to verify the necessary details as it was not verified at the time of assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been verified by the AO at the time of assessment. The relevant extract of the notice issued by the ld. CIT under section 263 of the Act is reproduced below: A. Total addition of your fixed assets (shown at Schedule-5) as per books of account was ₹ 5,34,90,34,744/-. It was seen from the Depreciation Schedule (as shown at Appendix-III) of TAR that total addition of fixed asset during the year was taken as ₹ 5,36,00,61,703/-. However, you have not disclosed the addition of fixed assets of ₹ 1,10,26,959/- in the books of account. So, the difference of ₹ 1,10,26,959/- should have been treated as unexplained investment u/s. 69B and should have been added back to your total income. Similarly the relevant extract of the order of the ld. CIT passed u/s 263 of the Act is reproduced below : They have not given me the date as to when the same was actually realized and how the same was treated in the Accounts and how the Revenue had, if at all, responded to the same. Nothing was examined by the AO and more importantly, this issue had never been raised only by the AO. From the above, we clearly find that the issue raised by the ld. CIT in the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which the assessee claims to have made entries regarding such income , and that he is directed to verify whether invoices relating to income from repairs of ₹ 55 lakhs and service income of ₹ 2,41,81,436/- are reflected in the sales account as claimed by the assessee . It is thus clear that the stand taken in the show-cause notice that on merits that incomes from repairs and services income, aggregating to₹ 55,00,000/- and ₹ 2,41,81,436/- were includible in the taxable income but were not actually assessed, but upon taking into account the submission made by the assessee, the learned Commissioner himself was not sure whether it is a correct stand. It was for this reason that as against decision on merits, which was indicated in the show-cause notice, in the revision order the learned Commissioner merely referred the matter to the Assessing Officer for verification of certain aspects. It is thus clear that there was a shift in the stand of the Commissioner as to whether it was a case for revision on the ground that income on account of repairs of machinery and contract receipts was required to be added to the income assessed in the hands of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order under section 263 refers only to the inference of hire charges being exigible to tax which was not mentioned at all in the show cause, obviously the assessee had no opportunity to meet that point. [Emphasis supplied] In our considered view the ratio of the above decision is that if a ground of revision is not mentioned in the show-cause notice issued under section 263, that ground cannot be made the basis of the order passed under the section, for the simple reason that the assessee would have had no opportunity to meet the point. We also find support from the judgment of the Hon ble Punjab and Haryana High Court in the case of CIT v. Jagadhri Electric Supply and Industrial Co. Ltd. (1983)140 ITR 490. The nature of the jurisdiction of the CIT under section 263 and the powers of the Tribunal while dealing with an appeal against the order passed under that section were explained in that decision. The CIT had found the order of the Assessing Officer allowing continuation of registration to the assessee-firm to be erroneous on the ground that the actual distribution of the profits was different from the ratio mentioned in the deed of partnership. The Tribunal set aside the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e hearing an appeal filed by the assessee, cannot substitute the grounds which the Commissioner himself did not think proper to form the basis of his order. 9. We respectfully understand this judgment as holding, by necessary implication, that if the CIT has not mentioned the ground on which action is proposed to be taken under section 263 in the show-cause notice, it is deemed that he was not satisfied that it was a fit ground for taking action under the section. Therefore the final order as based on the ground which he had earlier considered not fit for taking action under the section, will have to be set aside as not based on any ground which may justify his belief that the order passed by the Assessing Officer was erroneous insofar as it is prejudicial to the interests of the revenue. It is thus clear that in a situation in which the revision order is passed on the ground other than the grounds for which revision proceedings are initiated, the same cannot be sustainable in law. That apart, in the impugned order we have also noticed that the learned Commissioner has not faulted the explanation given by the assessee and has merely remitted the matter to the file of Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case. Learned Commissioner has not pointed out any reason as to why the Assessing Officer should have made further enquiry, which was apparently left out. In view of this discussion and entirety of the case, we uphold the grievance of the assessee and quash the impugned revision order. We also find that the AO has conducted the enquiry about the addition of the fixed assets as appearing from the notice issued under section 142(1) of the Act. The relevant extract of the notice is reproduced below : 17. Furnish the details of addition to fixed assets and produce the copy of bills for amounts exceeding ₹ 1 lakhs. Also furnish the proof of funds for the purchase of new assets and the details of interests paid thereon. Also furnish the information as per format specified below: Addition to Fixed Assets (DEPRECIATION) F.Y 2010-11(A.Y 2011-12) Name of Block % Description of Asset Purchased on (Date) Put to use Amount Description Claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etermined from what has been stated in the assessment order alone, it has to be examined as to whether any inquiry was at all conducted by the AO. There exists a difference between lack of inquiry and inadequate inquiry. If there were any inquiry, even inadequate that would not give an occasion to exercise jurisdiction u/s 263 of the said Act. In the instant case both audited financial statements and tax audit reports were available before the AO at the time of assessment which are placed pages 12,21,22 and 5 of the paper book. Therefore in our considered view the AO has conducted enquiries and applied his mind at the time of assessment. Accordingly, order passed by Ld. CIT u/s 263 of the Act is reversed hence, ground raised by assessee is allowed. b) With regard to the disallowance u/s 14A r.w.r. 8D(2)(ii) for ₹ 2,51,26,736.00, we find that the AO has netted off the interest paid with the interest income for working out the disallowance under rule 8D of Income Tax Rules, 1962. In our considered view the AO before taking the decision has applied his mind on the issue of disallowance of interest under the provisions of section 14A of the Act. The relevant extract of the not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... figure. Therefore, merely because another view is possible is not sufficient to invoke powers under section 263 of the Act. The view adopted by the Assessing Officer, being a plausible view, it cannot be said that the assessment order is erroneous so as to warrant exercise of powers under section 263 of the Act. In light of the above discussion, HIGH COURT does not find any infirmity in the impugned order passed by the Tribunal so as to give rise to any question of law, much less, a substantial question of law warranting interference. The appeal, therefore, fails and is accordingly dismissed. Merely because another view was possible, same was not sufficient to invoke powers u/s 263 and once view adopted by AO was a plausible view, it could not be said that assessment order was erroneous so as to warrant exercise of powers u/s 263. In the instant case the AO has taken the possible view for making the disallowance under section 14A of the Act. Thus in our considered view the AO has taken a possible view and therefore the order of the AO cannot be held erroneous prejudicial to the interest of Revenue. Accordingly the ground raised by the assessee is allowed. c) With regard ..... X X X X Extracts X X X X X X X X Extracts X X X X
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