Khoday Eshwarsa & Sons, Bangalore V. DCIT, Bangalore

ITA 1117/BANG/2010

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0334 (ITAT-BANGALORE)
• Duration Of Justice: 5 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 26-05-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 29-09-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S SUKUMAR
• Keywords: Capital asset; Search and seizure; Double taxation relief; Opportunity of being heard; Principle of natural justice; Difference of opinion; Assessment record; Capital receipt; Change of opinion; Capital expenditure
• Section: 37; 263; 2

Judgement Text

ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'C', BANGALORE BEFORE SHRI. SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER 1. I.T.A NO.1117/BANG/2010 2. I.T.A NO.614/BANG/2011 (ASSESSMENT YEAR : 2006-07) M/S. KHODAY ESHWARSA & SONS, NO.9, SESHADRI ROAD, BENGALURU 560 009 .. APPEL LANT PAN : AACFK8629H V. 1. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 3(1), BENGALURU 2. COMMISSIONER OF INCOME-TAX, BENGALURU-II, BENGALURU .. RESPONDENT ASSESSEE BY : SHRI. S. SUKUMAR, ADVOCATE REVENUE BY : DR. SIBICHEN K. MATHEW, CIT -III HEARD ON : 26.05.2016 PRONOUNCED ON : 17.06.2016 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THESE ARE ASSESSEES APPEALS FOR A. Y. 2006-07. A PPEAL IN ITA.614/BANG/2011 IS AGAINST ORDER DT.28.03.2011 OF CIT, BENGALURU-II, ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 2 U/S.263 OF THE INCOME-TAX ACT, 1961 (THE ACT IN S HORT). APPEAL IN ITA.1117/BANG/2010 IS AGAINST OF AN ORDER DT.23.03. 2010 OF CIT (A)-II, BENGALURU. 02. ITA. 614/BANG/2010 IS TAKEN UP FIRST FOR DISPOS AL. FACTS APROPOS ARE ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE AND TRADING OF STATIONERY, PERSONAL CARE AND PHARMACEUTICAL PRODUCTS HAD FILED RETURN FOR THE IMPUGNED ASSESSMENT YEAR DECLARING LOSS OF RS.2,90, 00,129/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO REQUIRED THE A SSESSEE TO FURNISH DETAILS OF EXPENDITURE. FROM SUCH DETAILS, AO FOUN D THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE INCLUDED IRRECOVERABLE ADVA NCE OF RS.1,33,40,620/- FOR ITS DISTILLERY DIVISION AND RS.51,17,440/- FOR STATIONARY DIVISION. AS PER THE AO, THIS EXPENDITURE COULD BE DIVIDED INTO THRE E CATEGORIES NAMELY ONE WHICH WAS CAPITAL IN NATURE, SECOND WHICH WAS INCUR RED IN EARLIER YEARS AND THE THIRD ONE FOR WHICH NO EXPLANATION WAS OFFERED BY THE ASSESSEE. ASSESSEE DID BRING TO THE NOTICE OF THE AO THAT TRI BUNAL IN THE CASE OF ITS SISTER CONCERN, NAMELY KHODAY BREWERIES LTD, IN ITA .374/BANG/2012, DT.29.04.2004, HAD HELD THAT SUCH CLAIM BE ALLOWED. HOWEVER THE AO WAS OF THE OPINION THAT CLAIM FOR CAPITAL EXPENDITURE C OULD NOT ALLOWED. OUT OF ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 3 THE TOTAL SUM OF RS.1,84,59,060/- A DISALLOWANCE OF RS.49,07,454/- WAS MADE BY THE AO FOR THIS, AND ASSESSMENT CONCLUDED A CCORDINGLY. 03. SUBSEQUENTLY CIT ISSUED A NOTICE U/S.263 OF THE ACT, TO THE ASSESSEE, CITING A REASON THAT ASSESSEE HAD RECEIVED A SUM RS .6.29 CRORES AS COMPENSATION WHICH WAS MENTIONED IN SCHEDULE 13 OF ITS AUDITED ACCOUNT STATEMENTS, AND HAD CLAIMED IT AS CAPITAL RECEIPT RELYING ON THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF BOMBAY BUR MAH TRADING CORPORATION LTD. V. CIT [81 ITR 777]. AS PER THE C IT, AO WHILE COMPLETING THE ASSESSMENT HAD NOT APPLIED HIS MIND WHETHER THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN BOMBAY BURMAH TRADI NG CORPORATION LTD (SUPRA) WAS APPLICABLE TO THE FACTS BEFORE HIM . IN REPLY TO THE ABOVE NOTICE, ASSESSEE MENTIONED THAT THERE WAS AN AGREEM ENT DT.22.09.2006 ENTERED BY ONE M/S. DAATHA BUILDERS AND SIX OTHERS, WHO WERE THE OWNERS OF A PLOT OF PROPERTY AT KENSINGTON ROAD, BENGALURU , WITH ONE M/S. PRESTIGE ESTATES PROJECTS LTD. AS PER THE ASSESSEE SAID M/S. DAATHA BUILDERS WAS ENTITLED TO 27.5% OF THE BUILT-UP ARE A OF THE BUILDINGS TO BE BUILT BY M/S. PRESTIGE ESTATES PROJECTS LTD, IN THE SAID PROPERTY, BY VIRTUE OF THIS AGREEMENT. ASSESSEE POINTED OUT THAT ANOTHER AGREEMENT WAS ENTERED BY IT ON 27.10.2004 WITH M/S. DAATHA BUILDERS THRO UGH WHICH ASSESSEE ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 4 AGREED TO PURCHASE 27.5% SHARE OF M/S. DAATHA BUILD ERS IN THE PROJECT TO BE BUILT BY M/S. PRESTIGE ESTATES PROJECTS LTD, FOR A TOTAL CONSIDERATION OF RS.17,16,00,000/-. AS PER THE ASSESSEE ON THE VERY SAME DAY A SUM OF RS.50 LAKHS WAS PAID BY IT AS ADVANCE. ASSESSEE FU RTHER STATED THAT ON 02.06.2005 THE PARTIES AGREED TO CANCEL THE AGREEME NT MENTIONED ABOVE AND ON SUCH TERMINATION IT WAS PAID A SUM OF RS.6.29 CR ORES. CONTENTION OF THE ASSESSEE WAS THAT THE SUM OF RS.6.29 CRORES WAS REC EIVED AS COMPENSATION FOR NOT EXERCISING THE RIGHT OF SPECIFIC PERFORMANC E AND BEING A CAPITAL RECEIPT COULD NOT BE TAXED BY VIRTUE OF THE JUDGMEN T OF HONBLE BOMBAY HIGH COURT IN BOMBAY BURMAH TRADING CORPORATION LTD (SUPRA). HOWEVER AS PER THE CIT, ABOVE MENTIONED CANCELLATION AGREEM ENT LOOKED SUSPICIOUS SINCE ASSESSEE HAD RECEIVED HUGE SUMS IN LIEU OF SU RRENDER OF ITS RIGHTS FOR SPECIFIC PERFORMANCE. AS PER THE CIT BY VIRTUE OF AGREEMENT DT.27.10.2004 THAT ASSESSEE HAD ENTERED WITH M/S. DAATHA BUILDERS , WHAT WAS PAID BY THE ASSESSEE WAS ONLY RS.50 LAKHS OUT OF THE TOTAL AGRE ED CONSIDERATION OF RS.17,16,00,000/- AND THE BALANCE SUM OF RS.16,16,0 0,000/- REMAINED PAYABLE TO M/S. DAATHA BUILDERS TO THE ASSESSEE. ACCORDING TO HIM IT COULD NOT BE BELIEVED THAT ASSESSEE RECEIVED A SUM OF RS. 6.29 CRORES WITHIN A FEW MONTHS, FOR THE CANCELLATION OF THE AGREEMENT. CIT ALSO NOTED THAT SHRI. K. L. HARI, WHO WAS THE DIRECTOR M/S. DAATHA BUILDERS , WAS A PARTNER OF THE ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 5 ASSESSEE FIRM. HE WAS OF THE OPINION THAT AO HAD N OT EXAMINED ALL THESE ISSUES, AND IT HAD ENTIRELY ESCAPED HIS ATTENTION. HE SET ASIDE THE ORDER DT.22.12.2008 OF THE AO WITH DIRECTIONS TO PASS A F RESH ORDER AFTER GIVING FRESH OPPORTUNITY TO THE ASSESSEE FOR A PERSONAL HE ARING. AGGRIEVED ON THE ABOVE ORDER OF CIT, ASSESSEE IS IN APPEAL BEFORE US . 04. GROUNDS TAKEN BY THE ASSESSEE ARE REPRODUCED HE REUNDER : ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 6 ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 7 05. IT CAN BE SEEN FROM THE ABOVE GROUNDS THAT THE ASSESSEE HAS DIVIDED THE GROUNDS TO TWO, ONE IN RESPECT OF JURISDICTION AND THE OTHER IN RESPECT OF MERITS. LD. AR HAS FILED TWO SETS OF SUBMISSION. IN THE FIRST SET OF SUBMISSION FILED ON 07.06.2011 IT IS STATED THAT TH E DEVELOPMENT AGREEMENT BETWEEN M/S. DAATHA BUILDERS AND M/S. PRESTIGE EST ATES PROJECTS LTD, WAS DT.22.09.2004 WHEREAS AGREEMENT OF THE ASSESSEE WIT H M/S. DAATHA BUILDERS WAS DT.27.10.2004. AS PER THE LD. AR CANC ELLATION WAS DONE ON 02.06.2005. LD. AR SUBMITTED THAT ASSESSMENT ORDER WAS PASSED AFTER SCRUTINY OF STATEMENT OF ACCOUNTS AND AUDIT REPORTS AND THAT TOO AFTER FOUR HEARINGS. AS PER THE LD. AR, AO HAD TAKEN A POSSIB LE VIEW THAT THE AMOUNT RECEIVED WAS NOT TAXABLE BEING CAPITAL IN NA TURE. RELYING ON THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF MALAB AR INDUSTRIAL CO. LTD, V. CIT [243 ITR 83] AND CIT V. MAX INDIA LTD, [295 ITR 282], LD. AR SUBMITTED THAT CIT COULD NOT SUBSTITUTE A LAWFUL V IEW TAKEN BY THE AO. AS PER THE LD. AR, CIT DID NOT INDICATE HOW THE FACTS IN ASSESSEES CASE WERE DIFFERENT FROM THAT OF HONBLE BOMBAY HIGH COURT JU DGMENT IN THE CASE OF BOMBAY BURMAH TRADING CORPN. LTD, (SUPRA). LD. AR SUBMITTED THAT COMPENSATION RECEIVED IN BREACH OF AGREEMENT FOR SA LE WAS IN THE NATURE OF DAMAGES AND WOULD BE CAPITAL RECEIPT. SIMILARLY AC CORDING TO HIM, AMOUNT RECEIVED BY AN AGREEMENT HOLDER THROUGH A COMPROMIS E AGREEMENT COULD ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 8 NOT BE CONSIDERED AS EITHER REVENUE INCOME OR CAPIT AL GAINS. RELIANCE WAS PLACED ON THE FOLLOWING JUDGMENTS : I) CIT V. HIRALAL MANILAL MODY [131 ITR 421] (GUJ) II) CIT V. VISHAKA MARKETING LTD [(1987) 164 ITR 66 4] III) SALGAONKAR MINING INDUSTRIES V. CIT [228 ITR 1 83] IV) CIT V. DHANRAJ DUGAR [137 ITR 350] (CAL) V) CIT V. MRS. GRACE COLLIS & OTHERS [248 ITR 323] (SC) VI) S. ZORASTER & CO. V. CIT [322 ITR 35] (RAJ) VII ) TRAVANCORE RUBBER & TEA & CO. LTD V. CIT [243 ITR 158] (SC) VIII) CIT V. D. P. SANDU BROS. CHEMBUR P. LTD [273 ITR 1] (SC) IX) SYNDICATE BANK LTD V. ACIT [(1985) 155 ITR 68] FURTHER ACCORDING TO HIM THERE COULD BE NO CAPITAL GAINS SINCE THERE WAS NO TRANSFER OF ANY CAPITAL ASSET BY VIRTUE OF AGREEMEN T FOR SALE. ACCORDING TO HIM NO COST COULD BE COMPUTED. WHEN NO COST COULD B E COMPUTED THERE WAS NO QUESTION OF LEVY OF CAPITAL GAINS. FOR THIS RELIANCE WAS PLACED ON JUDGMENT OF HONBLE MADHYA PRADESH IN THE CASE OF K AMALCHAND V. ITO [128 ITR 290]. THUS ACCORDING TO HIM THERE WAS NO ERROR IN THE ORDER OF THE AO WARRANTING INVOCATION OF JURISDICTION U/S.26 3 OF THE ACT, BY THE CIT. 06. PER CONTRA, LD. DR SUBMITTED THAT AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE NOTICE DT.11.11.2008, U /S.142(1) OF THE ACT, ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 9 HAD REQUIRED THE ASSESSEE TO PROVIDE PARTICULARS ON LY ON THE FOLLOWING MATTERS : AS PER THE LD. DR NONE OF THESE WERE ON THE SUM OF RS.6.29 CRORES SHOWN BY THE ASSESSEE IN ITS NOTE TO ACCOUNTS AS CAPITAL RECEIPTS. AO HAD NOT ASKED ANYTHING ON SUCH HUGE AMOUNT CLAIMED AS EXEMPT. TH EREFORE ACCORDING TO HIM, CIT WAS JUSTIFIED IN CONCLUDING THAT AO HAD NO T APPLIED HIS MIND IN TAXABILITY OF RS.6.29 CRORES. FURTHER AS PER THE L D. AR ASSESSMENT ORDER WAS PASSED ON 22.11.008 AFTER 41 DAYS OF ISSUE OF N OTICE U/S.142(1) OF THE ACT. LD. DR POINTED OUT THAT AO HAD PASSED THE ORD ER IN GREAT HURRY WITHOUT MAKING ANY ENQUIRIES ON AN IMPORTANT ASPECT REFLECTED IN THE ACCOUNTS OF THE ASSESSEE. AS PER THE LD. DR, THE A GREEMENT BY VIRTUE OF WHICH ASSESSEE BOUGHT 27.5% IN M/S. DAATHA BUILDERS AND THE CANCELLATION OF THE AGREEMENT WERE ALL DONE WITHIN A SHORT SPAN OF EIGHT MONTHS. WHAT THE ASSESSEE HAD PAID ON THE DATE OF ENTERING INTO AGREEMENT WAS RS.50 LAKHS TO M/S. DAATHA BUILDERS, WHEREAS ON CANCELLAT ION OF THE AGREEMENT IT RECEIVED A HUGE AMOUNT OF RS.6.29 CRORES. AS FOR T HE RELIANCE PLACED BY THE ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 10 LD. AR ON THE DECISION OF S. ZORASTER & CO., (SUPRA ) OF HONBLE RAJASTHAN HIGH COURT, LD. DR SUBMITTED THAT THE CONCERNED ASS ESSEE THERE WAS A SELLER WHO HAD RECEIVED COMPENSATION FROM THE PURCH ASER, WHERE THE AGREEMENT CONTAINED A SPECIFIC CONDITION FOR PAYMEN T OF COMPENSATION IN THE CASE OF DEFAULT OF PURCHASER. AS PER THE LD. D R JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF BOMBAY BURMAH TRAD ING CORPORATION LTD (SUPRA), WAS ALSO NOT APPLICABLE SINCE IN THE S AID CASE WHAT WAS RECEIVED BY THE ASSESSEE WAS COMPENSATION IN LIEU O F SURRENDER OF FOREST LEASE THEREBY STERILISING THE VERY SOURCE OF ITS PR OFIT MAKING APPARATUS, SINCE CONCERNED ASSESSEE WAS TRADING IN TEAK WOOD. 07. CONTINUING HIS ARGUMENT, LD. DR SUBMITTED THAT JUDGMENT OF HONBLE APEX COURT IN THE CASE OF SHAPURJI BROACHA MILLS LTD V. CIT [78 ITR 68] WOULD TILT THE ISSUE IN FAVOUR OF THE REVEN UE. ACCORDING TO HIM COMPENSATION RECEIVED FOR BREACH OF AN AGREEMENT FO R SELLING AGENCY, WAS HELD TO BE TAXABLE WHEN THE UNDERLYING AGREEMENT WA S FOUND TO BE SHAM. RELIANCE WAS ALSO PLACED ON THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF MADHOWJI DHARAMSHI MANUFACTURING CO. LTD V. CIT [78 ITR 62]. 08. AD LIBITUM REPLY OF THE LD. AR WAS THAT FOR INV OKING SECTION 263 OF THE ACT, ORDER OF THE AO SHOULD NOT ONLY ERRONEOUS BUT ALSO PREJUDICIAL TO ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 11 THE INTERESTS OF THE REVENUE. ACCORDING TO HIM, JU ST BECAUSE AN ORDER WAS ERRONEOUS, REVISIONARY JURISDICTION COULD NOT BE IN VOKED HERE. AS PER THE LD. AR, DEPARTMENT WAS UNABLE TO SHOW HOW THE ORDER OF AO WAS PREJUDICIAL TO THE INTERESTS OF REVENUE. ACCORDING TO HIM THE AMOUNT RECEIVED BY THE ASSESSEE ON CANCELLATION OF THE AGR EEMENT WAS CAPITAL IN NATURE AND THIS WAS SPECIFICALLY MENTIONED BY THE A SSESSEE IN ITS AUDITED FINANCIAL ACCOUNTS. FURTHER ACCORDING TO HIM, THER E WAS NO MENTION EITHER IN THE SHOW-CAUSE NOTICE OR IN THE ORDER PASSED U/S .263 OF THE ACT, AS TO HOW THE ORDER OF THE AO WAS ERRONEOUS. AS PER THE LD. AR, CIT HAD NOT GIVEN ANY FINDING AT ALL. IN HIS OPINION, CIT WAS HARBOURING A SUSPICION THAT THE AGREEMENTS WERE SHAM. MERE SUSPICION WOUL D NOT CONVERT AN ORDER OTHERWISE CORRECT TO AN ERRONEOUS ONE. FURTHER AS PER THE LD. AR, AUDIT REPORT U/S.44AB OF THE ACT, WAS FILED ALONG WITH TH E RETURN AND THE AO HAD PERUSED SUCH AUDITED RETURN WHILE COMPLETING THE AS SESSMENT. RELYING ON THE DECISION OF JODHPUR BENCH OF ITAT IN THE CASE O F PAWAN KUMAR V. AO [106 TTJ 494], LD. AR SUBMITTED THAT AO HAVING EXAM INED THE AUDIT REPORT IT COULD NOT BE SAID THAT HE HAD NOT APPLIED HIS MIND TO THE RELEVANT MATERIAL. AS PER THE LD. AR THE CIT HAD NO WHERE G IVEN A FINDING THAT THE ORDER OF THE AO WAS ERRONEOUS AND PREJUDICIAL TO TH E INTERESTS OF THE REVENUE. RELIANCE WAS ALSO PLACED ON HONBLE RAJAS THAN HIGH COURT IN ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 12 THE CASE OF CIT V. JAIN CONSTRUCTION CO. [257 CTR 3 36] AND ALSO THAT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF STERLING C ONSTRUCTION AND INVESTMENTS V. ACIT (INV) [374 ITR 474]. 09. WE HAVE PERUSED THE MATERIALS AND HEARD THE RIV AL CONTENTIONS. WE HAVE ALSO GONE THROUGH THE WRITTEN SUBMISSIONS CARE FULLY. ASSESSEE ALONG WITH THE RETURN OF INCOME FILED FOR THE IMPUGNED AS SESSMENT YEAR HAD FILED BALANCE SHEET, ITS SCHEDULES AND TAX AUDIT RETURN U /S.44AB OF THE ACT. SCHEDULES TO THE BALANCE SHEET WERE THIRTEEN IN NUM BER. 13 TH SCHEDULE GAVE SIGNIFICANT ACCOUNT POLICIES AND NOTES ON ACCOUNTS. NOTE NO.H, FORMING A PART OF SUCH SCHEDULE 13 IS REPRODUCED HEREUNDER : SALES AND OTHER INCOME ARE RECOGNISED ON ACCRUAL BA SIS. SALES TAX SERVICE TAX AND EXCISE DUTY COLLECTED IS NOT IN CLUDED IN SALES. AMOUNT OF RS.629 LAKHS BEING COMPENSATION FOR NOT E XERCISING THE RIGHT OF SPECIFIC PERFORMANCE HAS BEEN TREATED AS C APITAL RECEIPT IN VIEW OF THE DECISION OF THE BOMBAY HIGH COURT IN TH E CASE OF BOMBAY BURMAH TRADING CORPORATION LTD V. CIT (1971) 81 ITR 777. THE ABOVE NOTE APPEARS AS ITEM NUMBER H OF SCHEDU LE 13. NOTES PRIOR TO THAT RAN INTO A NUMBER OF PAGES. QUESTION IS WHETHE R THE RECEIPT OF RS.6.29 CRORES BY THE ASSESSEE AS CAPITAL RECEIPT WAS IN TH E MIND OF THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS, HAS TO BE SEE N IN THE ABOVE ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 13 PERSPECTIVE. AS MENTIONED BY US, WHAT WAS BEFORE T HE AO WAS THE AUDITED FINAL ACCOUNT STATEMENTS WITH 13 SCHEDULES, IN WHIC H THE THIRTEENTH SCHEDULE CARRIED A MENTION ABOUT RECEIPT OF 629 LAKHS AS COM PENSATION, AS ITEM NUMBER H, WHICH HAS BEEN REPRODUCED BY US ABOVE. WHAT WAS ASKED BY THE AO IN THE NOTICE ISSUED BY HIM U/S.142(1), DT.1 1.11.2008 HAS ALSO BEEN REPRODUCED BY US AT PARA SEVEN ABOVE. NOTHING WHAT SOEVER HAS BEEN ASKED BY THE AO ON THE CAPITAL RECEIPT OF RS.629 LAKHS CL AIMED AS EXEMPT. NATURALLY, THE REPLY OF ASSESSEE ALSO HAD NOT MENTI ONED ANYTHING REGARDING THE ABOVE. WHAT TRANSPIRED DURING THE ASSESSMENT H AS BEEN DESCRIBED BY US AT PARA TWO ABOVE. THERE WERE CERTAIN DISALLOWANCE S MADE BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON CLAI M OF IRRECOVERABLE ADVANCE, BASED ON THE DETAILS FILED BY ASSESSEE. N ONE OF THE DETAILS CALLED FOR OR SUBMITTED, RELATED TO THE RECEIPT OF COMPENS ATION OF RS.629 LAKHS BY THE ASSESSEE CLAIMED AS EXEMPT. IN OUR OPINION, AB SENCE OF ENQUIRY IS EXPLICIT. AO HAD NOT NOTED THE COMMENT OF THE ASSE SSEE IN THE NOTES TO ACCOUNTS REGARDING THE RECEIPT OF COMPENSATION NOR HAD HE APPLIED HIS MIND WHETHER SUCH AMOUNT WAS TAXABLE OR NOT. A PRUDENT MAN IF PUT IN THE POSITION OF AO OUGHT HAVE ENQUIRED INTO SUCH ASPECT S, ESPECIALLY WHEN THE AMOUNT INVOLVED CAME TO RS.6.29 CRORES AND WAS CLAI MED EXEMPT UNDER A JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE O F BOMBAY BURMAH ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 14 TRADING CORPORATION LTD (SUPRA). THERE WAS NO ATTE MPT BY THE AO TO VERIFY WHETHER THE FACTS IN THE CASE OF BOMBAY BURM AH TRADING CORPORATION LTD, WAS SIMILAR TO THAT OF THE ASSESSE E. AO DID NOT MAKE ANY ENQUIRY WITH REGARD TO THE AGREEMENT ENTERED BY THE ASSESSEE WHICH RESULTED IN RECEIPT OF RS.629 LAKHS. THUS, IN OUR OPINION, THERE WAS ABSOLUTELY NO ENQUIRY BY THE AO. ABSENCE OF ENQUIR Y DEFINITELY RENDERS THE ORDER OF AO ERRONEOUS. 10. NEXT QUESTION TO BE ANSWERED IS WHETHER THE ORD ER WAS PREJUDICIAL TO THE INTERESTS OF REVENUE. IN OUR OPINION WHEN AN O RDER IS CONSIDERED ERRONEOUS FOR A REASON THAT THERE WAS NO ENQUIRY BY THE AO, THE LOGICAL CONSEQUENCE IS THAT IT IS PREJUDICIAL AS WELL. WHE N A PUBLIC AUTHORITY VESTED WITH CERTAIN POWERS UNDER A STATUTE, WHICH IS TO BE EXERCISED IN A CERTAIN SPECIFIED SET OF CIRCUMSTANCES, FAILS TO DO SO, PRE JUDICE IS CAUSED, SINCE THE PURPOSE OF THE STATUTE ITSELF GETS DEFEATED OTHERWI SE. IN TAKING THIS VIEW WE ARE FORTIFIED BY THE JUDGMENT OF HONBLE JURISDICTI ONAL HIGH COURT IN THE CASE OF CIT V. INFOSYS TECHNOLOGIES LTD [(2012) 67 DTR 33]. IN THE SAID CASE ALSO ARGUMENT OF THE ASSESSEE WAS THAT CIT COU LD NOT HAVE EXERCISED JURISDICTION U/S.263 OF THE ACT UNLESS IT WAS SHOWN THAT THE ORDER PASSED BY THE AO WAS BOTH ERRONEOUS AND PREJUDICIAL TO THE IN TERESTS OF REVENUE. ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 15 RELIANCE WAS PLACED BY THE CONCERNED ASSESSEE IN TH E SAID CASE ON THE VERY SAME JUDGMENTS MENTIONED BY THE LD. AR BEFORE US. ARGUMENT OF THE ASSESSEE IN THE SAID CASE WAS THAT CIT COULD NOT EX ERCISE THE POWER OF REVISION, UNLESS PREJUDICE WAS ALSO CAUSED, EVEN WH EN THERE WAS ABSENCE OF PROPER ENQUIRY. QUESTION BEFORE THE HONBLE JURISD ICTIONAL HIGH COURT WAS INTERPRETATION OF ARTICLE 23 OF THE DTAA BETWEEN IN DIA AND CANADA AND WHETHER THE ASSESSING AUTHORITY HAD CORRECTLY CONSI DERED THE SAID ARTICLE WHILE DOING THE ASSESSMENT. PARAS 9 TO 29 OF THE A BOVE JUDGMENT IS REPRODUCED HEREUNDER : 9. HOWEVER, PER CONTRA, MR. G. SARANGAN, LEARNED SE NIOR COUNSEL APPEARING FOR THE ASSESSEE VEHEMENTLY URGED THAT IT WAS NOT OPEN TO THE CIT TO EXAMINE THE MATTER WITHIN THE SCOPE OF S . 263 OF THE ACT PARTICULARLY, WHEN THE ASSESSING AUTHORITY HAD IN F ACT SHOWN HIS AWARENESS FOR THE DEDUCTIONS AS CLAIMED BY THE ASSE SSEE AND HAD ALLOWED THE SAME AND THOUGH NOT NECESSARILY BY INDI CATING IN THE ORDER AND SUBMITS THAT THE ASSESSEE HAD PLACED MATE RIAL JUSTIFYING THE CLAIM BEFORE THE ASSESSING AUTHORITY AND IN THI S VIEW OF THE MATTER, WHEN THE ASSESSING AUTHORITY HAD CONSCIOUSL Y ALLOWED THE DEDUCTIONS AS CLAIMED UNDER THE RELEVANT ARTICLES O F THE AVOIDANCE AGREEMENTS WITH THE TWO COUNTRIES, IT WAS DEFINITEL Y NOT OPEN TO THE CIT, IN ANY MANNER TO INTERFERE OR UNDO AN ORDER PA SSED BY THE ASSESSING AUTHORITY, WHILE EXERCISING SUO MOTU REVI SIONAL JURISDICTION. 10. IN THIS REGARD STRONG RELIANCE IS PLACED BY THE LEARNED SENIOR COUNSEL FOR THE ASSESSEE ON THE FOLLOWING DECISIONS : ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 16 (I) CIT VS. MAX INDIA LTD. (2007) 213 CTR (SC) 266 : (2007) 295 ITR 282 (SC) (II) CIT VS. GABRIAL INDIA LTD. (1993) 114 CTR (BOM ) 81 : (1993) 203 ITR 108 (BOM) (III) CIT VS. ASHISH RAJPAL (2009) 23 DTR (DEL) 266 : (2010) 320 ITR (DEL) 674. 11. SUBMISSION OF SRI SARANGAN, LEARNED SENIOR COUN SEL APPEARING FOR THE RESPONDENTS-ASSESSEE, WITH REFERENCE TO THE SE DECISIONS, IS THAT THE CIT CAN EXERCISE JURISDICTION UNDER S. 263 OF THE ACT ONLY WHEN THE ORDER IS BOTH ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE; THAT IT SHOULD BE DEMONSTRABLE THAT NO T ONLY THE ORDERS PASSED BY THE LOWER AUTHORITIES, WHICH IS SOUGHT TO BE REVISED, IS ERRONEOUS, IN THE SENSE IT IS IN CONTRAVENTION OR A T VARIANCE WITH ANY STATUTORY PROVISIONS, BUT ALSO THAT IT SHOULD HAVE RESULTED IN A PREJUDICE TO THE INTEREST OF THE REVENUE AND WHILE THE FIRST PART OF THIS TWIN REQUIREMENTS SHOULD BE MADE GOOD WITH REFERENC E TO ANY STATUTORY PROVISIONS, THE SECOND PART, WHICH HAS CO ME IN FOR INTERPRETATION, IS A PHRASE WHICH IS NOT MERELY ONE OF A POSSIBLE LOSS OF REVENUE, BUT A SITUATION WHERE IT IS A DEFINITE LOSS OF REVENUE, IN THE SENSE, THAT ON THE POSSIBILITY OF A PARTICULAR LIABILITY BEING FASTENED AND THAT HAVING NOT BEEN DONE BY THE ORDER OR PROCEEDING UNDER REVISION, IT HAS RESULTED IN SOME LOSS OF REV ENUE, IS A SITUATION WHICH CANNOT QUALIFY FOR REVISION UNDER S. 263 OF T HE ACT; THAT JUDICIAL OPINION IS TO THE EFFECT THAT A MERE ALTER NATIVE VIEW BEING POSSIBLE IN RESPECT OF A PARTICULAR STATUTORY PROVI SION OR A SITUATION CANNOT BE BROUGHT WITHIN THE SCOPE OF THE PHRASE 'P REJUDICIAL TO THE INTERESTS OF THE REVENUE', AS IS INDICATED IN THE A BOVE-REFERRED JUDGMENTS AND THEREFORE SUBMITS THAT THE ORDER OF T HE CIT NEITHER DEMONSTRATES THAT THE ASSESSING AUTHORITY HAD VIOLA TED ANY STATUTORY PROVISION NOR HAVING INDICATED THE PRECISE LOSS OF REVENUE AND THAT WAS PERHAPS ONLY A POSSIBILITY, THE ORDER OF THE AS SESSING AUTHORITY DID NOT QUALIFY FOR BEING SUBJECTED TO REVISIONAL J URISDICTION UNDER S. ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 17 263 OF THE ACT AND THEREFORE SUBMITS THAT THE TRIBU NAL WAS VERY CORRECT IN SETTING ASIDE THE ORDER BEING OF THE OPI NION THAT THE CIT SHOULD NOT HAVE ACTED UNDER S. 263 OF THE ACT IN A SITUATION OF THE PRESENT NATURE. 12. SRI SARANGAN ALSO SUBMITS THAT IT IS ALSO NOT O PEN TO THE CIT TO GO INTO THE DETAILS OF LACK OF JURISDICTION WHEN THE A SSESSING AUTHORITY WAS ALLOWING DEDUCTION AS CLAIMED BY THE ASSESSEE I N RESPECT OF THE TAX DEDUCTED IN A FOREIGN COUNTRY WITH REFERENCE TO THE RELEVANT ARTICLES IN THE DTAA AND IF THE ASSESSING AUTHORITY HAD OPINED THAT THE ASSESSEE WAS ENTITLED TO CLAIM SUCH DEDUCTION, THE CIT CANNOT OPINE TO THE CONTRARY TO SAY THAT THE ASSESSEE WAS EITHER NOT ENTITLED TO SOME PART OF IT OR WAS NOT ENTITLED TO THE ENTIR E AMOUNT, MORE SO WHEN IT WAS NOT DEMONSTRATED IN TERMS OF THE ORDER OF THE CIT AND THEREFORE THE TRIBUNAL WAS FULLY JUSTIFIED IN SETTI NG ASIDE THE ORDER OF THE CIT. 13. SRI T. SURYANARAYANA, LEARNED COUNSEL FOR THE A SSESSEE, SUPPLEMENTING THE SUBMISSIONS MADE BY SRI SARANGAN, HAS FURTHER DRAWN OUR ATTENTION TO A DIVISION BENCH JUDGMENT OF THE DELHI HIGH COURT, IN THE CASE OF ASHISH RAJPAL (SUPRA), WHEREI N THE DELHI HIGH COURT HAD OCCASION TO DISCUSS VARIOUS AUTHORITIES O N THE SUBJECT I.E. SCOPE OF REVISIONAL JURISDICTION OF CIT UNDER S. 26 3 OF THE ACT AND IN PARTICULAR HAVING NOTICED THE DECISIONS WHICH HAVE BEEN REFERRED TO AND RELIED UPON BY THE ASSESSEE AND OBSERVED AS UND ER : 'BEFORE WE ADVERT TO THE SUBMISSIONS MADE BY THE LE ARNED COUNSEL APPEARING FOR THE PARTIES, IT WOULD BE WISE TO RECA LL THE PARAMETERS AND PRINCIPLES LAID DOWN BY THE COURTS WHICH GOVERN THE EXERCISE OF POWER BY THE CIT UNDER THE PROVISIONS OF S. 263 OF THE ACT. (I) THE POWER IS SUPERVISORY IN NATURE, WHEREBY THE CIT CAN CALL FOR AND EXAMINE THE ASSESSMENT RECORDS. ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 18 (II) THE CIT CAN REVISE THE ASSESSMENT ORDER IF THE TWIN CONDITIONS PROVIDED IN THE ACT ARE FULFILLED, THAT IS, THAT TH E ASSESSMENT ORDER IS NOT ONLY ERRONEOUS BUT IS ALSO PREJUDICIAL TO THE I NTEREST OF THE REVENUE. THE FULFILMENT OF BOTH THE CONDITIONS IS A N ESSENTIAL PREREQUISITE. [SEE MALABAR INDUSTRIAL CO. LTD. VS. CIT (2000) 159 CTR (SC) 1 : (2000) 243 ITR 83 (SC)]. (III) AN ORDER IS ERRONEOUS WHEN IT IS CONTRARY TO LAW OR PROCEEDS ON AN INCORRECT ASSUMPTION OF FACTS OR IS IN BREACH OF THE PRINCIPLES OF NATURAL JUSTICE OR IS PASSED WITHOUT APPLICATION OF MIND, THAT IS, IS STEREO-TYPED, IN AS MUCH AS, THE AO ACCEPTS WHAT IS STATED IN THE RETURN OF THE ASSESSEE WITHOUT MAKING ANY ENQUIRY C ALLED FOR IN THE CIRCUMSTANCES OF THE CASE, THAT IS, PROCEEDS WITH ' UNDUE HASTE'. [SEE GEE VEE ENTERPRISES VS. ADDL. CIT 1975 CTR (DEL) 61 : (1975) 99 ITR 375 (DEL) ]. (IV) THE EXPRESSION 'PREJUDICIAL TO THE INTERESTS O F THE REVENUE' WHILE NOT TO BE CONFUSED WITH THE LOSS OF TAX WILL CERTAI NLY INCLUDE AN ERRONEOUS ORDER WHICH RESULTS IN A PERSON NOT PAYIN G TAX WHICH IS LAWFULLY PAYABLE TO THE REVENUE. [SEE MALABAR INDUS TRIAL CO. LTD. (SUPRA)]. (V) EVERY LOSS OF TAX TO THE REVENUE CANNOT BE TREA TED AS BEING 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE'. FOR EXAMPLE, WHEN THE AO TAKES RECOURSE TO ONE OF THE TWO COURSES POSSIBL E IN LAW OR WHERE THERE ARE TWO VIEWS POSSIBLE AND THE CIT DOES NOT A GREE WITH THE VIEW TAKEN BY THE AO WHICH HAS RESULTED IN A LOSS. [SEE CIT VS. MAX INDIA LTD. (2007) 213 CTR (SC) 266 : (2007) 295 ITR 282 (SC) ]. (VI) THERE IS NO REQUIREMENT OF ISSUANCE OF A NOTIC E BEFORE COMMENCING PROCEEDINGS UNDER S. 263 OF THE ACT. WHA T IS REQUIRED IS ADHERENCE TO THE PRINCIPLES OF NATURAL JUSTICE BY G RANTING TO THE ASSESSEE AN OPPORTUNITY OF BEING HEARD BEFORE PASSI NG AN ORDER UNDER S. 263. [SEE CIT VS. ELECTRO HOUSE (1971) 82 ITR 824 (SC)]. ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 19 (VII) IF THE AO ACTS IN ACCORDANCE WITH LAW HIS ORD ER CANNOT BE TERMED AS ERRONEOUS BY THE CIT, SIMPLY BECAUSE ACCO RDING TO HIM THE ORDER SHOULD HAVE BEEN WRITTEN 'MORE ELABORATELY'. RECOURSE CANNOT BE TAKEN TO S. 263 TO SUBSTITUTE THE VIEW OF THE AO WITH THAT OF THE CIT. [SEE CIT VS. GABRIAL INDIA LTD. (1993) 114 CTR (BOM) 81 : (1993) 203 ITR 108 (BOM)]. (VIII) THE EXERCISE OF STATUTORY POWER UNDER S. 263 OF THE ACT IS DEPENDENT ON EXISTENCE OF OBJECTIVE FACTS ASCERTAIN ED FROM PRIMA FACIE MATERIAL ON RECORD. THE EVALUATION OF SUCH MA TERIAL SHOULD SHOW THAT TAX WHICH WAS LAWFULLY ELIGIBLE WAS NOT I MPOSED. [SEE CIT VS. GABRIAL INDIA LTD. (SUPRA)].' 14. SRI SURYANARAYANA SUBMITS THAT EVEN ON FACTS, T HE PRESENT CASE IS ALMOST ON PAR WITH THE CASE AS WAS EXAMINED BOTH BY THE BOMBAY HIGH COURT AND THE DELHI HIGH COURT IN THE CASES OF GABRIAL INDIA LTD. (SUPRA) AND ASHISH RAJPAL (SUPRA) RESPECTIVELY , AND THEREFORE, SUBMITS THAT THE VIEW TAKEN THEREIN SHOULD COMMEND FOR OUR ACCEPTANCE AND SHOULD BE APPLIED AND THE APPEALS OF THE REVENUE SHOULD BE DISMISSED. 15. WE HAVE PERUSED THE ORDERS OF THE ASSESSING AUT HORITY, REVISIONAL CIT AND THE TRIBUNAL. WE HAVE ALSO LOOKED INTO THE RELEVANT STATUTORY PROVISIONS AND BESTOWED OUR ATTENTION TO THE SUBMISSIONS MADE AT THE BAR AND THE AUTHORITIES RELIED UPON. 16. SRI E.R. INDRAKUMAR, LEARNED SENIOR COUNSEL APP EARING FOR THE REVENUE, WHILE PLACING STRONG RELIANCE ON THE JUDGM ENT OF THE SUPREME COURT IN THE CASE OF ELECTRO HOUSE (SUPRA), AS QUOTED EARLIER, AND HAS POINTED OUT THAT THE SCOPE OF EXER CISE OF REVISIONAL JURISDICTION BY THE CIT IS NOT ONE WHICH IS CONDITI ONED BY ANY PRIOR REQUIREMENT; THAT IT IS SUFFICIENT IF HE IS OF THE VIEW OR HE CONSIDERS THAT THE SUBJECT ORDER REQUIRES TO BE REVISED WITHI N THE SCOPE OF S. 263 OF THE ACT. ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 20 17. INSOFAR AS THE FACTS OF THE PRESENT CASE ARE CO NCERNED, IT IS NOT AT ALL IN DISPUTE THAT CERTAIN DEDUCTIONS IN THE NATUR E OF TAX RELIEF HAD BEEN CLAIMED BY THE ASSESSEE FOR THE TWO ASSESSMENT YEARS IN QUESTION AND WITH REFERENCE TO DTAA IN EXISTENCE BE TWEEN THE COUNTRIES OF INDIA AND CANADA ON THE ONE HAND AND I NDIA AND THAILAND ON THE OTHER, THE ASSESSING AUTHORITY ALLO WED DEDUCTIONS AS CLAIMED. IT IS TRUE THAT THE ORDER OF THE CIT DOES NOT MAKE IT ANY EXPLICIT AS TO THE MANNER IN WHICH IT IS EITHER ERR ONEOUS OR PREJUDICIAL INSOFAR AS THE ACTUAL AMOUNT OF DEDUCTI ON IS ALLOWED AND THIS IS THE THRUST OF THE ARGUMENT ON BEHALF OF THE ASSESSEE AND THEREFORE THE OLDER OF THE CIT IS BEYOND THE SCOPE OF S. 263 OF THE ACT. 18. WE HAVE ALREADY NOTICED THE STATUTORY PROVISION S OF S. 263 OF THE ACT. SEC. 263 IS A SECTION WHICH ENABLES THE CIT TO HAVE A LOOK AT THE ORDERS OR PROCEEDINGS OF THE LOWER AUTHORITIES AND TO EFFECT A CORRECTION, IF SO NEEDED, PARTICULARLY IF THE ORDER OR PROCEEDING IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. THIS PROVISION OCCURS IN A TAXING STATUTE, THE OBJECT OF WHICH IS TO RAISE REVENUE FOR THE STATE, AND S. 263 IS AN ENABLING PR OVISION CONFERRING JURISDICTION ON THE CIT TO REVISE THE ORDERS OF THE AUTHORITIES BELOW IN CERTAIN CIRCUMSTANCES PARTICULARLY WHEN IT IS ER RONEOUS AND PREJUDICIAL. ONE CAN AT ONCE REALIZE THAT THE PROVI SION IS INTENDED TO PLUG LEAKAGE TO THE REVENUE BY A ERRONEOUS ORDERS P ASSED BY THE LOWER AUTHORITIES, WHETHER BY MISTAKE OR IN IGNORAN CE OR EVEN BY DESIGN. IT MAKES LITTLE DIFFERENCE AS TO FOR WHAT R EASONS THE ORDER IS PASSED BY THE LOWER AUTHORITY, SO LONG AS IT BECOME S ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. ULTIMAT ELY. THE OBJECT IS TO ENSURE THAT LEAKAGE TO THE REVENUE IS PLUGGED AND S OME TAX DUE TO THE STATE NOT REACHING THE COFFERS OF THE STATE IS PREVENTED BY EXERCISE OF REVISIONAL JURISDICTION OF THE CIT. 19. THE OBSERVATION AS CONTAINED IN THE CASE OF ELE CTRO HOUSE (SUPRA), EXTRACTED ABOVE, AND AS HAS BEEN PARTICULA RLY POINTED OUT BY ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 21 SRI INDRAKUMAR IN THE CASE OF MALABAR INDUSTRIAL CO . LTD. VS. CIT (SUPRA), THOUGH THIS DECISION WAS RELIED UPON ON BE HALF OF THE ASSESSEE, PARTICULARLY TO THE PASSAGE/OBSERVATION O F THE SUPREME COURT AT P. 88 READING AS UNDER : 'MR. ABRAHAM RELIED ON THE JUDGMENT OF THE DIVISION BENCH OF THE HIGH COURT OF MADRAS IN VENKATA KRISHNA RICE CO. VS . CIT (1987) 62 CTR (MAD) 152 : (1987) 163 ITR 129 (MAD) INTERPRETING 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE.' THE HIGH COURT HELD (P. 138) : 'IN THIS CONTEXT, IT MUST BE REGARDED AS INV OLVING A CONCEPTION OF ACTS OR ORDERS WHICH ARE SUBVERSIVE OF THE ADMIN ISTRATION OF REVENUE. THERE MUST BE SOME GRIEVOUS ERROR IN THE O RDER PASSED BY THE ITO, WHICH MIGHT SET A BAD TREND OR PATTERN FOR SIMILAR ASSESSMENTS, WHICH ON A BROAD RECKONING, THE CIT MI GHT THINK TO BE PREJUDICIAL TO THE INTERESTS OF REVENUE ADMINISTRAT ION,' IN OUR VIEW, THIS INTERPRETATION IS TOO NARROW TO MERIT ACCEPTAN CE. THE SCHEME OF THE ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WI TH THE PROVISIONS OF THE ACT AND THIS TASK IS ENCRUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS ORDER OF THE ITO, THE REVENUE IS LOSING T AX LAWFULLY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICI AL TO THE INTERESTS OF THE REVENUE. THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REV ENUE' HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY TH E AO. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF AO CANNO T BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FOR EX AMPLE, WHEN AN ITO ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW A ND IT HAS RESULTED IN LOSS OF REVENUE OR WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, I T CANNOT HE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE IN TERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE ITO IS UNSUST AINABLE IN LAW. IT HAS BEEN HELD BY THIS COURT THAT WHERE A SUM NOT EA RNED BY A PERSON IS ASSESSED AS INCOME IN HIS HANDS ON HIS SO OFFERI NG, THE ORDER PASSED BY THE AO ACCEPTING THE SAME AS SUCH WILL BE ERRONEOUS AND ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 22 PREJUDICIAL TO THE INTERESTS OF THE REVENUE'RAMPYAR I DEVI SARAOGI VS. CIT (1968) 67 ITR 84 (SC) AND IN SMT. TARA DEVI AGGARWAL VS. CIT 1973 CTR (SC) 107 : (1973) 88 ITR 323 (SC). IN THE INSTANT CASE, THE CIT NOTED THAT THE ITO PAS SED THE ORDER OF NIL ASSESSMENT WITHOUT APPLICATION OF MIND. INDEED, THE HIGH COURT RECORDED THE FINDING THAT THE ITO FAILED TO APPLY H IS 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 AO. THUS, THERE W AS NO MATERIAL TO SUPPORT THE CLAIM OF THE APPELLANT THAT THE SAID AMOUNT REPRESENTED COMPENSATION FOR LOSS OF AGRICULTURAL I NCOME. 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 T HAT THE ORDER OF THE ITO WAS ERRONEOUS IS IRRESISTIBLE. WE ARE. THER EFORE, OF THE OPINION THAT THE HIGH COURT HAS RIGHTLY HELD THAT T HE EXERCISE OF THE JURISDICTION BY THE CIT UNDER S. 263(1) WAS JUSTIFI ED. THE SECOND CONTENTION HAS TO BE REJECTED IN VIEW OF THE FINDING OF FACT RECORDED BY THE HIGH COURT. IT WAS NOT SHOWN AT ANY STAGE OF THE PROCEEDINGS, THE AMOUNT IN QUESTION WAS FIXED OR QU ANTIFIED AS LOSS OF AGRICULTURAL INCOME AND ADMITTEDLY IT IS NOT SO FOUND BY THE TRIBUNAL. THE FURTHER QUESTION WHETHER IT WILL BE A GRICULTURAL INCOME WITHIN THE MEANING OF S. 2(1A) OF THE ACT AS ELUCID ATED BY THIS COURT IN CIT VS. RAJA BENOY KUMAR SAHAS ROY (1957) 32 ITR 466 (SC), DOES NOT ARISE FOR CONSIDERATION. IT IS EVIDENT FRO M THE ORDER OF THE HIGH COURT THAT THE FINDINGS RECORDED BY THE TRIBUN AL THAT THE APPELLANT STOPPED AGRICULTURAL OPERATION IN NOVEMBE R, 1982, AND THE RECEIPT UNDER CONSIDERATION DID NOT RELATE TO ANY A GRICULTURAL OPERATION CARRIED ON BY THE APPELLANT, WERE NOT QUE STIONED BEFORE IT. THOUGH, WE DO NOT AGREE WITH THE HIGH COURT THAT TH E SAID AMOUNT WAS PAID FOR BREACH OF CONTRACT AS INDEED IT WAS PA ID IN MODIFICATION/RELAXATION OF THE TERMS OF THE CONTRAC T, WE HOLD THAT THE ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 23 HIGH COURT IS JUSTIFIED IN CONCLUDING THAT THE SAID AMOUNT WAS A TAXABLE RECEIPT UNDER THE HEAD 'INCOME FROM OTHER S OURCES'. WE FIND NO MERIT IN THE APPEAL AND DISMISS THE SAME WITH COSTS.' 20. THOUGH IT IS EITHER VAGUELY OR LOOSELY DESCRIBE D BY THE AUTHORITIES, EVEN INCLUDING THE TRIBUNAL THAT THE C IT LACKED JURISDICTION TO EXERCISE REVISIONAL POWERS IN A SIT UATION OF THE PRESENT NATURE, AS IT WAS VIRTUALLY IN THE NATURE OF CHANGE OF OPINION ON THE PART OF THE CIT, TAKING A DIFFERENT VIEW FROM THE V IEW TAKEN BY THE ASSESSEE TO THE EFFECT THAT THE AUTHORITY TAKING TH E VIEW THAT THE ASSESSEE WAS ENTITLED FOR DEDUCTION IN FULL, BUT TH E CIT DOUBTING THAT, THAT IN ITSELF DOES NOT BECOME A SITUATION OF THE O RDER BEING ERRONEOUS, THE QUESTION IS NOT ONE OF THE ORDER BEI NG ERRONEOUS DIRECTLY WITH REFERENCE TO THE SPECIFIC STATUTORY P ROVISION BUT COULD BE ON A PROCEDURAL ASPECT ALSO. 21. IN THE PRESENT CASE, WHILE THERE IS NO DOUBT TH AT THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION IN TERMS OF THE ARTS. 2 3(3)(A) AND 23(4) OF THE AGREEMENTS BETWEEN INDIA WITH CANADA AND THAILA ND RESPECTIVELY, THE QUESTION IS ONE OF WHAT EXACTLY W AS THE ENTITLEMENT ? IN THE ABSENCE OF ANY DISCUSSION EITHER IN THE ASSE SSMENT ORDER OR IN THE COMPUTATION CLAIM, PARTICULARLY AS THE EXTENT O F RELIEF THAT CAN BE CLAIMED UNDER THESE TWO ARTICLES IS ONLY AFTER A SP ECIFIC EXERCISE AND THOUGH SRI SARANGAN HAS VERY VEHEMENTLY URGED THAT IT IS NOT NECESSARY FOR THE ASSESSING AUTHORITY TO MAKE ALL T HESE THINGS EXPLICIT, SO LONG AS HE IS SATISFIED, ON THE STRENG TH OF THE AUTHORITY OF THE SUPREME COURT NOT ONLY IN THE CASE OF ELECTRO H OUSE (SUPRA) AND MORE SO ON THE BASIS OF THE OBSERVATIONS AND LAW AS DECLARED IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. (SUPRA), WE ARE FULLY SATISFIED THAT A SITUATION WHERE A DEDUCTION OF THE PRESENT N ATURE IS ALLOWED OR IN THE SENSE DEDUCTED FROM OUT OF THE TAX LIABILITY OF THE ASSESSEE WITHOUT INDICATING THE BASIS, CAN DEFINITELY BE CON STRUED AS AN ORDER BOTH ERRONEOUS AND PREJUDICIAL, AS THIS IS DEFINITE LY A POSSIBILITY AND IT IS ONLY BECAUSE IT IS PER SE, NOT DISCERNABLE IN THE REVISIONAL ORDER, ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 24 BUT DEFINITELY GIVES RISE TO A SITUATION WHERE THE CIT MAY CONSIDER THE ORDER AS ERRONEOUS AND PREJUDICIAL AND THE CIT HAVING REMANDED THE MATTER TO THE ASSESSING AUTHORITY, WE ARE OF TH E CLEAR OPINION THAT IT CANNOT BE CHARACTERIZED AS A SITUATION BEYOND TH E REALM OF S. 263 OF THE ACT, AS THE ORDER BEING ERRONEOUS AND PREJUD ICIAL IS A CLEAR POSSIBILITY PARTICULARLY THE ASSESSING AUTHORITY NO T DISCLOSING THE BASIS. 22. TO TEST THIS PROPOSITION, IF AN ORDER WHICH IS EXPLICIT IS PASSED BY THE ASSESSING AUTHORITY AND INDICATING THAT THE ASS ESSEE IS ENTITLED TO A PARTICULAR EXTENT OF RELIEF, BUT IF IT IS WITH RE FERENCE TO RELEVANT ARTICLES OF THE DTAA AND IF IT IS NOT EITHER A PROP ER COMPUTATION OR NOT FULLY IN CONSONANCE WITH THE SAME AND IF IT HAS RESULTED IN A SITUATION OF GRANTING A GREATER RELIEF THAN THE ASS ESSEE IS OTHERWISE ENTITLED TO UNDER THESE AGREEMENTS AND IF THE CIT C AN REVISE SUCH AN ORDER WITHOUT ANY HASSLE IN THE EXERCISE OF REVISIO NAL JURISDICTION UNDER S. 263 OF THE ACT AND CAN CORRECT THE ORDER W HICH IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, JUS T BECAUSE THE ASSESSING AUTHORITY DOES NOT SPELL OUT THE REASONS AND THEREFORE CAN AVOID SCRUTINY UNDER S. 268 OF THE ACT, IS AN ARGUM ENT WHICH IS NOT LOGICAL OR RATIONAL AND NOT ACCEPTABLE AND AT ANY R ATE ON THE AUTHORITY OF THE SUPREME COURT IN THE CASE OF MALAB AR INDUSTRIES CO. (SUPRA) IS NOT AN ACCEPTABLE SUBMISSION. 23. THOUGH LEARNED COUNSEL FOR THE ASSESSEE HAVE PL ACED STRONG RELIANCE ON TWO JUDGMENTS OF THE BOMBAY HIGH COURT AND THE DELHI HIGH COURT IN THE CASES OF GABRIEL INDIA LTD. (SUPR A) AND ASHISH RAJPAL (SUPRA) RESPECTIVELY AND THE DELHI HIGH COUR T, IN FACT, HAS MADE REFERENCE TO THE DECISION OF THE SUPREME COURT IN THE CASE OF MAX INDIA LTD. (SUPRA), WITH GREAT RESPECT, WE ARE UNABLE TO APPLY THE RATIO OF THESE TWO DECISIONS TO THE PRESENT CIR CUMSTANCE AND WE ARE QUITE SATISFIED THAT THE LAW DECLARED BY THE SU PREME COURT NOT ONLY IN THE CASE OF ELECTRO HOUSE (SUPRA) AND ALSO IN THE CASE AT MALABAR INDUSTRIES CO. (SUPRA) FULLY COVERS THE SIT UATION, NO FURTHER ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 25 NEED TO DISCUSS WITH ANY GREATER ELABORATION ON THE VIEW EXPRESSED BY THE BOMBAY AND THE DELHI HIGH COURTS. 24. IN THE PRESENT SITUATION, THE CIT HAVING ONLY D IRECTED THE ASSESSING AUTHORITY TO COMPUTE IT OR RECOMPUTE IT A ND MAKE IT EXPLICIT AS TO THE ENTITLEMENT OF THE ASSESSEE, AN ORDER OF THIS NATURE, IN FACT, COULD NOT HAVE BEEN CONTENDED AS DETRIMENTAL TO THE INTEREST OF THE ASSESSEE, AS IT WAS ALWAYS OPEN TO THE ASSESSEE TO JUSTIFY THE CLAIM IN TERMS OF THE DTAA. IN A SITUATION OF THIS NATURE, W E ARC ALSO OF THE OPINION THAT IT WAS NOT A CASE WHICH WARRANTED INTE RFERENCE BY THE TRIBUNAL, MORE SO FOR SETTING ASIDE THE ORDER OF TH E CIT AND FOR ENSURING THAT THE ORDER PASSED BY THE ASSESSING AUT HORITY WAS LEFT IN TACT. 25. ONE SHOULD BEAR IN MIND THAT A RELIEF WHICH IS REQUIRED TO BE GIVEN TO ANY LITIGANT IN ANY GIVEN CASE SHOULD BE C OMMENSURATE TO THE GRAVITY OF THE SITUATION, TO THE NEEDS AND NECE SSITY OF THE SITUATION AND WARRANTING SUCH RELIEF AND WITH REFERENCE TO TH E GOVERNING STATUTORY PROVISIONS. JUST BECAUSE THE TRIBUNAL HAS APPELLATE JURISDICTION OVER THE ORDERS PASSED BY THE CIT, IT DOES NOT MEAN THAT THE TRIBUNAL SHOULD INTERFERE WITH EACH AND EVERY O RDER OF THE CIT WHEN IT IS REALLY NOT WARRANTED AND IN A SITUATION OF THE PRESENT NATURE, BY CALLING IN AID ALL LEGAL PRINCIPLES, PAR TICULARLY QUESTIONS OF JURISDICTION AND BY INTERPRETING A STATUARY PROVISI ON, TO LIMIT OR CURTAIL THE SCOPE AND OPERATION OF THE PROVISION EV EN WHEN THERE IS NO NEED FOR IT. 26. WE ARE ALSO NOT IN A POSITION TO ACCEPT THE SUB MISSION THAT THE MATERIALS HAD BEEN PLACED BEFORE THE ASSESSING AUTH ORITY AND THEREFORE THERE SHOULD BE A CONCLUSION THAT THE AUT HORITY HAS APPLIED HIS MIND TO THE SAME AND THERE WAS NO QUESTION OF T HE CIT INTERFERING BY TAKING A DIFFERENT VIEW ETC. 27. ASSESSING AUTHORITY PERFORMS A QUASI-JUDICIAL F UNCTION AND THE REASONS FOR HIS CONCLUSIONS AND FINDINGS SHOULD BE FORTHCOMING IN ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 26 THE ASSESSMENT ORDER. THOUGH IT IS URGED ON BEHALF OF THE ASSESSEE BY ITS LEARNED COUNSEL THAT REASONS SHOULD BE SPELT OU T ONLY IN A SITUATION WHERE THE ASSESSING AUTHORITY PASSES AN O RDER AGAINST THE ASSESSEE OR ADVERSE TO THE INTEREST OF THE ASSESSEE AND NO NEED FOR THE ASSESSING AUTHORITY TO SPELL OUT REASONS WHEN THE O RDER IS ACCEPTING THE CLAIM OF THE ASSESSEE AND THE LEARNED COUNSEL S UBMIT THAT THIS IS THE LEGAL POSITION ON AUTHORITY, WE ARE AFRAID THAT TO ACCEPT A SUBMISSION OF THIS NATURE WOULD BE TO GIVE A FREE H AND TO THE ASSESSING AUTHORITY, JUST TO PASS ORDERS WITHOUT RE ASONING AND TO SPELL OUT REASONS ONLY IN A SITUATION WHERE THE FIN DING IS TO BE AGAINST THE ASSESSEE OR ANY CLAIM PUT FORTH BY THE ASSESSEE IS DENIED. 28. WE ARE OF THE CLEAR OPINION THAT THERE CANNOT B E ANY DICHOTOMY OF THIS NATURE AS EVERY CONCLUSION AND FINDING BY T HE ASSESSING AUTHORITY SHOULD BE SUPPORTED BY REASONS, HOWEVER B RIEF IT MAY BE, AND IN A SITUATION WHERE IT IS ONLY A QUESTION OF C OMPUTATION IN ACCORDANCE WITH RELEVANT ARTICLES OF A DTAA AND THA T SHOULD BE CLEARLY INDICATED IN THE ORDER OF THE ASSESSING AUT HORITY, WHETHER OR NOT THE ASSESSEE HAD GIVEN PARTICULARS OR DETAILS O F IT. IT IS THE DUTY OF THE ASSESSING AUTHORITY TO DO THAT AND IF THE ASSES SING AUTHORITY HAD FAILED IN THAT, MORE SO IN EXTENDING A TAX RELIEF T O THE ASSESSEE, THE ORDER DEFINITELY CONSTITUTES AN ORDER NOT MERELY ER RONEOUS BUT ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE AND THER EFORE WHILE THE CIT WAS JUSTIFIED IN EXERCISING THE JURISDICTION UNDER S. 263 OF THE ACT, THE TRIBUNAL WAS DEFINITELY NOT JUSTIFIED IN INTERFERIN G WITH THIS ORDER OF THE CIT IN ITS APPELLATE JURISDICTION. 29. THEREFORE, WE ANSWER THE QUESTION POSED FOR OUR ANSWER IN THE NEGATIVE AND AGAINST THE ASSESSEE. BOTH APPEAL ARE ALLOWED. PARTIES TO BEAR THEIR RESPECTIVE COST. 11. A READING OF THE ABOVE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT, IN OUR OPINION, DOES SHOW THAT IT IS NOT NEC ESSARY FOR A CIT TO ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 27 SPECIFICALLY SAY THAT THE ORDER PASSED BY THE AO WA S ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE WHEN SUCH O RDER WAS PASSED WITHOUT APPLICATION OF MIND. THIS IS FOR THE SIMPLE REASON THAT AN ORDER PASSED WITHOUT ENQUIRY BY ITSELF MAKES SUCH ORDER ERRONEOU S AND PREJUDICIAL TO THE INTERESTS OF REVENUE. IT DOES NOT MATTER MUCH THAT CIT DID NOT SPECIFICALLY MENTION THE AOS ORDER AS ERRONEOUS AND PREJUDICIAL , WHEN HE HAD OPENED HIS MIND AND MADE OBSERVATIONS WHICH ARE PREGNANT E NOUGH TO SHOW SUCH A STATE OF AFFAIRS. WHEN AN ASSESSING OFFICER WHO IS DUTY BOUND UNDER LAW TO CARRY OUT CERTAIN ENQUIRIES ON A RETURN FILED BY AN ASSESSEE, DOES NOT DO IT IN A MANNER A PRUDENT PERSON WOULD HAVE DONE, IF PLACE D IN SUCH A AUTHORITY, THIS IN OUR OPINION, WOULD DEFINITELY MAKE THE ORDE R ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. THE CIT H AD ONLY SET ASIDE THE ASSESSMENT AND DIRECTED THE AO TO PASS A FRESH ORDE R AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE. CONSIDERING ALL THESE , WE HAVE NO HESITATION IN UPHOLDING THE ORDER OF CIT. APPEAL OF THE ASSESSEE IN ITA NO.614/BANG/2010 STANDS DISMISSED. 12. NOW WE TAKE UP APPEAL OF THE ASSESSEE IN ITA.11 17/BANG/2010 WHICH IS DIRECTED AGAINST AN ORDER DT.23.05.2010 OF CIT (A)- VI, BENGALURU. ASSESSEE HAS ALTOGETHER RAISED THREE GROUNDS. THESE GROUNDS ARE REPRODUCED HEREUNDER : ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 28 ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 29 13. GROUND 1 CONCERNS A DISALLOWANCE OF RS.36,50,75 0/-, MADE AS CAPITAL EXPENDITURE. LD. AR SUBMITTED THAT THE CLAIM WAS O N EXPENDITURE INCURRED BY THE ASSESSEE ON WRITING OFF ADVANCES GIVEN FOR P URCHASE OF VARIOUS ASSETS. AS PER THE LD. AR, THE SUPPLIES IN PURSUAN CE TO SUCH ADVANCES WHICH WERE GIVEN IN THE EARLIER YEARS, WERE NOT FO RTHCOMING. ACCORDING TO HIM THIS WAS A PURE BUSINESS LOSS FOR THE ASSESSEE, AND HAD TO BE ALLOWED. 14. PER CONTRA, LD. DR SUBMITTED THAT ASSESSEE IN I TS GROUND WAS RELYING ON A DECISION OF THE TRIBUNAL IN THE CASE OF A SIST ER CONCERN, NAMED KHODAY BREWERIES LTD, [ITA.374/BANG/2012, DT.29.04.2004]. ACCORDING TO LD. DR, REVENUE HAD MOVED AN APPEAL AGAINST THE ABOVE D ECISIONS BEFORE THE HONBLE JURISDICTIONAL HIGH COURT. AS PER THE LD. DR, HONBLE JURISDICTIONAL HIGH COURT IN CIT V. KHODAY INDIA LT D, [ITA.10/2005, ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 30 DT.02.06.2010], HAD REVERSED THE FINDING OF THE TRI BUNAL AND UPHELD THE ORDER OF AO AND CIT (A). 15. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. DISALLOWANCE MADE BY THE AO WAS FOR A REASON THAT A DVANCES WRITTEN OFF BY THE ASSESSEE WERE FOR PURCHASING CAPITAL ASSETS. SIMILAR ISSUE HAD COME UP IN THE CASE OF KHODAY INDIA LTD, WHICH WAS A SIS TER CONCERN OF THE ASSESSEE. THE CLAIM WAS ALLOWED BY THE TRIBUNAL ON ASSESSEES APPEAL AND THE MATTER WAS CARRIED TO THE HONBLE JURISDICTIONA L HIGH COURT BY THE REVENUE. QUESTION NO.1, FRAMED BEFORE THE HONBLE JURISDICTIONAL HIGH COURT IN THE SAID CASE WAS AS UNDER : WHETHER THE ADVANCE AMOUNT OF RS.7,97,645/- PAID BY THE ASSESSEE FOR PURCHASE OF CAPITAL ASSETS, CAN BE WRI TTEN OFF AS BUSINESS LOSS OF THE ASSESSEE, ON THE GROUND THAT IT IS INCURRED IN THE COURSE OF BUSINESS ACTIVITY CARRIED ON BY THE A SSESSEE. 16. THEIR LORDSHIP AT PARAS 6 AND 7 DISPOSED OFF TH IS QUESTION AS UNDER : 6. HAVING HEARD THE LEARNED COUNSEL ON BOTH SIDES AND ON PERUSAL OF THE MATERIAL ON RECORD, WE FIND THAT THE DETAILS OF THE EXPENDITURE OF RS.7,97,645/- HAS BEEN GIVEN BY THE ASSESSING OFFICER IN THE ASSESSMENT. ORDER AND THE SAME HAS BEEN CONSIDERED WITH REGARD TO THE ADVANCES MADE FO R PROCURING CAPITAL ITEMS. THERE IS NO DISPUTE WITH R EGARD TO THE NATURE OF THE EXPENDITURE AS SUCH, AND THE COUN SEL FOR THE RESPONDENT-ASSESSEE ALSO SUBMITS THAT IT IS IN THE NATURE OF THE ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 31 CAPITAL EXPENDITURE, BUT SINCE THE SAID CAPITAL ASSETS IS NOT IN EXISTENCE, A DEDUCTION HAS TO BE GIVEN UNDER SECTIO N 37 OF THE ACT. ON A PERUSAL OF THE SAID SECTION, WE FIND THA T IT IS EXPRESSLY MENTIONED THAT, AN Y EXPENDITURE IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENDITURE OF THE ASSESSEE ARE EXCLUDED FROM THE PURVIEW OF THE EXPENDITURE AND IT IS EXPENDITURE WHOLLY AND EXCLUS IVELY FOR THE PURPOSE OF BUSINESS OR PROFESSION WOULD HAVE TO BE TAKEN INTO ACCOUNT FOR THE PURPOSE OF DEDUCTION UND ER THE SAME. IN THIS VIEW OF THE MATTER, WE DO NOT CONCUR WITH THE DECISION OF THE CALCUTTA HIGH COURT IN THE CASE STATED SUPRA SINCE THE DEDUCTION SOUGHT. BY THE COUNSEL FOR THE RESPONDENT -ASSESSEE IS NOT MENTIONED IN THE SECTION AND ON A PLAIN READING OF THE SAME, IN RESPECT OF CAPITAL EXPENDITURE CANNOT BE READ IN TO THE SAID SECTION. IN FACT, IN THE SAID DECISION, WH ILE ANSWERING QUESTION NO.4, THE CALCUTTA HIGH COURT WAS CONCERNE D WITH THE QUESTION AS TO WHETHER THE ADVANCES MADE F OR THE PROJECT EXPENDITURE IN PETRO-CHEMICAL PROJECT WAS F OR A BUSINESS PURPOSE OR NOT AND WHILE SO ANSWERING HELD THAT THE DELETION IN DISALLOWANCE WAS NOT CORRECT. 7. WE FIND THAT SINCE SECTION 37 DOES NOT INCORPORA TE SUCH A CONDITION AND IT EXPRESSLY EXCLUDES ALL EXPENDITURE IN THE NATURE OF CAPITAL EXPENDITURE, THE CONTENTION RAISE D BY THE LEARNED COUNSEL FOR THE RESPONDENT CANNOT BE ACCEPT ED AND HENCE, THE SUBSTANTIAL QUESTIONS OF LAW RAISED IN T HIS APPEAL HAVE TO BE ANSWERED IN FAVOUR OF THE APPELLANT. ACCORDIN GLY, THE ORDER OF THE TRIBUNAL IS SET ASIDE BY ALLOWING HIS APPEAL AND ANSWERING THE QUESTIONS OF LAW IN FAVOUR OF THE REV ENUE. CONSEQUENTLY THE ORDER PASSED BY THE COMMISSIONER O F INCOME TAX (APPEALS) AND THE ASSESSING OFFICER ARE CONFIRMED. 18. BY VIRTUE OF THE ABOVE JUDGMENT WE ARE OF THE O PINION THAT ASSESSEES GROUND IN THIS REGARD CANNOT SUCCEED. GROUND.1 IS THEREFORE DISMISSED. ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 32 19. SECOND ISSUE RAISED BY THE ASSESSEE IS WITH REG ARD TO DISALLOWANCE OF EXPENDITURE OF RS.5,29,000/-, INCURRED IN AN EARLI ER YEAR. AO HAS LISTED THE ITEMS OF EXPENDITURE AT PAGE 3 OF THE ASSESSMENT OR DER. THE DATES OF EXPENDITURE CLEARLY SHOW THAT ALL THESE PERTAINED T O AN EARLIER YEAR. ANOTHER CONTENTION TAKEN BY THE ASSESSEE IS THAT SOME OF TH E AMOUNTS WERE SHOWN TWICE. THE AMOUNTS SEEN AS REPEATING ARE RS.292/- PAID TO ERNAKULAM SALES TAX AND RS.8,553/- PAID AT JAIPUR AS SALES-TA X. ONE OTHER ARGUMENT TAKEN BY THE ASSESSEE IS THAT CUSTOMS DUTY OF RS.4, 08,419/- IS INCLUDED ANOTHER SUM OF RS.5,29,000/- PAID ON BEHALF OF ANOT HER PARTY. IN OUR OPINION ASSESSEE WAS UNABLE TO PRODUCE EVIDENCE FOR ANY OF THE ABOVE CLAIMS BEFORE ANY OF THE LOWER AUTHORITIES. WHEN A CLAIM THAT AN EXPENDITURE NORMALLY NOT ALLOWABLE, HAS TO BE ALLOW ED, THERE LIES A STRICT ONUS ON THE ASSESSEE TO PROVE ITS CLAIM. ASSESSEE HAVING NOT DONE SO AO IN OUR OPINION WAS JUSTIFIED IN DISMISSING THE CLAIM. AS FOR THE DECISION OF COORDINATE BENCH IN THE CASE OF KHODAY BREWERIES LT D (SUPRA) FOR A. Y. 1998-99 RELIED ON BY THE ASSESSEE, FACTS WERE DIFF ERENT. RESULTANTLY, GROUND.2 OF THE ASSESSEE IS DISMISSED. ITA NO.1117/BANG/2010 & ITA.614/BANG/2010 PAGE - 33 20. VIDE ITS GROUND.3 GRIEVANCE RAISED BY THE ASSES SEE, IS THAT DISALLOWANCE OF RS.7,27,304/- WAS MADE FOR A REASON THAT NO EXPLANATION WAS FURNISHED. 21. WE FIND THAT EVEN BEFORE US ASSESSEE HAS NOT SH OWN ANY EVIDENCE TO SUPPORT THE CLAIM OF EXPENDITURE. NOTHING WAS BROU GHT BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES ALSO. WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LOWER AUTHORITIES. GROUND.3 OF THE AS SESSEE STANDS DISMISSED. 22. TO SUMMARISE THE RESULT, BOTH THE APPEALS OF TH E ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH DAY OF JUNE, 2016. SD/- SD/- (SUNIL KUMAR YADAV) (ABRAHAM P GEORG E) JUDICIAL MEMBER ACCOUNTA NT MEMBER MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR