M/s Umang Commercial Co. Pvt. Ltd., Kolkata V. DCIT, CIR-2, KOLKATA, Kolkata

ITA 1173/KOL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9274 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 27-09-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 26-05-2016
• Court: TRIBUNAL
• Department Lawyers: G MALLIKARJUNACI T
• Assessee Lawyers: S JHAJHARIA; J P KHAITAN
• Keywords: Earning of tax free income; Proportionate interest; Question of law
• Section: 143(3); 142(1); 80HHC; 14A; 115JB; 133(6); 263; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA [BEFORE SHRI N. V. VASUDEVAN, JM & SHRI M. BALAGAN ESH, AM] I.T.A NO.1173/KOL/2016 ASSESSMENT YEAR: 2011-12 M/S. UMANG COMMERCIAL CO. (P) LTD. VS. DEPUTY COM MISSIONER OF INCOME-TAX, (PAN: AAACU3731B) CIRCLE-2, KOLKATA. ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 25.01.2017 DATE OF PRONOUNCEMENT: 08.03.2017 FOR THE APPELLANT: SHRI J.P.KHAITAN, SR. ADVOCATE & SHRI S. JHAJHARIA, FCA FOR THE RESPONDENT: SHRI G. MALLIKARJUNA,CIT, DR ORDER PER SHRI M. BALAGANESH, AM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF REVISION ORDER OF PR. CIT-1, KOLKATA VIDE PR. CIT-1/15-16/U/S.263/UMANG/2011-12/12574-76 DATE D 28.03.2016. ASSESSMENT WAS FRAMED BY DCIT, CIRCLE-2, KOLKATA U/S. 143(3) OF TH E INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2011- 12 VIDE HIS ORDER DATED 06.03.2014. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CIT WAS JUSTIFIED IN INVOKING REVISIONARY JURISDICTION U/S 263 OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS CASE IS THAT THE ASSESS EE FILED ITS RETURN OF INCOME FOR THE ASST YEAR 2011-12 ON 28.9.2011 DECLARING TOTAL LOSS OF RS. 7,13,40,514/- AND BOOK PROFIT TO THE TUNE OF RS. 20,88,02,973/-. THE CASE WAS SELE CTED FOR SCRUTINY AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE LD AO OBSERVED THAT THE ASSESSEE WAS IN RECEIPT OF DIVIDEND OF RS. 9,45,55,748/- ; PROFIT ON SALE OF LONG TERM INVESTMENTS OF RS. 28,65,62,101/- AND PROFIT ON SALE OF CURRENT INVESTMENTS OF RS. 62,60, 745/-. THE LD AO OBSERVED THAT THE ASSESSEE HAD VOLUNTARILY DISALLOWED A SUM OF RS. 9, 95,65,228/- U/S 14A OF THE ACT AS EXPENDITURE INCURRED FOR THE PURPOSE OF EARNING INC OME WHICH DO NOT FORM PART OF THE TOTAL INCOME. THE ASSESSEE MADE THE DISALLOWANCE U/S 14 A OF THE ACT VOLUNTARILY IN THE RETURN OF INCOME ON THE FOLLOWING BASIS :- 2 ITA NO.1173/K/2016 UMANG COMMERCIAL CO. (P) LTD., AY 2011-12 DEMAT ACCOUNT CHARGES (DIRECT EXPENSES) RS. 552/- INTEREST EXPENSES RELATABLE TO INVESTMENT RS. 9, 91,24,091/- 25% OF TOTAL ADMINISTRATIVE EXPENSES RS. 4 ,40,585/- ---------------------- RS. 9,95,65,228/- ---------------------- THE LD AO IN THE COURSE OF SCRUTINY PROCEEDINGS U/S 143(3) OF THE ACT DISCUSSED THE ISSUE OF DISALLOWANCE U/S 14A OF THE ACT HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE BY LOOKING INTO THE NET WORTH OF THE ASSESSEE AND INVE STMENTS IN SECURITIES MADE BY THE ASSESSEE. BASED ON THESE EXAMINATION OF ACCOUNTS, THE LD AO ACCEPTED THE DISALLOWANCE MADE BY THE ASSESSEE IN THE SUM OF RS. 9,95,65,228/ - THE LD AO DISCUSSED THIS ISSUE OF DISALLOWANCE U/S 14A OF THE ACT IN DETAIL IN THE AS SESSMENT ORDER. THE LD CIT SOUGHT TO INVOKE REVISIONARY JURISDICTION U/S 263 OF THE ACT ON THE GROUND THAT THE SAID ORDER PASSED BY THE LD AO IS ERRONEOUS IN AS MUCH AS IT IS PREJU DICIAL TO THE INTERESTS OF THE REVENUE . ACCORDING TO LD CIT, THE DISALLOWANCE MADE U/S 14A OF THE ACT SHOULD BE INCREASED TO RS. 18,83,15,804/- UNDER RULE 8D(2)(II) AS AGAINST RS. 9,91,24,091/- MADE BY THE LD AO. 4. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE REPLIED THAT THE NET WORTH OF ASSESSEE STOOD AT RS 90.27 CRORES AS AGAINST WHICH INVESTMEN T IN SECURITIES YIELDING TAX FREE INCOME STOOD AT RS. 211.12 CRORES. THUS, AS ON 1.4.2010, INVESTMENT IN SECURITIES WAS EXCESS BY RS. 120.85 CRORES. SIMILARLY AS ON 31.3.2011, THE N ET WORTH OF THE COMPANY STOOD AT RS. 105.62 CRORES AS AGAINST WHICH INVESTMENT IN SECURI TIES YIELDING TAX FREE INCOME STOOD AT RS. 183.02 CRORES. THUS AS ON 31.3.2011, INVESTMEN T IN SECURITIES YIELDING TAX FREE INCOME WAS EXCESS BY RS. 77.40 CRORES WHEN COMPARED TO THE NET WORTH. THUS, AVERAGE INVESTMENT IN SECURITIES YIELDING TAX FREE INCOME I N EXCESS OF NET WORTH DURING THE FINANCIAL YEAR 2010-11 STOOD AT RS. 99.12 CRORES AN D THE EXCESS HAS BEEN FINANCED OUT OF BORROWINGS ON WHICH INTEREST HAS BEEN PAID WHICH IN TEREST NEEDS TO BE DISALLOWED. THE ASSESSEE HAD ADOPTED THE WEIGHTED AVERAGE INTEREST RATE OF BORROWINGS MADE BY THE COMPANY DURING THE FINANCIAL YEAR 2010-11 AT 10% AN D APPLIED THE SAID INTEREST RATE ON RS 99.12 CRORES AND ARRIVED AT THE DISALLOWANCE OF INT EREST FIGURE AT RS. 9,91,24,091/- WHICH WAS DISALLOWED SUO MOTO WHILE FILING THE RETURN OF INCOME, IN ADDITION TO OTHER DIRECT EXPENSES OF RS 552/- AND INDIRECT EXPENSES OF RS. 4 ,40,585/-. THE WORKINGS FOR DISALLOWANCE MADE BY THE ASSESSEE U/S 14A OF THE AC T WAS ALSO FURNISHED BEFORE THE LD 3 ITA NO.1173/K/2016 UMANG COMMERCIAL CO. (P) LTD., AY 2011-12 CIT DURING REVISION PROCEEDINGS U/S 263 OF THE ACT. WITH REGARD TO DISALLOWANCE MADE TOWARDS ADMINISTRATIVE EXPENSES, IT WAS SUBMITTED T HAT THE ASSESSEE HAD DISALLOWED RS. 4,40,585/- BEING 25% OF TOTAL ADMINISTRATIVE EXPENS ES. IT WAS SUBMITTED THAT THE ASSESSEE BEING A NON-BANKING FINANCE COMPANY (NBFC) REGISTER ED WITH THE RESERVE BANK OF INDIA (RBI) AND ENGAGED IN THE ACTIVITY OF INVESTME NT IN SHARES AND ALSO GRANTING OF LOANS. THUS THE ASSESSEE COMPANY IS HAVING TAX FREE INCOME IN THE FORM OF DIVIDEND ON SHARES AND ALSO TAXABLE INCOME IN THE FORM OF INTEREST INC OME ON LOANS GRANTED. DURING THE FINANCIAL YEAR 2010-11, THE TOTAL REVENUE OF THE AS SESSEE COMPANY WAS RS. 58,48,69,384/- OUT OF WHICH DIVIDEND INCOME WAS RS. 9,45,55,748/- AND THUS DIVIDEND INCOME AS A PERCENTAGE OF TOTAL REVENUE STOOD AT 16.17%. OUT O F THE TOTAL ADMINISTRATIVE AND OTHER EXPENSES OF RS. 17,62,890/- , THE ASSESSEE COMPANY HAS ALREADY ADDED BACK RS. 26,538/- ON ACCOUNT OF INCREMENTAL PROVISION FOR GRATUITY / LEAVE SALARY AND RS. 552/- ON ACCOUNT OF DEMAT CHARGES LEAVING A BALANCE OF RS. 17,35,800/-. 16.17% OF RS. 17,35,800/- WORKS OUT TO RS. 2,80,679/- BEING THE INDIRECT EXPENSES ATTRI BUTABLE TO DIVIDEND INCOME. AS AGAINST THIS, THE ASSESSEE HAS ITSELF ADDED BACK RS. 4,40,5 85/- WHICH WAS MUCH MORE THAN RS. 2,80,679/- AND HENCE THE LD AO HAD RIGHTLY ACCEPTED THE SAID DISALLOWANCE TOWARDS INDIRECT EXPENSES. 4.1. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE DU RING THE ASST YEARS 2008-09 , 2009-10 AND 2010-11 HAD OFFERED DISALLOWANCE OF INTEREST ON A NET BASIS AT (I.E INTEREST PAID LESS INTEREST INCOME ON LOANS GRANTED) . THE INTEREST P AID ON LOANS TAKEN WAS RS. 37,76,73,248/- AND INTEREST INCOME RECEIVED ON LOAN S GRANTED WAS RS. 18,93,57,444/- AND ACCORDINGLY THE NET INTEREST PAID WORKED OUT TO RS. 18,83,15,804/-. 4.2. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HA D UTILIZED BORROWINGS OF RS 150 CRORES SPECIFICALLY TOWARDS PURCHASE OF BONDS IN MARCH 201 0. THE SAID BONDS WERE HELD DURING THE FINANCIAL YEAR 2010-11 AND WERE SOLD ONLY IN DE CEMBER 2010 AND FEB 2011. AS SUCH, THE INTEREST OF RS. 11,63,01,170/- PERTAINING TO TH E LOAN OF RS 150 CRORES TAKEN FOR PURCHASE OF BONDS NEEDS TO BE FIRST REDUCED FROM GROSS INTE REST EXPENSE OF RS 37,76,73,248/- LEAVING BEHIND THE BALANCE OF RS. 26,13,72,078/- (I .E RS. 37,76,73,248 MINUS RS. 11,63,01,170) . FROM THIS RS. 26,13,72,078/- , THE INTEREST INCOME OF RS. 18,93,57,444/- 4 ITA NO.1173/K/2016 UMANG COMMERCIAL CO. (P) LTD., AY 2011-12 NEEDS TO BE REDUCED AND THE NET INTEREST AMOUNT WOR KS OUT TO RS. 7,20,14,634/- WHICH ALONE COULD BE CONSIDERED FOR THE PURPOSE OF DISALL WOANCE UNDER RULE 8D(2)(II) OF THE RULES. ACORDINGLY IT WAS SUBMITTED THAT THE DISALLW OANCE OF INTEREST MADE BY THE ASSESSEE AT RS. 9,91,24,091/- BEING MORE THAN RS. 7,20,14,63 4/- HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, CANNOT BE HELD AS ERRONEOUS AND PREJUDICI AL TO THE INTERESTS OF THE REVENUE. 4.3. IN OTHER WORDS, IT WAS PLEADED THAT IN RESPEC T OF DISALLOWANCE OF INTEREST AS PER RULE 8D(2)(II) OF THE RULES, THE FIGURE WORKED OUT ABOVE COMES TO RS. 7,20,14,634/- BUT WHEREAS THE ASSESSEE COMPANY ITSELF HAD VOLUNTARILY DISALLOWED RS. 9,91,24,091/-. IN RESPECT OF DISALLOWANCE OF INDIRECT EXPENSES AS PER RULE 8D(2)(III) OF THE RULES, THE FIGURE WORKED OUT ABOVE COMES TO RS. 2,80,679/- BUT WHEREA S THE ASSESSEE COMPANY ITSELF HAD VOLUNTARILY DISALLOWED RS. 4,40,585/-. BASED ON T HESE SUBMISSIONS, IT WAS PLEADED THAT THERE WAS NO ERROR IN THE ORDER OF THE LD AO ACCEPT ING THE DISALLOWANCE U/S 14A OF THE ACT MADE BY THE ASSESSEE AND HENCE THE ORDER OF THE LD AO CANNOT BE TERMED AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 5. THE LD CIT HOWEVER PROCEEDED TO IGNORE THE AFOR ESAID SUBMISSIONS AND DID NOT AGREE TO THE ELIMINATION OF INTEREST ATTRIBUTABLE O N LOANS BORROWED IN THE SUM OF RS. 150 CRORES UTILIZED FOR PURCHASE OF BONDS WHILE CALCUL ATING DISALLOWANCE UNDER RULE 8D(2)(II) OF THE RULES AND PROCEEDED TO ARRIVE AT THE DISALLO WANCE FIGURE THEREON AT RS. 18,83,15,804/- . HE FURTHER ADOPTED 0.5% OF AVERA GE VALUE OF TOTAL INVESTMENTS OF THE ASSESSEE COMPANY AND ARRIVED AT THE DISALLOWANCE FI GURE OF RS. 98,53,465/- UNDER RULE 8D(2)(III) OF THE RULES. ACCORDINGLY, HE PROPOSED TO MAKE ADDITIONAL DISALLOWANCE OF RS. 9,86,04,041/- ( 18,83,15,804 + 98,53,465 9,95,65, 228) AND NON-CONSIDERATION OF THE SAID ADDITIONAL DISALLOWANCE RESULTED IN THE ORDER OF TH E LD AO AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. AGGRIEVED, THE ASSES SEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS :- 1. FOR THAT IN VIEW OF THE FACTS AND IN THE CIRCU MSTANCES, THE LD. PCIT IS WHOLLY WRONG AND UNJUSTIFIED IN INITIATING PROCEEDINGS U/S. 263 AND PASSING AN ARBITRARY ORDER U/S.263 OF THE ACT DIRECTING REVISION OF ORIGINAL ASSESSMENT ORDER U/S 143(3) WITHOUT CONSIDERING THE FACTS AND THE LAW EXPLAINED BEFORE THE AO AS WELL AS BEFO RE LD. PCIT AS WELL. 2. FOR THAT IN VIEW OF THE FACTS AND IN THE CIRCUMS TANCES, THE ORDER U/S. 263 IS WHOLLY BAD, ILLEGAL AND VOID AB INITIO AND SUCH ORDER U/S 263 H AS BEEN MADE BY THE LD. PCIT WITHOUT PROPERLY TAKING INTO CONSIDERATION THE SUBMISSION M ADE BY YOUR PETITIONER BY LETTER DATED 5 ITA NO.1173/K/2016 UMANG COMMERCIAL CO. (P) LTD., AY 2011-12 26.02.2016 AND IN VIEW OF THE FACTS AND IN THE CIRC UMSTANCES SUCH ORDER U/S 263 MAY KINDLY BE QUASHED/CANCELLED. 3. FOR THAT IN VIEW OF THE FACTS AND IN THE CIRCUMS TANCES, THE AO HAVING TAKEN A POSSIBLE VIEW IN THE MATTER, PROVISIONS OF SECTION 263 EVEN OTHER WISE ALSO DID NOT LIE IN THE CASE. 4. FOR THAT IN VIEW OF THE FACTS AND IN THE CIRCUMS TANCES, THE LD. PCIT HAVING NOWHERE CONCLUDED THAT THE ORDER OF THE AO WAS ERRONEOUS AN D PREJUDICIAL TO THE INTEREST OF REVENUE, ORDER OF THE LD. PCIT IS EVEN OTHERWISE ALSO WHOLLY BAD, ILLEGAL, UNJUSTIFIED AND UNCALLED FOR AND IT MAY KINDLY BE QUASHED/CANCELLED. 5. FOR THAT THE LD. PCLT HAVING PASSED THE ORDER U/ S 263 IN RESPECT OF MATTER WHICH WAS NOT THE SUBJECT MATTER OF NOTICE U/S 263 AND IN VIEW OF THE FACTS THE ORDER SO PASSED BY LD. PCIT IS WHOLLY BAD AND ILLEGAL. 6. WITHOUT PREJUDICE TO GROUND NO. 5 ABOVE, THE DIS ALLOWANCE MADE U/S 14A CANNOT BE IN EXCESS OF EXEMPT INCOME AND IN VIEW OF THE FACTS TH E LD. PCIT FAILED TO APPRECIATE THE LAW SETTLED IN SUCH RESPECT AND IN VIEW OF THE FACTS AN D IN THE CIRCUMSTANCES IT MAY KINDLY BE HELD ACCORDINGLY. 7. FOR THAT IN VIEW OF THE FACTS AND IN THE CIRCUMS TANCES AND WITHOUT PREJUDICE TO GROUNDS NO. 5 & 6 ABOVE, THE LD. PCIT IS WHOLLY UNJUSTIFIED IN DIRECTING AO TO DISALLOW RS.18,83,15,804/- U/S 14A READ WITH RULE 80(2)(I) A ND IN VIEW OF THE FACTS AND IN THE CIRCUMSTANCES AO ALREADY HAVING TAKEN/CONSIDERED TH E MATTER IN ITS ASSESSMENT ORDER AND AO'S VIEW BEING NEITHER ERRONEOUS NOR PREJUDICIAL T O THE INTEREST OF REVENUE, THE LD. PCIT'S ACTION AND DIRECTION IN PASSING ORDER U/S 263 IS WH OLLY BAD & ILLEGAL AND IT MAY KINDLY BE HELD ACCORDINGLY. 8. FOR THAT IN VIEW OF THE FACTS AND IN THE CIRCUMS TANCES, THE ORDER SO PASSED BY THE LD. PCIT U/S 263 WHEREIN HE HAS SET ASIDE THE ORDER PASSED B Y THE AO U/S 143(3) IS WITHOUT BRINGING ANY MATERIAL ON RECORD AS TO THE MANNER IN WHICH TH E AO'S ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND IN VIEW OF THE FACTS AND IN THE CIRCUMSTANCES THE ORDER SO PASSED BY THE LD. PCIT IS LIABLE TO BE QUA SHED / CANCELLED. 9. FOR THAT YOUR PETITIONER CRAVES THE RIGHT TO PUT ADDITIONAL GROUNDS AND / OR TO ALTER / AMEND / MODIFY THE PRESENT GROUNDS AT THE TIME OF H EARING. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND T HAT THE ASSESSEE HAD ENCLOSED A DETAILED NOTE TOGETHER WITH THE WORKINGS FOR DISALL OWANCE U/S 14A OF THE ACT IN THE TAX AUDIT REPORT IN FORM 3CD IN RESPONSE TO QUESTION NO . 17 (L) OF FORM 3CD. THE LD AR DREW OUR ATTENTION TO QUESTIONNAIRE ISSUED BY THE L D AO IN THE COURSE OF ASSESSMENT PROCEEDINGS VIDE QUESTION NO.13 TO QUESTIONNAIRE DA TED 5/11.9.2013 WHICH IS ENCLOSED IN PAGE 61 OF THE PAPER BOOK AS BELOW:- 13. PLEASE STATE WHY THE DISALLOWANCE U/S 14A IN RE LATION TO THE EXEMPTED INCOME (I.E DIVIDEND INCOME OF RS. 9,45,55,748/- AND LTCG OF S. 42,72,57,122/-) IS NOT MADE FOLLOWING THE RULE 8D. IN RESPONSE TO THE SAME, THE ASSESSEE FILED REPLY T O THE SAID QUESTIONNAIRE ON 4.3.14 WHICH IS ENCLOSED IN PAGES 100 -103 OF PAPER BOOK. THE ASSESSEE ALSO FILED COMPLETE DETAILS OF CAPITAL GAINS WHEREIN IN RESPECT OF SALE OF UNLISTE D BONDS OF ADITYA BIRLA RETAIL LIMITED (ABRL) ON WHICH GAIN OF RS. 41,09,589/- WAS EARNED BY THE ASSESSEE. IT WAS STATED THAT THESE BONDS WERE PURCHASED IN FINANCIAL YEAR 2009-1 0 IN PHYSICAL MODE BUT WERE SOLD IN 6 ITA NO.1173/K/2016 UMANG COMMERCIAL CO. (P) LTD., AY 2011-12 DEMAT MODE IN THE FINANCIAL YEAR 2010-11. WE FIND THAT THE ASSESSEE HAD REPLIED BEFORE THE LD AO THAT ON 31.3.2010, IT HAD SUBSCRIBED TO 1 ,50,00,000 1% OPTIONALLY FULLY CONVERTIBLE BONDS OF RS. 100 EACH OF ADITYA BIRLA R ETAIL LIMITED AT A TOTAL COST OF RS. 150,00,00,000/-. THESE BONDS WERE ORIGINALLY IN PH YSICAL FORM BUT WERE THEN SUBSEQUENTLY HELD IN DEMAT MODE. ON 20.12.2010, TH E ASSESSEE SOLD 1,00,00,000 BONDS AND ON 18.2.2011, IT SOLD REMAINING 50,00,000 BONDS AND TOTAL SALE CONSIDERATION AMOUNTED TO RS. 150,41,09,589/- THEREBY RESULTING I N SHORT TERM CAPITAL GAIN OF RS. 41,09,589/- ON SALE OF THESE BONDS OF ABRL. THE R ELEVANT PAPERS IN THIS REGARD ARE PART OF PAGES 98 TO 99 OF THE PAPER BOOK. WE FIND THAT THE ASSESSEE HAD ALSO EARNED INTEREST INCOME OF RS. 21,91,781/- FOR THE PERIOD FROM 1.10. 2010 TO 19.12.2010 FOR RS. 100,00,00,000 @ 1% FOR 80 DAYS AND RS. 19,17,808/- FOR THE PERIOD FROM 1.10.2010 TO 17.2.2011 FOR RS. 50,00,00,000 @ 1% FOR 140 DAYS. THIS INTEREST INCOME FROM BONDS IS OFFERED TO TAX BY THE ASSESSEE. HENCE IT COULD BE SAFELY CONCLUDED THAT THE INVESTMENT IN BONDS HAD YIELDED ONLY TAXABLE INCOME AND NOT ANY E XEMPT INCOME TO THE ASSESSEE. HENCE THE ARGUMENT OF THE LD AR THAT THE SAID INVESTMENT SHOULD BE EXCLUDED WHILE CALCULATING THE TOTAL VALUE OF INVESTMENTS AND TOTAL VALUE OF A SSETS IS LOGICAL AND SINCE IT IS NOT IN DISPUTE THAT THE SAID BONDS WERE PURCHASED OUT OF B ORROWED FUNDS, THE PROPORTIONATE INTEREST ELEMENT ATTRIBUTABLE TO RS 150 CRORES LOAN DESERVES TO BE ELIMINATED FROM THE GROSS INTEREST PAID BY THE ASSESSEE. THIS IS TO BE DONE IN VIEW OF THE FACT THAT ONLY INTEREST PAID ON LOANS RELATABLE TO INVESTMENTS YIELDING TAX FREE INCOME ALONE WOULD BE THE SUBJECT MATTER OF DISALLOWANCE UNDER RULE 8D(2)(II) OF THE RULES. 6.1. WE FIND THAT THE ASSESSEE HAD VOLUNTARILY DIS ALLOWED TOTAL SUM OF RS. 9,95,65,228/- U/S 14A OF THE ACT BOTH UNDER NORMAL PROVISIONS OF THE ACT AS WELL AS IN THE COMPUTATION OF BOOK PROFITS U/S 115JB OF THE ACT. WE FIND THAT THE COMMENT MADE BY THE LD CIT AS TO HOW THE FIGURE OF RS. 20,88,02,973/- WAS ARRIVED AT IS UNWARRANTED IN VIEW OF THE FACT THAT THE ASSESSEE HAD MADE THE COMPUTATION OF BOOK PROFI TS U/S 115JB OF THE ACT AS BELOW:- NET PROFIT BEFORE TAX AS PER PROFIT AND LOSS ACCOUN T 20,37,93,493 ADD: DISALLOWANCE UNDER SECTION 14A 9,95,65,22 8 -------------------- 30,33,58,721 LESS: DIVIDEND INCOME EXEMPT U/S 10 9,45,55,74 8 -------------------- 7 ITA NO.1173/K/2016 UMANG COMMERCIAL CO. (P) LTD., AY 2011-12 BOOK PROFITS U/S 115JB 20,88,02,973 -------------------- WE DO NOT FIND ANY INFIRMITY IN THE SAID COMPUTATIO N OF BOOK PROFITS U/S 115JB OF THE ACT. 6.2. WITH REGARD TO THE OTHER COMMENT MADE BY THE LD CIT IN HIS ORDER U/S 263 OF THE ACT THAT THE LD AO HAD NOT BOTHERED TO PROBE INTO T HE DETAILS OF INTEREST PAID IN THE HUGE SUM OF RS. 37.76 CRORES BY NOT CALLING FOR THE DETA ILS OF THE SAME, WE FIND THAT THE ASSESSEE HAD DULY REPLIED BEFORE THE LD AO IN THE COURSE OF ASSESSMENT PROCEEDINGS VIDE LETTER DATED 7.2.2014 WHEREIN IT HAD CLEARLY GIVEN THE PARTY WIS E DETAILS OF LOANS GIVEN AND LOANS GRANTED BY THE ASSESSEE TOGETHER WITH ITS INTEREST, TDS DETAILS, REPAYMENTS , IF ANY, MADE THEREON ETC WHICH ARE ENCLOSED IN PAGES 69 TO 97 OF THE PAPER BOOK. HENCE FROM THE PERUSAL OF THE SAID DOCUMENTS, WE ARE CONVINCED THA T THE LD AO HAD DULY EXAMINED THE ASPECT OF INTEREST PAID ON LOANS AND INTEREST RECEI VED ON LOANS IN THE ASSESSMENT PROCEEDINGS. THE LD AR EVEN INFORMED THE BENCH THAT THE LD AO HAD ALSO SENT NOTICES U/S 133(6) OF THE ACT TO THOSE PARTIES AND CROSS VERIFI ED THE LOAN STATEMENTS WITH THEIR RECORDS AND NO ADVERSE INFERENCES WERE DRAWN BY THE LD AO I N THE ASSESSMENT PROCEEDINGS. ACCORDINGLY, THE LD AR ARGUED THAT THE LD AO AFTER HAVING ELABORATE ENQUIRIES ON THE ISSUE OF DISALLOWANCE U/S 14A OF THE ACT THOUGHT IT FIT T HAT THE DISALLOWANCE MADE THEREON BY THE ASSESSEE ITSELF IS MUCH MORE THOUGH THE SAME IS NOT IN ACCORDANCE WITH RULE 8D OF THE RULES. THIS VIEW HAS BEEN TAKEN BY HIM TAKING INTO CONSIDERATION THE ACCOUNTS OF THE ASSESSEE IN TERMS OF SECTION 14A(2) OF THE ACT AND ACCORDINGLY IT COULD BE SAFELY CONCLUDED THAT HE HAD TAKEN A POSSIBLE VIEW THEREON WHICH CANNOT BE SUBJECT MATTER OF REVISION U/S 263 OF THE ACT. IN SUPPORT OF HIS CO NTENTIONS, HE PLACED RELIANCE ON THE FOLLOWING DECISIONS:- (A) HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT VS J.L.MORRISON (INDIA) LTD REPORTED IN (2014) 366 ITR 593 (CAL) ; (B) HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT VS MULCHAND BAGRI REPORTED IN (1993) 68 TAXMAN 215 (CAL) ; (C) HONBLE SUPREME COURT IN THE CASE OF CIT (CENTR AL) VS MAX INDIA LTD REPORTED IN (2007) 295 ITR 282 (SC) 8 ITA NO.1173/K/2016 UMANG COMMERCIAL CO. (P) LTD., AY 2011-12 6.3. THE LD DR ARGUED THAT THE LD AO SIMPLY REPRO DUCED THE VERSION AND EXPLANATION OF THE ASSESSEE IN THE ASSESSMENT ORDER AND THAT DOES NOT TANTAMOUNT TO MAKING ANY ENQUIRIES WITH REGARD TO THE ISSUE OF DISALLOWANCE U/S 14A OF THE ACT AND HENCE IT CANNOT BE CONSTRUED AS HAVING TAKEN ANY ONE POSSIBLE VIEW IN THE MATTER SO AS TO STAY OUTSIDE THE AMBIT OF REVISION U/S 263 OF THE ACT AND HENCE THE CASE LAWS CITED BY THE LD AR ARE NOT APPLICABLE TO THE FACTS OF THE INSTANT CASE. 6.4. WE HOLD IN THE FACTS AND CIRCUMSTANCES OF TH E CASE AND FROM PERUSAL OF THE VARIOUS PAGES OF THE PAPER BOOK AS DETAILED ABOVE, WE ARE C ONVINCED OF THE FACT THAT THE LD AO HAD SOUGHT TO MAKE DISALLOWANCE U/S 14A OF THE ACT HAVI NG REGARD TO THE ACCOUNTS OF THE ASSESSEE IN TERMS OF SECTION 14A(2) OF THE ACT AND WE HOLD THAT HE NEED NOT RESORT TO RULE 8D ALWAYS FOR THE PURPOSE OF MAKING DISALLOWANCE. ADMITTEDLY, THE RULES CANNOT PREVAIL OVER THE ACT AS IT IS ONLY A SUBORDINATE PIECE OF L EGISLATION. WHEN THE ACT CLEARLY STIPULATES THE POINT THAT THE LD AO IS ENTITLED TO MAKE DISALLOWANCE U/S 14A(2) OF THE ACT HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE , THE N NO ERROR COULD BE ATTRIBUTED ON THAT ASPECT IN THE ORDER OF THE LD AO. MOREOVER, WE AL SO FIND THAT IF RULE 8D IS ADOPTED , THEN IT WOULD ONLY RESULT IN LESSER DISALLOWANCE FIGURE U/S 14A OF THE ACT AS ENUMERATED ABOVE IN THE DETAILED FACTUAL WORKINGS GIVEN BY THE ASSES SEE BEFORE THE LD CIT. HENCE IT COULD BE SAFELY CONCLUDED THAT THE ASSESSEE HAD ERRED ON THE REVENUE SIDE AND OFFERED MORE AMOUNT OF DISALLOWANCE U/S 14A OF THE ACT WHICH HAS BEEN A CCEPTED BY THE LD AO. HENCE IT COULD BE SAFELY CONCLUDED THAT THE LD AO HAD TAKEN A POSS IBLE VIEW AND THIS ACTION HAD NOT CAUSED ANY PREJUDICE TO THE INTEREST OF THE REVENUE BUT ON THE CONTRARY AS STATED ABOVE, IT HAD ONLY CAUSED PREJUDICE TO THE INTEREST OF THE AS SESSEE. HENCE, THE DUAL CONDITIONS STIPULATED IN SECTION 263 OF THE ACT ARE NOT SATISF IED CUMULATIVELY. 6.5. WE FIND THAT THE LD AR HAD PLACED RELIANCE O N THE FOLLOWING DECISIONS :- (A) HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT VS J.L.MORRISON (INDIA) LTD REPORTED IN (2014) 366 ITR 593 (CAL), WHEREIN IT WA S HELD :- 85. HE ALSO DREW OUR ATTENTION TO A JUDGMENT OF THE PU NJAB & HARYANA HIGH COURT IN THE CASE OF HARI IRON TRADING CO. V. CIT [2003] 263 ITR 437/131 TAXMAN 535 , WHEREIN THE FOLLOWING VIEWS WERE EXPRESSED: 9 ITA NO.1173/K/2016 UMANG COMMERCIAL CO. (P) LTD., AY 2011-12 'THE EXPRESSION 'RECORD' HAS ALSO BEEN DEFINED IN C LAUSE (B) OF THE EXPLANATION SO AS TO INCLUDE ALL RECORDS RELATING TO ANY PROCEEDINGS AVA ILABLE AT THE TIME OF EXAMINATION BY THE COMMISSIONER. THUS, IT IS NOT ONLY THE ASSESSME NT ORDER BUT THE ENTIRE RECORD WHICH HAS TO BE EXAMINED BEFORE ARRIVING AT A CONCLUSION AS TO WHETHER THE ASSESSING OFFICER HAD EXAMINED ANY ISSUE OR NOT. THE ASSESSEE HAS NO CONTROL OVER THE WAY AN ASSESSMENT ORDER IS DRAFTED. THE ASSESSEE ON ITS PART HAD PROD UCED ENOUGH MATERIAL ON RECORD TO SHOW THAT THE MATTER HAD BEEN DISCUSSED IN DETAIL B Y THE ASSESSING OFFICER. THE LEAST THAT THE TRIBUNAL COULD HAVE DONE WAS TO REFER TO THE AS SESSMENT RECORD TO VERIFY THE CONTENTIONS OF THE ASSESSEE. INSTEAD OF DOING THAT, THE TRIBUNAL HAS MERELY BEEN SWAYED BY THE FACT THAT THE ASSESSING OFFICER HAS NOT MENT IONED ANYTHING IN THE ASSESSMENT ORDER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER EXAMINES NUMEROUS ISSUES. GENERALLY, THE ISSUES WHICH ARE AC CEPTED DO NOT FIND MENTION IN THE ASSESSMENT ORDER AND ONLY SUCH POINTS ARE TAKEN NOT E OF ON WHICH THE ASSESSEE'S EXPLANATIONS ARE REJECTED AND ADDITIONS/DISALLOWANC ES ARE MADE. AS ALREADY OBSERVED, WE HAVE EXAMINED THE RECORDS OF THE CASE AND FIND T HAT THE ASSESSING OFFICER HAD MADE FULL INQUIRIES BEFORE ACCEPTING THE CLAIM OF THE AS SESSEE QUA THE AMOUNT OF RS.10 LAKHS ON ACCOUNT OF DISCREPANCY IN STOCK. NOT ONLY THIS, HE HAS EVEN GONE A STEP FURTHER AND APPENDED AN OFFICE NOTE WITH THE ASSESSMENT ORDER T O EXPLAIN WHY THE ADDITION FOR ALLEGED DISCREPANCY IN STOCK WAS NOT BEING MADE. IN THE ABSENCE OF ANY SUGGESTION BY THE COMMISSIONER AS TO HOW THE INQUIRY WAS NOT PROP ER, WE ARE UNABLE TO UPHOLD THE ACTION TAKEN BY HIM UNDER SECTION 263 OF THE ACT.' 86. WHETHER THE ASSESSMENT ORDER DATED 28TH MARCH, 200 8 WAS PASSED WITHOUT APPLICATION OF MIND IS BASICALLY A QUESTION OF FACT. THE LEARNED T RIBUNAL HAS HELD THAT THE ASSESSMENT ORDER WAS NOT PASSED WITHOUT APPLICATION OF MIND. THE REC ORDS OF THE ASSESSMENT INCLUDING THE ORDER SHEETS GO TO SHOW THAT APPROPRIATE ENQUIRY WA S MADE AND THE ASSESSEE WAS HEARD FROM TIME TO TIME. IN DECIDING THE QUESTION COURT HAS TO BEAR IN MIND THE PRESUMPTION IN LAW LAID DOWN IN SECTION 114 CLAUSE - E OF THE EVIDENCE ACT: 'THAT JUDICIAL AND OFFICIAL ACTS HAVE BEEN REGULARL Y PERFORMED;' 87. THEREFORE, THE COURT HAS TO START WITH THE PRESUMP TION THAT THE ASSESSMENT ORDER DATED 28TH MARCH 2008 WAS REGULARLY PASSED. THERE IS EVID ENCE TO SHOW THAT THE ASSESSING OFFICER HAD REQUIRED THE ASSESSEE TO ANSWER 17 QUESTIONS AN D TO FILE DOCUMENTS IN REGARD THERETO. IT IS DIFFICULT TO PROCEED ON THE BASIS THAT THE 17 QU ESTIONS RAISED BY HIM DID NOT REQUIRE APPLICATION OF MIND. WITHOUT APPLICATION OF MIND TH E QUESTIONS RAISED BY HIM IN THE ANNEXURE TO NOTICE UNDER SECTION 142 (1) OF THE ACT COULD NO T HAVE BEEN FORMULATED. 88. THE ASSESSING OFFICER WAS REQUIRED TO EXAMINE THE RETURN FILED BY THE ASSESSEE IN ORDER TO ASCERTAIN HIS INCOME AND TO LEVY APPROPRIATE TAX ON THAT BASIS. WHEN THE ASSESSING OFFICER WAS SATISFIED THAT THE RETURN, FILED BY THE ASSESSE E, WAS IN ACCORDANCE WITH LAW, HE WAS UNDER NO OBLIGATION TO JUSTIFY AS TO WHY WAS HE SATISFIED . ON THE TOP OF THAT THE ASSESSING OFFICER BY HIS ORDER DATED 28TH MARCH, 2008 DID NOT ADVERSELY AFFECT ANY RIGHT OF THE ASSESSEE NOR WAS ANY CIVIL RIGHT OF THE ASSESSEE PREJUDICED. HE WAS AS SUCH UNDER NO OBLIGATION IN LAW TO GIVE REASONS. 96. THE FUNCTION OF AN ASSESSING OFFICER IS TO ESTIMAT E THE INCOME OF THE ASSESSEE AND TO RECOVER TAX ON THE BASIS OF SUCH ESTIMATE AS LAID D OWN BY THE APEX COURT IN THE CASE OF S.S GADGIL (SUPRA). THEIR LORDSHIPS OPINED THAT THE INC OME TAX PROCEEDINGS DO NOT PARTAKE THE CHARACTER OF A JUDICIAL PROCEEDING BETWEEN THE STAT E AND THE CITIZEN. THEREFORE, THE PRINCIPLES 10 ITA NO.1173/K/2016 UMANG COMMERCIAL CO. (P) LTD., AY 2011-12 APPLICABLE TO A PROCEEDING BEFORE A JUDICIAL OR A Q UASI-JUDICIAL AUTHORITY WHERE THERE ARE TWO CONTESTING PARTIES CANNOT BE MADE APPLICABLE TO THE PROCEEDINGS BEFORE AN ASSESSING OFFICER. 97. MR. NIZAMUDDIN CONTENDED THE JUDGMENTS CITED BY MR . PODDAR INDICATE THAT THE ASSESSING OFFICER IS NOT REQUIRED TO WRITE AN ELABORATE JUDGM ENT. HE CONTENDED THAT THE ASSESSING OFFICER MAY NOT HAVE ANY SUCH OBLIGATION BUT IT CAN NOT BE SAID, ACCORDING TO HIM, THAT THE ASSESSING OFFICER IS UNDER NO OBLIGATION TO RECORD ANYTHING IN HIS ASSESSMENT ORDER. IT IS NOT IN THE FIRST PLACE A FACT THAT HE HAS NOT RECORDED ANYTHING. FROM THE ASSESSMENT ORDER, THE FOLLOWING FACTS AND CIRCUMSTANCES APPEAR: 'RETURN WAS FILED ON 29/11/06 SHOWING TOTAL INCOME OF RS.3,80,66,940/-. IN RESPONSE TO NOTICES U/S. 143(2) AND 142(1) OF THE I. T. ACT, 19 61, SRI P. R. KOTHARI, A/R APPEARED FROM TIME TO TIME AND EXPLAINED THE RETURN. NECESSA RY DETAILS AND PARTICULARS WERE FILED. THE BUSINESS OF THE ASSESSEE IS MANUFACTURING AND T RADING OF COSMETICS AND DENTAL CARE PRODUCTS AS IN EARLIER YEARS. IN VIEW OF ABOVE TOTA L INCOME IS COMPUTED IS UNDER:' 98. UNLESS THE AFORESAID RECITAL IS FACTUALLY INCORREC T OR THE COMPUTATION IS LEGALLY WRONG, IT IS NOT POSSIBLE TO HOLD THAT THE ASSESSMENT ORDER W AS PASSED WITHOUT APPLICATION OF MIND. ON THE TOP OF THAT WHEN THE ASSESSING OFFICER ACCEPTED THE CONTENTION OF THE ASSESSEE THERE WAS NO OCCASION FOR HIM TO MAKE ANY DISCUSSION IN HIS O RDER. (B) HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT VS MULCHAND BAGRI REPORTED IN (1993) 68 TAXMAN 215 (CAL) WHEREIN IT WAS HELD T HAT :- 13. THERE CAN BE NO DOUBT THAT IF THE ITO ACCEPTED THE ASSESSEE'S CASE WITHOUT ANY ENQUIRY ABOUT THE SALE OF SILVER UTENSILS, THE COMMISSIONER WAS ENTITLED TO COME TO THE CONCLUSION THAT THE ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. EVEN IF SIMILAR UTENSILS WERE SOLD IN THE EARLIER YEARS AND SOME ENQUIRIES WERE MADE IN THE EARLIER YEARS, THAT WILL NOT BE OF ANY RELEVANCE IN THE CUR RENT ASSESSMENT YEAR BECAUSE EVERY SALE HAS TO BE EXAMINED SEPARATELY AND INDEPENDENTLY BY THE ITO. BUT UNFORTUNATELY, FOR THE REVENUE IN THIS CASE, THE FINDING OF THE TRIBUNAL IS THAT '. . . BUT IN THE PRESENT CASE, BEFORE US, THE ITO APPEARS TO HAVE MADE ENQUIRY FROM THE ASSESSEE AS CAN BE SEEN FROM HIS LETTER DATED 29-12 -1980 WHICH IS AT PAGE 23 OF THE PAPER BOOK PLACED BEFORE US TO WHICH THE ASSESSEE SENT A REPLY, WHICH IS AT PAGE 21. HAVING REGARD TO THE FACTS OF THE CASE, WE ARE OF O PINION THAT EVEN ON MERITS THE PROVISIONS OF SECTION 263 CANNOT BE INVOKED ON THE FACTS OF TH E PRESENT CASE BEFORE US.' 14. THIS FINDING HAS NOT BEEN CHALLENGED BY THE COMMIS SIONER AS PERVERSE IN THIS CASE. THERE IS NO ALLEGATION OF ANY MISDIRECTION OF LAW. IN OTH ER WORDS, THE FINDING OF THE TRIBUNAL WAS THAT THE ITO HAD ACTUALLY MADE AN ENQUIRY INTO THE SALE OF SILVER UTENSILS. THEREFORE, THE COMMISSIONER WAS NOT RIGHT IN HIS CONCLUSION THAT T HE CASE OF THE ASSESSEE HAD BEEN ACCEPTED BY THE ITO WITHOUT ANY ENQUIRY. SINCE THIS FINDING OF FACT OF THE TRIBUNAL HAS NOT BEEN CHALLENGED, IT WILL BE ACADEMIC TO GIVE ANY ANSWER TO THE QUESTION OF LAW POSED BY THE REVENUE. THE TRIBUNAL MIGHT HAVE WRONGLY DECIDED THE QUESTIO N OF THE COMMISSIONER'S JURISDICTION UNDER SECTION 263 AND THE NATURE OF THE ASSESSMENT ORDER MADE BY THE ITO PURSUANT TO A DIRECTION GIVEN BY THE IAC. BUT THE TRIBUNAL HAS CO ME TO A CONCLUSION THAT THE ITO HAD MADE ENQUIRIES ABOUT THE SALE OF THE SILVER UTENSILS. TH EREFORE, THE COMMISSIONER WAS NOT RIGHT IN COMING TO THE CONCLUSION THAT THE ORDER PASSED BY T HE ITO WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE BECAUSE HE HAD NOT MADE THE NECESSARY ENQUI RY IN THIS REGARD. SO LONG AS THIS FINDING 11 ITA NO.1173/K/2016 UMANG COMMERCIAL CO. (P) LTD., AY 2011-12 OF FACT STANDS, IT HAS TO BE HELD THAT THE COMMISSI ONER'S DECISION TO REVISE THE ORDER OF THE ITO UNDER SECTION 263 WAS ERRONEOUS. (C) HONBLE SUPREME COURT IN THE CASE OF CIT (CENTR AL) VS MAX INDIA LTD REPORTED IN (2007) 295 ITR 282 (SC) WHEREIN IT WAS HELD THAT :- 2. AT THIS STAGE WE MAY CLARIFY THAT UNDER PARA 10 OF THE JUDGMENT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. (SUPRA) THIS COURT HAS TAKEN TH E VIEW THAT THE PHRASE 'PREJUDICIAL TO THE INTEREST OF THE REVENUE' UNDER SECTION 263 HAS TO B E READ IN CONJUNCTION WITH THE EXPRESSION 'ERRONEOUS' ORDER PASSED BY THE ASSESSIN G OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CA NNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. FOR EXAMPLE, WHEN THE INCO ME-TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN L OSS OF REVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE V IEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORD ER PREJUDICIAL TO THE INTEREST OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE INCOME-TAX OF FICER IS UNSUSTAINABLE IN LAW. ACCORDING TO THE LEARNED ADDITIONAL SOLICITOR GENER AL ON INTERPRETATION OF THE PROVISION OF SECTION 80HHC(3) AS IT THEN STOOD THE VIEW TAKEN BY THE ASSESSING OFFICER WAS UNSUSTAINABLE IN LAW AND THEREFORE THE COMMISSIONER WAS RIGHT IN INVOKING SECTION 263 OF THE INCOME-TAX ACT. IN THIS CONNECTION HE HAS FURTH ER SUBMITTED THAT IN FACT 2005 AMENDMENT WHICH IS CLARIFICATORY AND RETROSPECTIVE IN NATURE ITSELF INDICATES THAT THE VIEW TAKEN BY THE ASSESSING OFFICER AT THE RELEVANT TIME WAS UNSUSTAINABLE IN LAW. WE FIND NO MERIT IN THE SAID CONTENTIONS. FIRSTLY, IT IS NOT I N DISPUTE WHEN THE ORDER OF THE COMMISSIONER WAS PASSED THERE WERE TWO VIEWS ON THE WORD 'PROFIT' IN THAT SECTION. THE PROBLEM WITH SECTION 80HHC IS THAT IT HAS BEEN AMEN DED ELEVEN TIMES. DIFFERENT VIEWS EXISTED ON THE DAY WHEN THE COMMISSIONER PASSED THE ABOVE ORDER. MOREOVER THE MECHANICS OF THE SECTION HAVE BECOME SO COMPLICATED OVER THE YEARS THAT TWO VIEWS WERE INHERENTLY POSSIBLE. THEREFORE, SUBSEQUENT AMENDMEN T IN 2005 EVEN THOUGH RETROSPECTIVE WILL NOT ATTRACT THE PROVISION OF SECTION 263 PARTI CULARLY WHEN AS STATED ABOVE WE HAVE TO TAKE INTO ACCOUNT THE POSITION OF LAW AS IT STOOD O N THE DATE WHEN THE COMMISSIONER PASSED THE ORDER DATED 5-3-1997 IN PURPORTED EXERCISE OF H IS POWERS UNDER SECTION 263 OF THE INCOME-TAX ACT. 3. FOR ABOVE REASONS CIVIL APPEALS FILED BY THE DEPAR TMENT STAND DISMISSED. NO ORDER AS TO COSTS. WE FIND THAT EVEN THE MOST CELEBRATED JUDGEMENT ON THE IMPUGNED SUBJECT WAS RENDERED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF GEE VEE ENTERPRISES VS ADDL CIT REPORTED IN (1975) 99 ITR 375 (DEL) WOULD NOT COME TO THE RE SCUE OF THE REVENUE IN THE INSTANT CASE AS THE FACTS OF THE INSTANT CASE DID NOT PROVOKE AN Y FURTHER ENQUIRY IN THE MIND OF THE LD AO AND HENCE THERE CANNOT BE ANY ERROR THAT COULD B E ATTRIBUTED IN HIS ORDER. HENCE THE LD CIT COULD NOT INVOKE REVISION JURISDICTION U/S 263 OF THE ACT IN THE INSTANT CASE. 12 ITA NO.1173/K/2016 UMANG COMMERCIAL CO. (P) LTD., AY 2011-12 6.6. IN VIEW OF OUR AFORESAID FINDINGS IN THE FACT S AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE JUDICIAL PRECEDENTS RELI ED UPON HEREINABOVE, WE HOLD THAT THE REVISION ORDER PASSED BY THE LD CIT U/S 263 OF THE ACT HAS NO LEGS TO STAND IN THE EYES OF LAW AND DESERVES TO BE QUASHED IN THE INSTANT CASE . ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE IN THIS REGARD ARE ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 08.03.2017 SD/- SD/- (N. V. VASUDEVAN) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 8 TH MARCH, 2017 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT M/S. UMANG COMMERCIAL CO. (P) LTD., C/O SALARPURIA JAJODIA & CO., 7, C. R. AVENUE, KOLKATA-700 072. 2 RESPONDENT DCIT, CIRCLE-2, KOLKATA. 3. THE CIT(A), KOLKATA 4. 5. CIT, KOLKATA. DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .