M/S Shree Bhavani Minerals, Panaji V. CIT, Panaji

ITA 101/PAN/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72045 (ITAT-PANAJI)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 16-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NISHANT K
• Assessee Lawyers: N N NAIK GAUNEKAR; V Y PAWAR
• Keywords: Gift; Opportunity of being heard; Period of limitation; Assessment record; Prejudicial to interest; Reason to believe
• Section: 143(3); 142(1); 10B; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 101/PNJ/2013 : (ASST. YEAR : 2008 - 09) M/S. SHR EE BHAVANI MINERALS BANDODKAR HOUSE, ALTINHO, PANAJI, GOA PAN : ABGFS0924C (APPELLANT) VS. COMMISSIONER OF INCOME TAX, PANAJI, GOA. (RESPONDENT) APPELLANT BY : V.Y. PAWAR, CA & N.N. NAIK GAUNEKAR, CA RESPONDENT BY : NISHANT K., DR DATE OF HEARING : 22/08/2013 DATE OF PRONOUNCEMENT : 19 /09/2013 O R D E R PER P.K. BANSAL : 1. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT DT. 15.3.2013 PASSED U/S 263 OF THE INCOME TAX ACT BY TAKING AS MUCH AS 8 GROUNDS OF APPEAL BUT AT THE TIME OF HEARING, THE ASSESSEE DID NOT PRESS GROUND NOS. 3 TO 8 AS BEING ARGUMENTATIVE. THE ONLY GROUNDS THAT SURVIVE FOR ADJUDICATION READS AS UNDER : 1. THE ORDER OF THE LEARNED CIT, PANAJI, GOA, PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 ON 15/03/2013 IS AGAINST THE FACTS OF THE CASE AND PRINCIPLES OF LAW. 2. THE LEARNED CIT ERRED ON THE FACTS OF THE CASE AND THE EXISTING LEGAL POSITION IN PAS SING THE ORDER UNDER SECTION 263 ON 15/03/2013, ON THE ORDER PASSED BY THE LEARNED ACIT, CIRCLE 1, PANAJI (ASSESSING OFFICER) UNDER SECTION 143(3) ON 22 - 12 - 2010 AND HOLDING THAT ALLOWING OF DEDUCTION BY THE ASSESSING OFFICER UNDER SECTION 10B IS NOT IN ORD ER AND 2 ITA NO. 101/PNJ/2013 (ASST. YEAR : 2008 - 09) THEREBY SETTING ASIDE THE ORDER UNDER SECTION 143(3) PASSED BY THE LEARNED ASSESSING OFFICER. 2. THE BRIEF FACTS RELATING TO THIS CASE ARE THAT THE ASSESSEE, A PARTNERSHIP FIRM, SUBMITTED THE RETURN FOR THE ASSESSMENT YEAR 2008 - 09 AT A TOTAL INCOME OF RS.1,23,24,930/ - ON 29.9.2009. THE ASSESSEE CLAIMED DEDUCTION U/S 10B. THE AO COMPLETED THE ASSESSMENT ON AN INCOME OF RS.1,25,79,644/ - DETERMINING THE INCOME AS UNDER : TOTAL INCOME AS PER RETURN RS.1,23,24,930/ - ADD : ADDITION AS DISCUSSED IN PARA 4.2 RS. 2,54,714/ - TOTAL INCOME RS.1,25,79,644/ - SUBSEQUENTLY, THE CIT INVOKING THE PROVISIONS OF SEC. 263 NOTED THAT THE ASSESSEE HAS CLAIMED EXEMPTION OF RS.10,63,88,323/ - U/S 10B FOR ITS 100% EXPORT - ORIENTED U NIT. ON PERUSAL OF THE RECORD , CIT WAS OF THE OPINION THAT THE SAID EXPORT - ORIENTED UNIT DOES NOT FULFIL THE BASIC CONDITION (MANUFACTURE OR PRODUCTION) AS REQUIRED U/S 10B AS T HE UNIT IS NOT ENGAGED IN ANY EXTRACTION OF IRON ORE AND IN HIS OPINION EXTRAC TION AND PROCESSING OF IRON ORE TOGETHER CONSTITUTES PRODUCTION AS INTERPRETED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SESA GOA LTD., 271 ITR 331. ACCORDINGLY, A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE AS IN HIS OPINION THE AO HAD ALLOWED THE EXEMPTION U/S 10B TO THE ASSESSEE ERRONEOUSLY WITHOUT EXAMINING THE CLAIM OF THE ASSESSEE. IN REPLY THERETO THE ASSESSEE SUBMITTED HIS WRITTEN SUBMISSION ON MERIT AS HAS BEEN REPRODUCED IN THE ORDER PASSED U/S 263 UNDER PARA 4 STATING THEREIN THAT TH E CASE OF THE ASSESSEE CLEARLY FITS WITHIN THE REQUIREMENT OF SEC. 10B OF THE INCOME TAX ACT, 1961 AND EXEMPTION HAS BEEN CORRECTLY GRANTED TO THE ASSESSEE. THEREFORE, IT WAS SUBMITTED THAT THERE IS NO CASE FOR INVOKING THE JURISDICTION U/S 263 OF THE INC OME TAX ACT AND THE PROCEEDINGS U/S 263 BE DROPPED. CIT AFTER EXAMINING THE SUBMISSIONS OF THE ASSESSEE TOOK THE VIEW THAT THE SAID 100% EXPORT - ORIENTED UNIT IS NOT ENGAGED IN EXTRACTION OF IRON ORE 3 ITA NO. 101/PNJ/2013 (ASST. YEAR : 2008 - 09) AND THEREFORE BY PROCESSING ALONE IT WILL NOT BE REGARDED THAT THE UNIT IS ENGAGED IN PRODUCTION AND TOOK THE VIEW THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 10B AND ACCORDINGLY SET ASIDE THE ASSESSMENT WITH THE DIRECTION TO THE AO TO CONSIDER DISALLOWANCE OF DEDUCTION U/S 10B AS CLA IMED BY THE ASSESSEE. THE AO WAS FURTHER DIRECTED TO CONSIDER THE ASSESSEES SUBMISSION, THE LEGAL POSITION, FACTS OF THE CASE AND ACCORDINGLY PASS FRESH ASSESSMENT ORDER GIVING THE ASSESSEE OPPORTUNITY OF BEING HEARD. 2.1 THE ASSESSEE CAME IN APPEAL B EFORE US AND SUBMITTED ALONGWITH THE PAPER BOOK, WRITTEN ARGUMENTS ON MERIT THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION U/S 10B. THESE ARGUMENTS DID NOT UTTER EVEN A SINGLE WORD ON THE LEGALITY WHETHER CIT HAS RIGHTLY INVOKED THE PROVISIONS OF SEC. 263 OR NOT. THEREFORE, THE CASE WAS ADJOURNED AND THE ASSESSEE REQUESTED FOR SUBMISSION OF WRITTEN SUBMISSION ON MERIT ON THE NEXT DATE. ON THE NEXT DATE, THE ASSESSEE SUBMITTED THE FOLLOWING SUBMISSION : THE APPELLANT SUBMITS THAT THE ORDER OF ASSESSMENT U /S. 143(3) PASSED BY THE LEARNED ASSESSING OFFICER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO INTEREST OF REVENUE AS HAS BEEN HELD BY THE LEARNED COMMISSIONER OF INCOME TAX, PANAJI IN HIS ORDER U/S. 263 OF THE INCOME TAX ACT PASSED ON 15/03/2013. THE APPELLANT FILED RETURN OF INCOME IN T I M E ALONG WITH THE COPIES OF FINANCIAL STATEMENTS AND NECESSARY AUDIT REPORTS, A COPY OF WHICH IS FILED FROM PAGE NO. 33 TO 56 OF THE PAPER BOOK OF WHICH THESE WRITTEN ARGUMENTS ARE PART OF. IT IS SUBMITTED THAT UP ON SELECTION OF THE CASE OF THE APPELLANT FOR THE YEAR 2008 - 09 FOR SCRUTINY, THE LEARNED ASSESSING OFFICER ISSUED NOTICE U/S. 143(3) AND 142(1). NOTICE U/S. 142(1) WAS FOR CALLING GENERAL DETAILS WHICH WAS ISSUED ON 07/09/2010 COPY OF THE SAID NOTICE IS INCLUDED FROM PAGE NO. 81 TO 83 OF THE PAPER BOOK OF WHICH THESE WRITTEN ARGUMENTS ARE PART OF. 4 ITA NO. 101/PNJ/2013 (ASST. YEAR : 2008 - 09) IN RESPONSE TO THIS LETTER, THE APPELLANT FILED A LETTER ALONGWITH NECESSARY DETAILS ON 11/10/2010 COPY OF WHIC H IS INCLUDED FROM PAGE NO. 84 TO 88 OF THIS PAPER BOOK. PERIODICALLY THE REPRESENTATIVE OF THE APPELLANT APPEARED FOR HEARING BEFORE THE LEARNED ASSESSING OFFICER. DURING THE COURSE OF HEARING, FURTHER DETAILS REGARDING THE BUSINESS OF THE ASSESSEE WERE CALLED FOR, IN ADDITION TO EVIDENCE AND DOCUMENTS RELATING TO APPLICABILITY OF SEC. 10B OF THE INCOME TAX ACT. THE APPELLANT FILED A LETTER DATED 27/11/2010 ALONGWITH ENCLOSURES WHICH IS INCLUDED FROM PAGE NO. 89 TO 112 OF THIS PAPER BOOK. AFTER VERIFICATION OF THESE DETAILS THE LEARNED ASSESSING OFFICER CALLED FOR FURTHER DETAILS WHICH WERE FILED ON 22/12/2010 WHICH COVERING LETTER IS INCLUDED FROM PAGE NO. 113 TO 121 OF THIS PAPER BOOK. ALONG WITH THE COVERING LETTER, THE APPELLANT FURNISHED DETAILED SUBMISSIONS EXPLAINING THE MANUFACTURING PROCESS AND ALSO THE NECESSARY CERTIFICATES OBTAINED BY THE APPELLANT FOR GETTING APPROVAL OF E.O.U, PERMISSION FROM POLLUTION CONTROL BOARD ETC., WERE FILED AND EXPLAINED BEFORE THE ASSESSING OFFICER. THUS IT IS SUBMITTED THAT THE LEARNED ASSESSING OFFICER EXAMINED THE ISSU E OF APPLICABILITY OF SECTION 10B TO THE FACTS OF THE CASE OF THE APPELLANT CAREFULLY. ONLY AFTER CRITICAL EXAMINATION OF ALL THE DETAILS FILED BY THE APPELLANT AND VERIFICATION OF THE DOCUMENTS AND CERTIFICATES OF APPROVAL ETC., AND HAVING BEEN SATISFIED THAT THE APPELLANT WAS ELIGIBLE TO GET DEDUCTION U/S. 10B THAT THE DEDUCTION WAS ALLOWED BY THE LEARNED ASSESSING OFFICER. THIS BEING THE CASE, SINCE THE ASSESSING OFFICER HAD EXAMINED THE ISSUE OF ALLOWABILITY OF DEDUCTION U/S. 10B IN DETAIL AND ALLOWED THE SAME, THE ORDER OF THE LEARNED ASSESSING OFFICER U/S. 143(3) CAN NOT BE TREATED AS ERRONEOUS AND PREJUDICIAL TO INTEREST OF REVENUE BY THE LEARNED CIT, PANAJI - GOA. IN THIS CONNECTION, AND IN SUPPORT OF TH E ABOVE CONTENTION, THE APPELLANT RELIES ON THE FOLLOWING DECISIONS: (1) DECISION OF THE HONOURABLE PANAJI BENCH OF ITAT IN THE CASE OF DR. PRAFULLA R. HEDE VS CIT IN ITA NO. 135/PNJ/2011 DT. 29/08/2011. (2) THE ABOVE DECISION WAS UPHELD AND CONFIRMED BY THE HONOURABLE BOMBAY HIGH COURT IN TAX APPEAL NO. 15 OF 2012 DT. 06/02/2012. 5 ITA NO. 101/PNJ/2013 (ASST. YEAR : 2008 - 09) IN THE ABOVE CASE THE HONOURABLE TRIBUNAL HAS HELD THAT THE ASSESSING OFFICER AFTER DETAILED EXAMINATION OF FACTS TAKES A VIEW PERMISSIBLE IN LAW AND IF THE CIT DOES NOT AGREE WITH THE VIEW TAKEN BY ASSESSING OFFICER WHERE ANOTHER VIEW IS POSSIBLE, THE ORDER OF THE ASSESSING OFFICER DOES NOT BECOME ERRONEOUS AND PROVISION OF SECTION 263 CANNOT BE INVOKED. THIS VIEW OF THE HONOURABLE ITAT WAS UPHELD IN APPEAL OF THE DEPARTMENT BY THE HONOURABLE HIGH COURT OF BOMBAY. (3) DECISION OF THE HONOURABLE DELHI HIGH COURT IN THE CASE OF CIT VS SU B BEAM AUTO LTD., REPORTED AT 332 ITR 167 (DELHI). AND (4) DECISION OF THE HONOURABLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS SATPAL AGARWAL REPORTED AT 293 ITR 90 (P&H). IN THESE CASES ALSO, THE HONOURABLE COURTS HAVE TAKEN THE STAND THAT ONCE THE ASSESSING OFFICER HAS EXAMINED THE ISSUE IN DETAIL, IF ANOTHER VIEW IS POSSIBLE, THE CIT CANNOT INVOKE PROVISIONS OF SECTION 263. COPIES OF ALL THE ABOVE CASE LAWS WITH RELEVANT PORTIONS MARKED ARE FILED IN THIS PAPER BOOK. ON THE OTHER HAND, THE LEARNED COMMISSIONER OF INCOME TAX, PANAJI, WRONGLY INTERPRETED THE DECISIONS OF THE HONOURABLE SUPREME COURT IN THE CASE OF SESA GOA LTD., REPORTED AT 271 ITR 331 AND THE DECISION OF THE HONOURABLE ITAT, PANAJI IN THE CASE OF CHOWGULE & CO. LTD. IN ITA 162 & 184/PNJ/2006 AND APPLIED THE SAME TO THE CASE OF THE APPELLANT HOLDING THAT EXTRACTION AND PROCESSING OF IRON ORE ALONE AMOUNT TO MANUFACTURING / PRODUCTION FOR THE PURPOSE OF SECTION 10B OF INCOME TAX ACT. THERE B Y, THE LEARNED COMMISSIONER OF INCOME TAX, PANAJI, BY INCORRECT INTERPRETATIONS AND WRONG APPLICATION OF THE ABOVE CASE LAWS TO THE CASE OF APPELLANT HELD THAT THE ASSESSMENT ORDER OF THE ASSESSING OFFICER WAS ERRONEOUS AT WHICH IS NOT CORRECT. IN VIEW O F THE ABOVE SUBMISSIONS IT IS PRAYED THAT THE HONOURABLE TRIBUNAL MAY BE PLEASED TO HOLD THAT THE ORDER OF THE LEARNED ASSESSING OFFICER IS NOT ERRONEOUS AND THEREBY HOLD THAT THE LEARNED CIT WAS NOT JUSTIFIED IN INVOKING PROVISIONS OF SECTION 263 AND AS S UCH CANCEL THE ORDER U/S 263 OF LEARNED CIT, PANAJI. 2. 2 THE LD. DR VEHEMENTLY CONTENDED THAT THE ORDER PASSED BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. CIT HAS RIGHTLY EXERCISED THE JURISDICTION U/S 263 OF THE INCOME TAX ACT. IT IS A CASE WHERE THE 6 ITA NO. 101/PNJ/2013 (ASST. YEAR : 2008 - 09) AO HAS NOT AT ALL EXAMINED THE C LAIM OF THE ASSESSEE U/S 10B. EVEN NO NOTICE HAS EVER BEEN ISSUED TO THE ASSESSEE ASKING FOR THE EXPLANATION ON THE CLAIM OF THE ASSESSEE. IN THIS REGARD, THE LD. DR EVEN PRODUCED BEFORE US THE ORIGINAL ASSESSMENT RECORD WHICH WE EXAMINED AND WHICH WAS A LSO SHOWN TO THE LD. AR. ON THE ORDER SHEET WE DID NOT FIND THAT ANY QUERY HAS EVER BEEN RAISED BY THE AO REGARDING THE CLAIM OF THE ASSESSEE IN RESPECT OF THE EXEMPTION CLAIM U/S 10B. WE DID NOT EVEN FIND ANY NOTICE BEING ISSUED BY THE AO ASKING FOR EXPLANATION IN RESPECT OF THE CLAIM MADE BY THE ASSESSEE FOR THE EXEMPTION U/S 10B OF THE INCOME TAX ACT. 2 . 3 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD ALONG WITH THE CASE LAWS AS RELIED ON AND THE ORDER OF THE CIT PASSED U/S. 263 OF THE ACT. SECTION 263 LAYS DOWN AS UNDER: - 263(1) THE COMMISSIONER MAY CALL FOR AND E XAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BE ING 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 FR ESH ASSESSMENT. EXPLANATION. - FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT, FOR THE PURPOSES OF THIS SUB - SECTION, - (A) AN ORDER PASSED ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE, 1988 BY THE ASSESSING OFFICER SHALL INCLUDE - (I) AN ORDER OF ASSE SSMENT MADE BY THE ASSISTANT COMMISSIONER OR DEPUTY DIRECTOR OR THE INCOME - TAX OFFICER ON THE BASIS OF THE DIRECTIONS ISSUED BY THE JOINT COMMISSIONER UNDER SECTION 144A; (II) AN ORDER MADE BY THE JOINT COMMISSIONER IN EXERCISE OF THE POWER OR IN THE PERF ORMANCE OF THE FUNCTIONS OF AN ASSESSING OFFICER CONFERRED ON, OR ASSIGNED TO, HIM UNDER THE ORDERS OR DIRECTIONS ISSUED BY THE BOARD OR BY THE CHIEF COMMISSIONER OR DIRECTOR GENERAL OR COMMISSIONER AUTHORISED BY THE BOARD IN THIS BEHALF UNDER SECTION 120; 7 ITA NO. 101/PNJ/2013 (ASST. YEAR : 2008 - 09) (B) 'RECORD' SHALL INCLUDE AND SHALL BE DEEMED ALWAYS TO HAVE INCLUDED ALL RECORDS RELATING TO ANY PROCEEDING UNDER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMISSIONER; (C) WHERE ANY ORDER REFERRED TO IN THIS SUB - SECTION AND PASSED BY THE AS SESSING OFFICER HAD BEEN THE SUBJECT MATTER OF ANY APPEAL FILED ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE, 1988, THE POWERS OF THE COMMISSIONER UNDER THIS SUB - SECTION SHALL EXTEND AND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL. (2) NO ORDER SHALL BE MADE UNDER SUB - SECTION (1) AFTER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER SOUGHT TO BE REVISED WAS PASSED. (3) NOTWITHSTANDING ANYTHING CONTAINED IN SUB - SECT ION (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, 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. FROM THE PERUSAL OF THE AFORESAID SECTION, IT IS APPARENT THAT THERE ARE FOUR MAIN FEATURES OF THE POWER OF REVISION TO BE EXERCISED U/S 263 BY THE COMMISSIONER OF INCOME - TAX. FIRSTLY, THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORDS OF ANY PROCEEDIN GS UNDER THE ACT AND FOR THIS PURPOSE HE NEED NOT TO SHOW ANY REASON OR RECORD ANY REASON TO BELIEVE. IT IS A PART OF HIS ADMINISTRATIVE POWER TO CALL FOR THE RECORD AND EXAMINE THEM RELATING TO ANY ASSESSEE. SECONDLY, HE MAY CONSIDER ANY ORDER PASSED B Y THE ASSESSING OFFICER AS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THIS IS EXERCISED BY CALLING FOR AND EXAMINING THE RECORD AVAILABLE AT THIS STAGE. THERE IS NO QUESTION OF THE ASSESSEE TO APPEAR AND MAKE SUBMISSION AT THIS STAGE. THIRDLY, IF AFTER CALLING FOR AND EXAMINING THE RECORDS THE COMMISSIONER CONSIDERS THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, HE IS BOUND TO GIVE AN OPPORTUNITY TO THE ASSESSEE OF BEIN G HEARD AND 8 ITA NO. 101/PNJ/2013 (ASST. YEAR : 2008 - 09) AFTER MAKING OR CAUSING TO BE MADE SUCH ENQUIRY AS HE MAY DEEM FIT, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE MAY JUSTIFY INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT OR CANCELING ASSESSMENT AND DIRECTING A FRESH ASSE SSMENT. THIS EMPOWERS THE CIT TO CAUSE OR MAKE SUCH ENQUIRIES AS HE DEEMS NECESSARY. FOURTHLY, THE CIT U/S 263 CAN ENHANCE OR MODIFY THE ASSESSMENT AS A RESULT OF ENQUIRY CONDUCTED AND HEARING OF THE ASSESSEE. 2.3.1 FOR INVOKING THE PROVISIONS OF SEC. 263, THE TWIN CONDITION THAT THE ORDER PASSED BY THE AO IS ERRONEOUS AND ALSO THAT IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE MUST BE SATISFIED. IF ONE OF THEM IS ABSENT, THE PROVISIONS OF SEC. 263 CANNOT BE INVOKED. THE TERM ERRONEOUS HAS NOT BE EN DEFINED UNDER THE INCOME TAX ACT BUT IT IS WELL SETTLED THAT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE AO CANNOT BE SAID TO BE AN ERROR. AN ORDER CAN BE SET TO BE ERRONEOUS IF THERE IS INCORRECT ASSUMPTION OF FACTS OR INCORRECT APPLICATI ON OF LAW IN THE ORDER OF THE AO. IF THE AO AFTER MAKING THE INQUIRY AND EXAMINING THE RECORD HAS TAKEN ONE OF THE POSSIBLE VIEWS, IT CANNOT BE SAID THAT THE ORDER PASSED BY THE AO WAS ERRONEOUS. THE ASSESSMENT RECORD AND THE EVIDENCE PRODUCED BEFORE US DURING THE COURSE OF THE HEARING REFLECT APPARENTLY THAT THE AO, IN THIS CASE, DURING THE IMPUGNED ASSESSMENT YEAR HAS NOT CARRIED OUT ANY INQUIRY WHETHER THE ASSESSEE IS ENTITLED FOR EXEMPTION U/S 10B OR NOT. IT IS A FACT THAT IN THIS CASE, THE AO HAS NO T ISSUED ANY NOTICE OR RAISED ANY QUERY TO THE ASSESSEE IN RESPECT OF EXEMPTION CLAIMED BY THE ASSESSEE U/S 10B. NO DOUBT, THE AO ISSUED NOTICE U/S 142(1) ON 7.9.2010 BUT NO QUERY IN RESPECT OF THE CLAIM MADE U/S 10B WAS EVER MADE. THE ASSESSEE EVEN THOU GH CLAIMED VIDE LETTER DT. 27.11.2010, A COPY OF WHICH IS AVAILABLE AT PG. 33 , THAT THE ASSESSEE FILED THE WORKING OF THE DEDUCTION BEING CLAIMED U/S 10B , EXCEPT FOR THIS WORKING GIVEN BY THE ASSESSEE, WE DO NOT FIND ANY LETTER BEING WRITTEN BY THE AO ASKI NG FROM THE ASSESSEE ABOUT THE CLAIM OF EXEMPTION U/S 10B. WE ASKED THE ASSESSEE TO SUPPLY A COPY OF THE LETTER IN REPLY TO WHICH THIS INFORMATION WAS SUPPLIED VIDE 9 ITA NO. 101/PNJ/2013 (ASST. YEAR : 2008 - 09) LETTER DT. 27.11.2010 BUT NO SUCH LETTER WAS FILED BY THE ASSESSEE BEFORE US NOR WE FOUND ANY SUCH LETTER IN THE ASSESSMENT RECORDS WHICH WAS PRODUCED BEFORE US BY THE LD. DR . WHEN THE LD. DR PRODUCED THE ASSESSMENT RECORD BEFORE US, WE FOUND THAT THE AO EVEN THOUGH ON 22.12.2010 ASKED FOR FURTHER DETAILS BUT THESE DETAILS ALSO DID NOT INCLUDE ANY QUERY OR EXPLANATION IN RESPECT OF CLAIM BEING MADE BY THE ASSESSEE U/S 10B. NO DOUBT, VIDE LETTER DT. 27.11.2010 THE ASSESSEE SUBMITTED THE WORKING OF THE DEDUCTION U/S 10B ON THE BASIS OF THE FORMULA EXPORT TURNOVER X PROFIT OF BUSINESS TOTAL TURNOVER OF THE BUSINESS BUT THIS DOES NOT MEAN THAT THE AO HAS APPLIED HIS MIND ON THE ISSUE WHETHER THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 10B OR WHETHER THE ASSESSEE HAS COMPLIED WITH THE CONDITIONS AS STIPULATED UNDER SEC. 10B . 2 .3 .2 FROM THE PERUSAL OF THE SAID SECTION IT IS APPARENT THAT BENEFIT U/S 10B IS AVAILABLE ONLY TO THOSE UNDERTAKINGS WHICH ARE ENGAGED IN THE BUSINESS OF MANUFACTURE AND PRODUCTION OF AN ARTICLE OR THING AND COMPLIED WITH THE CONDITIONS AS STIPULATED U/S 10B . OTHER BUSINESSES ARE NOT ELIGIBLE TO CLAIM THE BENEFIT. THIS IS A FACT THAT IN THIS CASE THE ASSESSING OFFICER HAS NOT ISSUED ANY NOTICE OR RAISED ANY QUERY TO THE ASSESSEE IN RESPECT OF THE CLAIM OF SEC. 10B DURING COURSE OF ASSESSMENT PROCEEDING. EVE N NO SUBMISSIONS WERE ALSO MADE BY THE ASSESSEE EXCEPT FILING THE COMPUTATION OF EXEMPTION AT ITS OWN . NO DOUBT, THE ASSESSEE HAS SUBMITTED THE CLAIM IN THE INCOME TAX RETURN FILED BY IT AND ASSESSING OFFICER ALLOWED THE CLAIM WITHOUT MAKING ANY INQUIRY I N THIS REGARD, THIS DOES NOT MEAN THAT THE ASSESSING OFFICER HAS APPLIED HIS MIND. HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT [2000] 243 ITR 83, AT PAGE 88 HAS CATEGORICALLY HELD AS UNDER: IN THE INSTANT CASE, THE COMMISSI ONER NOTED THAT THE INCOME TAX OFFICER PASSED THE ORDER OF NIL ASSESSMENT WITHOUT APPLICATION OF 10 ITA NO. 101/PNJ/2013 (ASST. YEAR : 2008 - 09) MIND. INDEED, THE HIGH COURT RECORDED THE FINDING THAT THE INCOME TAX OFFICER FAILED TO APPLY HIS MIND TO THE CASE IN ALL PERSPECTIVE AND THE ORDER PASSED BY HIM WAS ERRONEOUS. IT APPEARS THAT THE RESOLUTION PASSED BY THE BOARD OF THE APPELLANT COMPANY WAS NOT PLACED BEFORE THE ASSESSING OFFICER. THUS, THERE WAS NO MATERIAL TO SUPPORT THE CLAIM OF THE APPELLANT THAT THE SAID AMOUNT REPRESENTED COMPENSATION FO R LOSS OF AGRICULTURAL INCOME. HE ACCEPTED THE ENTRY IN THE STATEMENT OF THE ACCOUNT FILED BY THE APPELLANT IN THE ABSENCE OF ANY SUPPORTING MATERIAL AND WITHOUT MAKING ANY INQUIRY . ON THESE FACTS THE CONCLUSION THAT THE ORDER OF THE INCOME TAX OFFICER WAS ERRONEOUS IS IRRESISTIBLE. WE, ARE, THEREFORE OF THE OPINION THAT THE HIGH COURT HAS RIGHTLY HELD THAT THE EXERCISE OF THE JURISDICTION BY THE COMMISSIONER U/S 263(1) WAS JUSTIFIED. THIS ITSELF PROVES NON APPLICATION OF MIND ON THE PART OF THE ASSESS ING OFFICER AND ALLOWING THE DEDUCTION TO THE ASSESSEE WITHOUT MAKING AN ENQUIRY WILL TANTAMOUNT THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. (SUPRA) WHILE HOLDING SO HAS RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RAMPYARI DEVI SARAOGI VS. COMMISSIONER OF INCOME - TAX 67 ITR 84(SC). IN THIS CASE THE INCOME TAX OFFICER ACCEPTED THE RETURN OF THE ASSESSEE IN RESPECT OF THE INITIAL CAPITAL, GIFT RECEI VED AND SALE OF JEWELLERY, THE INCOME FROM BUSINESS ETC. WITHOUT ANY ENQUIRY OR EVIDENCE WHATSOEVER. FOR THAT REASON THE CIT HELD THE ORDER TO BE ERRONEOUS. IN REVISION, HE CANCELLED THE ORDER AND ORDERED THE INCOME TAX OFFICER TO MAKE FRESH ASSESSMENT. IN HIS ORDER THE COMMISSIONER HAD USED CERTAIN NEW GROUNDS WHICH HAD NOT BEEN DISCLOSED TO THE ASSESSEE IN THE NOTICE GIVEN TO HIM TO SHOW CAUSE WHY THE ORDER OF THE INCOME TAX OFFICER SHOULD NOT BE REVISED. (THIS IS THE SAME THING WHICH THE LEARNED A. R . ARGUED THAT THE CIT HAS NOT STATED IN THE SHOW CAUSE NOTICE THAT THIS IS A CASE OF LACK OF ENQUIRY) BUT, APART FROM THIS NEW GROUND, THE HON'BLE SUPREME COURT OBSERVED AT PAGE 385 AS UNDER: 'THERE WAS AMPLE MATERIAL TO SHOW THAT THE INCOME TAX OFFICER MADE THE ASSESSMENTS IN UNDUE HURRY...THE ASSESSEE MADE A DECLARATION GIVING THE FACTS REGARDING INITIAL CAPITAL, THE ORNAMENTS AND PRESENTS 11 ITA NO. 101/PNJ/2013 (ASST. YEAR : 2008 - 09) RECEIVED AT THE TIME OF MARRIAGE, OTHER GIFTS RECEIVE D FROM HER FATHER IN LAW, ETC., WHICH SHOULD HAVE PUT ANY INCOME TAX OFFICER ON HIS GUARD. BUT THE INCOME TAX OFFICER WITHOUT MAKING ANY INQUIRIES TO SATISFY HIMSELF PASSED THE ASSESSMENT ORDER... A SHORT STEREO TYPED ASSESSMENT ORDER WAS MADE FOR EACH ASS ESSMENT YEAR... NO EVIDENCE WHATSOEVER WAS PRODUCED IN RESPECT OF THE MONEY LENDING BUSINESS DONE...NO NAMES WERE GIVEN AS TO THE PARTIES TO WHOM THE LOANS WERE ADVANCED ......' 2.3.3 THUS, THE LAW AS MAY BE STATED AFTER GOING THROUGH BOTH THE DECISIONS OF SUPREME COURT IS VERY CLEAR THAT IF THE ASSESSMENT HAS BEEN MADE WITHOUT MAKING THE PROPER ENQUIRY AND APPLICATION OF MIND, THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. UNLIKE THE CIVIL COURT WHICH IS NEUTRAL TO GIVE A DECISION ON T HE BASIS OF EVIDENCE PRODUCED BEFORE IT, AN ASSESSING OFFICER IS NOT ONLY AN ADJUDICATOR BUT IS ALSO AN INVESTIGATOR. THE ASSESSING OFFICER CANNOT REMAIN PASSIVE ON THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER ENQUIRY. IT IS TH E DUTY OF THE ASSESSING OFFICER TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETURN WHEN THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE ENQUIRY. IF THERE IS FAILURE TO MAKE SUCH ENQUIRY, IN OUR OPINION, THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE REVENUE HAS NOT TO PROVE THAT ITS ORDER IS ERRONEOUS AND CIT CAN REVISE IT U/S 263. EVEN THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF SWARUP VEGETABLE PRODUCTS INDUSTRIES LTD. (NO. 1) VS. CIT [1991] 187 ITR 412 HAS ALSO TAKEN THE SIMILAR VIEW BY OBSERVING AS UNDER: IT IS BEYOND DISPUTE THAT, UNDER SECTION 263 OF THE I.T. ACT, THE COMMISSIONER HAS POWER TO SET ASIDE THE ASSESSMENT ORDER AND SEND THE MATTER FOR FRESH ASSESSMENT IF HE IS SATISFIED THAT FURTHER ENQUIRY IS NECESSARY AND THAT THE ORDER OF INCOME TAX OFFICER IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. HON'BLE DELHI HIGH COURT ALSO IN THE CASE OF GEE VEE ENTERPRISES VS. ADDL. CIT [1975] 99 ITR 375 (DEL) HAS ALSO TAKEN THE SIMILAR VIEW THAT LACK OF PROPER E NQUIRY TANTAMOUNT THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 12 ITA NO. 101/PNJ/2013 (ASST. YEAR : 2008 - 09) 2 . 3.4 SIMILAR ISSUE HAS ARISEN BEFORE THE SPECIAL BENCH OF I.T.A.T. CHENNAI B BENCH IN THE CASE OF RAJALAKSMI MILLS LTD. VS. INCOME TAX OFFICER [2009] 121 ITD 343 (CHENNAI) (SB). THE FACTS OF THIS CASE WERE THAT THE ASSESSEE ENCLOSED THE BALANCE SHEET ALONG WITH THE RETURN AND IN THE BALANCE SHEET THE ASSESSEE MADE A PROVISION FOR GRATUITY AMOUNTING TO RS.7,85,600/ - . THE ASSESSEE CLAIMED IT AS DEDUCTION IN THE RE TURN OF INCOME. THE ASSESSING OFFICER ALLOWED THE SAME WITHOUT MAKING ANY DISCUSSION IN THE ORDER OF ASSESSMENT. THE CIT BY INVOKING THE PROVISION OF SECTION 263 TOOK THE VIEW THAT THE ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE SPECIAL BENCH OF I.T.A.T. UNDER THESE FACTS HAS HELD AS UNDER: IT IS NOT NECESSARY FOR THE COMMISSIONER TO MAKE FURTHER ENQUIRIES BEFORE CANCELLING THE ASSESSMENT ORDER OF THE ASSESSING OFFICER. THE COMMISSIONER CAN REGARD THE ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE THE ASSESSING OFFIC ER SHOULD HAVE MADE FURTHER INQUIRIES BEFORE ACCEPTING THE STATEMENTS MADE BY THE ASSESSEE IN THE RETURN. THE REASON IS OBVIOUS. UNLIKE THE CIVIL COURT WHICH IS NEUTRAL TO GIVE A DECISION ON THE BASIS OF EVIDENCE PRODUCED BEFORE IT, AN ASSESSING OFFICER IS NOT ONLY AN ADJUDICATOR BUT IS ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER ENQUIRY. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETURN WHEN THE CIRCUMST ANCES OF THE CASE ARE SUCH AS TO PROVOKE AN INQUIRY. THE MEANING TO BE GIVEN TO THE WORD 'ERRONEOUS IN SECTION 263 EMERGES OUT OF THIS CONTEXT. THE WORD 'ERRONEOUS' IN THAT SECTION INCLUDES CASES WHERE THERE HAS BEEN FAILURE TO MAKE THE NECESSARY INQUIRI ES. IT IS INCUMBENT ON THE ASSESSING OFFICER TO INVESTIGATE THE FACTS STATED IN THE RETURN WHEN CIRCUMSTANCES MAKE SUCH AN INQUIRY PRUDENT AND THE WORD 'ERRONEOUS' IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN ENQUIRY. THE ORDER BECOMES ERRONEOUS BEC AUSE SUCH AN ENQUIRY HAS NOT BEEN MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE FACTS STATED THEREIN ARE ASSUMED TO BE CORRECT. IN THE INSTANT CASE, THE ASSESSING OFFICER FAILED TO MAKE ANY ENQUIRY IN REGARD TO THE ALLOWABILITY OF THE PROVISION FOR GRATUITY. AS SUCH, THE ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THEREFORE, THE CONDITIONS PRECEDENT FOR ASSUMING 13 ITA NO. 101/PNJ/2013 (ASST. YEAR : 2008 - 09) JURISDICTION UNDER SECTION 263 DID EXIST IN THE FACTS OF THE INSTANT CASE. 2.3.5 THIS CLEARLY PROVES THAT THE SPECIAL BENCH OF TRIBUNAL HAS ALSO TAKEN THE VIEW THAT LACK OF ENQUIRY WILL TANTAMOUNT TO BE THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. WE ALSO NOTED THAT ON MERIT THE TRIBUNAL HAS ALLOWED THE RELIEF TO OTHER A SSESSEE DOING THE SAME BUSINESS IN THE A.Y.2009 - 10 AFTER CONSIDERING THE DEFINITION OF MANUFACTURING INSERTED W.E.F. 1.4.2009 IN SEC. 2(29AB) AND VARIOUS OTHER DECISIONS ON THE SAME ISSUE BUT THE ISSUE BEFORE US DOES NOT RELATE TO THE MERIT OF THE CASE AS THE CIT HAS NOT GIVEN THE DIRECTION TO THE ASSESSING OFFICER ON MERIT BUT HAS SIMPLY RESTORED THIS ISSUE TO THE FILE OF THE AO WITH THE DIRECTION THAT THE AO SHALL RE - DECIDE THIS ISSUE ON MERIT AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE. THE ASSESSEE CAN PLACE ALL THESE DECISIONS ON MERIT BEFORE THE AO. EVEN WE HAVE ALREADY DECIDED IN THE CASE OF THE ASSESSEE S APPEAL FOR THE A.Y 2009 - 10 VIDE ORDER DT. 13.9.2013 IN ITA NO. 68/PNJ/2013 AND HELD THAT THE ASSESSEE IS ENTITLED FOR THE CLAIM U/S 10B. THE ASSESSING OFFICER IS DIRECTED TO LOOK INTO ALL THOSE DECISIONS AND DECIDE HOW FAR THOSE DECISIONS WILL ASSIST THE ASSESSEE IN ALLOWING HIM THE CLAIM U/S 10B. WE, THEREFORE, DISMISS THE APPEAL OF THE ASSESSEE. 3. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. 4. ORDER PRONOUNCED IN THE OPEN COURT ON 1 9 /09/2013. S D / - (D.T.GARASIA) JUDICIAL MEMBER S D / - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 1 9 /09/ 2013 *SSL* 14 ITA NO. 101/PNJ/2013 (ASST. YEAR : 2008 - 09) COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT, PANAJI (4) CIT(A), PANAJI (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER SR. P RIVATE S ECRETARY ITAT, PANAJI, GOA