Shri Girishkumar R. Tanti, RAJKOT-GUJARAT V. The Pr. Commr. of Income Tax-2, RAJKOT-GUJARAT

ITA 118/RJT/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0084 (ITAT-RAJKOT)
• Duration Of Justice: 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-10-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 15-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: YOGESH PANDEY
• Assessee Lawyers: MJ RANPURA
• Keywords: Depreciation; Rectification of order; Opportunity of being heard; Audit objection; Source of fund; Difference of opinion; Assessment record; Notional interest; Unabsorbed depreciation; Change of opinion
• Section: 143(3); 142(1); 263; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE: SHRI S.S. GODARA, JUDICIAL MEMBER AND S H RI AMARJIT SINGH , ACCOUNTANT MEMBER [CONDUCTED THROUGH E - COURT AT AHMEDABAD] SHRI GIRISHKUMAR R. TANTI, RACHNA , 3 - NALANDA SOCIETY, KALAWAD ROAD, RAJKOT PAN: ABFPT3310E (APPELLANT) VS THE PRINCIPAL COMMISSIONER OF INCOME TAX - 2, RAJKOT (RESPONDENT) REVENUE BY : S H RI YOGESH PANDEY, CIT - D . R. ASSESSEE BY: S H RI M.J. RANPURA , A.R. DATE OF HEARING : 04 - 10 - 2 016 DATE OF PRO NOUNCEMENT : 11 - 11 - 2 016 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THE APPEAL HAS BEEN PREFERRED BY THE ASSESSEE CHALLENG ING THE IMPUGNED ORDER DATED 22 - 03 - 2016 PASSED BY THE PR. COMMISSIONER OF INCOME TAX U/S. 263 OF THE ACT . THE GROUNDS OF APPEAL FILED BY THE ASSESSEE ARE AS UNDER: - I T A NO . 118 / RJT /20 16 A SSESSMENT YEAR 2011 - 12 I.T.A NO. 118/RJT /20 16 A.Y. 2011 - 12 PAGE NO SHRI GIRISHKUM AR R. TANTI VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX 2 1.0 THE GROUNDS OF APPEAL MENTIONED HEREUNDER ARE WITHOUT PREJUDICE TO ONE ANOTHER. 2.0 THE ORDER U/S. 263 OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE 'ACT'] PASSED BY THE LEARNED PRINCIPAL COMMISSIONER O F INCOME TAX - 2, RAJKOT (HEREINAFTER REFERRED TO AS THE 'PR. CIT') IS WITHOUT JURISDICTION AND BAD IN LAW AS ALSO ON FACTS. 3.0 THE LEARNED PR. CIT ERRED ON FACTS AS ALSO IN LAW IN HOLDING THAT THE ORDER U/S. 143(3) OF THE ACT IS ERRONEOUS AND PREJUDI CIAL TO THE INTEREST OF THE REVENUE ON THE ALLEGED GROUND THAT THE ASSESSING OFFICER (AO) HAS NOT MADE PROPER INVESTIGATION AND VERIFICATION IN RESPECT OF (I) INTEREST INCOME AND (II) QUANTUM OF DEDUCTION ALLOWABLE U/S 80IA(5) OF THE ACT. 3.1 THE ID . PR. CIT ERRED ON FACTS AS ALSO IN LAW IN ARBITRARILY ASSUMING ACCRUED INTEREST ON ADVANCES GIVEN TO SANMAN HOLDING PVT. LTD. IN TOTAL DISREGARDS TO THE FACTS OF THE CASE AND REPLIES FURNISHED FROM TIME TO TIME. THE ORDER PASSED U/S 263 OF THE ACT IS THER EFORE TOTALLY UNJUSTIFIED ON FACTS AS ALSO IN LAW AND MAY KINDLY BE QUASHED. 4.0 THE ID. PR. CIT ERRED ON FACTS AS ALSO IN LAW IN HOLDING THAT APPELLANT CLAIMED DEDUCTION U/S 80IA OF THE ACT IN AY 2011 - 12 FOR THE FIRST TIME; HENCE LOSSES AND UNABSORB ED DEPRECIATION WERE REQUIRED TO BE CONSIDERED WHILE COMPUTING DEDUCTION U/S 80IA OF THE ACT. THE ALLEGATION OF THE PR. CIT IS AGAINST THE PROVISIONS OF SECTION 80IA AND AS INTERPRETED BY VARIOUS COURTS. THEREFORE, THE ORDER PASSED U/S 263 OF THE ACT IS TO TALLY UNJUSTIFIED ON FACTS AS ALSO IN LAW AND MAY KINDLY BE QUASHED. THESE GROUNDS OF APPEALS ARE ON TWO ISSUES WHICH ARE DECIDED AS UNDER. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAD FILED RETURN OF INCOME O N 29 - 09 - 2011 DECLARING TOTAL INC OME OF RS. 17,34,260/ - . THE ASSESSEE IS ENGAGED IN THE BUSINESS OF GENERATION OF ELECTRICITY. THE ASSESSMENT U/S. 143(3) WAS MADE ON 29 - 03 - 2004 BY THE I.T.A NO. 118/RJT /20 16 A.Y. 2011 - 12 PAGE NO SHRI GIRISHKUM AR R. TANTI VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX 3 ASSESSING OFFICER DETERMINING TOTAL INCOME OF THE ASSESSEE AT RS. 17,54,953/ - . 3. SUBSEQUENTLY , THE PR. COMMISSIONER OF INCOME TAX HAS PASSED ORDER UNDER SECTION 263 OF THE ACT ON 22/03/2016. THE LD. PR. COMMISSIONER OF INCOME TAX HELD THAT THE ASSESSING OFFICER HAD PASSED ASSESSMENT ORDER U/S. 143(3) OF THE ACT WITHOUT MAKING INQUIRIES AND VERIFICATION IN RESPECT OF THE FOLLOWING TWO ISSUES: (I) THE ASSESSEE HAD ACCRUED INTEREST IN COME ON DEPOSIT OF RS. 350 CRORES GIVEN TO M/S. SANMAN HOLDING PVT. LTD. WHICH WAS NOT OFFERED FOR TAXATION, ALTHOUGH HE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING WHICH WAS NOT VERIFIED OR INQUIRED INTO, WHILE FINALIZING THE ASSESSMENT. (II) THE ASSESSEE HAD CLAIMED DEDUCTION U/S. 80IA OF THE ACT WHICH WAS ALLOWED TO HIM IN RESPECT OF PROFIT OF AN UNDERTAKING ENGAGED IN GENERATION OF POWER FROM WIND MILLS. FROM THE RECORDS, IT WAS SEEN THAT THE ELIGIBLE UNDERTAKING HAD INCURRED LOSSES AND HAD UNABSORBED DEPRECIATION, WHICH WAS SET OFF AGAINST THE SOURCE OF INCOME OF THE RELEVANT A.Y. SEC. 80IA(5) OF THE ACT, PROVIDES THAT PROFIT AND GAIN OF AN ELIGIBLE BUSINESS TO BE COMPUTED A S IT SUCH BUSINESS WAS THE ONLY SOURCE OF INCOME OF THE ASSESSEE FOR THE PURPOSE OF DETERMINING QUANTUM OF DEDUCTION U/S. 80IA(1) OF THE ACT. LOSS OF THE ELIGIBLE UNDERTAKING OF THE ASSESSEE AS INCURRED I.T.A NO. 118/RJT /20 16 A.Y. 2011 - 12 PAGE NO SHRI GIRISHKUM AR R. TANTI VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX 4 IN THE PRECEDING ASSESSMENT YEARS BUT SET OFF AGAINST OTHER SOURCE OF INCOME WAS REQUIRED TO BE CONSIDERED FOR DETERMINATION OF QUANTUM OF DEDUCTION U/S. 80IA(1) OF THE ACT. BUT THE ASSESSING OFFICER HAS PASSED THE ORDER ALLOWING DEDUCTION U/S. 80IA OF THE ACT AS CLAIMED BY THE ASSESEE WITHOUT MAKING NECESS ARY INQUIRY AND VERIFICATION IN THIS REGARD. 4. T HE PR. COMMISSIONER OF INCOME TAX HAS ISSUED A SHOW CAUSE NOTICE U/S. 263 OF THE ACT IN THE CASE OF THE ASSESSE. THE CONTENTS OF THE S HOW CAUSE NOTICE DATED 12 - 01 - 2016 IS REPRODUCED AS UNDER: - SHOW CAUSE NOTICE U/S 263 OF THE I.T. ACT. TO, SHRI GIRISHBHAI R. TANTI, 'RACHANA', 3 - NALANDA SOCIETY, KALAWAD ROAD, RAJKOT. SUB: SHOW CAUSE NOTICE U/S 263 OF THE I.T. ACT IN CASE OF SHRI GIRISHBHAI R. TANTI FOR AY. 2011 - 12. SIR, PLEASE REFER TO THE ABOVE SUBJECT. 2. IN THE ABOVE NOTED CASE, AN ASSESSMENT OF 143(3) OF THE ACT WAS FINALIZED ON 29/03/2014 BY THE ACIT, CIRCLE - 1, RAJKOT, ASSESSING TOTAL INCOME AT RS, 17,54,950/ - . 3. A PERUSAL OF THE RECORDS SHOW THAT A DEPOSITS OF RS. 350 CRORES WAS MADE WITH SANMAN HOLDI NG PVT. LTD. AND AN INTEREST OF RS.10.76 CRORES WAS RECEIVED IN THE PRECEDING AY 2010 - 11, WHICH WAS OFFERED TO TAX. THE AFORESAID DEPOSIT WAS REMAINED OUTSTANDING IN THE FY 2010 - 11 RELEVANT TO AY 2011 - 12 LEAVING CLOSING BALANCE OF RS.2,78,67,60,000/ - AS ON 31/03/2011. HOWEVER NO ACCRUED INTEREST ON THE AFORESAID DEPOSIT HAS BEEN OFFERED TO TAX IN AY 2011 - 12. THE A.O. DID NOT EXAMINE THE MATTER I.E. AS TO - WHY INTEREST BEARING DEPOSIT BECAME INTEREST FREE DEPOSIT. THUS THE ASSESSMENT ORDER PASSED IS ERRONEOUS AND PREJUDICE TO THE INTEREST OF THE REVENUE. I.T.A NO. 118/RJT /20 16 A.Y. 2011 - 12 PAGE NO SHRI GIRISHKUM AR R. TANTI VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX 5 4. IT IS, FURTHER, OBSERVED THAT DEDUCTION U/S 80IA WAS CLAIMED AND ALLOWED AN ACCOUNT OF PROFIT FROM AN UNDERTAKING ENGAGED IN GENERATION OF ELECTRICITY FROM WIND MILL. THE UNDERTAKING HAD INCURRED LOSSES AN D UNABSORBED DEPRECIATION IN THE ELIGIBLE UNDERTAKING IN THE PRECEDING YEARS WHICH WAS SET OFF AGAINST THE OTHER SOURCES OF INCOME OF THE RELEVANT ASSESSMENT YEARS. 5. AS PER PROVISIONS OF SECTION 80IA(5) OF TO ACT, , NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, THE PROFIT AND GAIN OF AN ELIGIBLE BUSINESS TO WHICH THE PROVISIONS OF SUB - SECTION (1) APPLY SHALL, FOR THE PURPOSES OF DETERMINING THE QUANTUM OF DEDUCTION UNDER THAT SUB - SECTION FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEE DING THE INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT YEAR, BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO BE MADE. 6. ACCORDINGLY, THE UNABSORBED DEPRECIATION AND LOSS OF THE ELIGIBLE UNDERTAKING AS INCURRED IN THE PRECEDING ASSESSMENT YEARS BUT SET OFF AGAINST OTHER SOURCES OF INCOME SHOULD HAVE BEEN NOTIONALLY BROUGHT FORWARD AND SET OFF AGAINST THE PROFIT OF THE ELIGIBLE UNDERTAKING FOR THE ASSESSMENT YEAR UNDER CONSIDERATION FOR WORKING OF DEDUCTION U/S 80IA OF THE ACT. THE AO ALLOWED THE DEDUCTION U/S 80IA OF THE ACT, WITHOUT MAKING NECES SARY VERIFICATION IN THIS REGARD. THUS THE ASSESSMENT ORDER PASSED BY THE AO IS ERRONEOUS AND PREJUDICE TO THE INTEREST OF THE REVENUE. 7. THE ABOVE FACTS SHOW THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IN RESPECT O F AY 2011 - 12 APPEARS TO B E ERR ONEOUS AND PREJUDICIAL T O THE INTEREST OF THE REVENUE. THEREFORE, I INTEND TO INITIATE PROCEEDINGS U/S 263 OF THE I. T. ACT AND PASS A SUITABLE ORDER. BEFORE PASSING SUCH ORDER, YOU ARE HEREBY GIVEN AN OPPORTUNITY OF BEING HEARD IN THE MATTER. PLEASE STATE AS TO WHY THE ORDER PASSED BY THE ASSESSING OFFICER IN YOUR CASE SHOULD NOT BE REVISED AFTER MAKING NECESSARY INQUIRY. IN THIS CONNECTION YOU ARE REQUESTED TO SUBMIT THE WRITTEN SUBMISSION, IF ANY AND ATTEND THIS OFFICE ON 28/01/2016 AT 11:30AM. A SO FT COPY OF THE WRITTEN SUBMISSION SHOULD ALSO BE PRODUCED. YOURS FAITHFULLY, I.T.A NO. 118/RJT /20 16 A.Y. 2011 - 12 PAGE NO SHRI GIRISHKUM AR R. TANTI VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX 6 SD/ - (O P MEHRA) PR. COMMISSIONER OF INCOME - TAX - 2 RAJKOT 5 . THE ASSESSEE FILED A DETAILED REPLY TO THE QUESTIONS RAISED BY THE LD. PR. COMMISSIONER OF INCOME TAX. TH E REPLY WAS PRECISELY ON THE ISSUE NUMBER 1 WAS THAT ON THE 1 ST D AY OF ACCOUNTING YEAR 2010 - 11 RELEVANT TO A.Y. 2011 - 12 THE COMPANY M/S. SANMAN HOLDING PVT. LTD WAS AMALGAMATED WITH M/S. TANTI HOLDING PVT. LTD WITH ITS ALL ASSETS AND LIABILITIES AS PER OR DER DATED 10 - 05 - 2011 OF GUJARAT HIGH COURT. KEEPING TO THE FINANCIAL CONSTRAINTS AND BUSINESS EXPED IENCY , THE AMALGAMATED COMPANY DI D NOT MAKE ANY PROVISIONS FOR PAYMENT OF INTEREST ON THE DEPOSIT OF RS. 350 CRORES. THE ISSUE HAS BEEN CONSIDERED BY THE A .O. IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER DID NOT MAKE ANY VARIATION TO THE RETUNED INCOME BECAUSE THE NON - INTEREST BEARING DEP OSITS ARE MORE THAN THE ADVANC E S GIVEN. THERE WAS NO PROVISION TO CHARGE INCOME HYPOTHETICALLY OR NO TIONALLY. RELIANCE WAS PLACED ON THE DECISION OF COMMISSIONER OF INCOME TAX VS. SOORJI VALLABHDAS & CO. 461 ITR 144 (SC) AND COMMISSIONER OF INCOME TAX VS. ARIHAN T AVENUE AND CREDIT LTD. (2014) 36 TAXMANN. COM 14 (GUJARAT) 6. BEFORE THE LD. COMMISSIONER OF INCOME TAX , ON SECOND ISSUE THE ASSESSEE HAD SUBMITTED THAT AS PER PROVISION OF SEC. 80IA(2) I.T.A NO. 118/RJT /20 16 A.Y. 2011 - 12 PAGE NO SHRI GIRISHKUM AR R. TANTI VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX 7 TH E DEDUCTION SPECIFIED IN SUB - SECTION (1) CAN BE CLAIMED BY THE ASSESSEE FOR ANY TEN CONSECUTIVE ASSESSMENT YEARS OUT OF FIFTEEN YEARS BEGINNING F R O M THE YE AR IN WHICH THE UNDERTAKING DEVELOP ED AND BEGIN TO OPERATE ANY INFRASTRUCTURE FACILITY. IN THIS CAS E THE ENTERPRISE OF THE ASSESSEE STARTED TO OPERATE THE ELIGIBLE BUSINESS FROM 13 - 03 - 2007 RELEVANT TO A.Y. 2007 - 08. THE RECORDS IN THE POSSESSION OF DEPAR TMENT A ND TH E RETURNS FILED FROM A.Y. 2007 - 08 CLEARLY SHOWS THAT THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION U/S. 80IA OF T HE ACT, TILL A.Y. 2010 - 11 AS HE HAS SUFFICIENT TIME O U T OF FIFTEEN YEARS TO OPT FOR THE CONSEQUENT TEN YEARS FOR CLAIMING DEDUCTION U/ S. 80IA. THE PROVISIONS OF SECTION 80IA(5) W OULD BE APPLICABLE FROM A.Y. 20 11 - 2012 BEING THE INITIAL ASSESSMENT YEAR FOR MAKING THE CLAIM OF DEDUCTION U/S. 80IA OF THE ACT. TH E RE WAS NO CARRY FORWARD OF UNABSORBED DEPRECIATION OR LOSS FROM THE ELIGIBLE B USINESS AS ON 01 - 04 - 2010, THEREFORE, THE A SSESSEE HAS RIGHTLY CLAIMED AND ALLOWED THE DEDUCTION U/S. 80IA OF THE ACT. THE ASSESSEE HAS PLACED RELIANCE IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS P. LTD VS. ACIT (2012) 21 TAXMANN. COM 95, SHEVIE EXPORTS VS. JCIT (2013) 33 TAXMANN.COM 446 (MUMBAI - TRIB) , ACIT V. STERLING DEVELOPERS P. LTD (2013) 32 TAXMANN.COM 16 (B ANGLALORE - TRIB), A CIT VS. PATNAKAR WIND FORMS P. LTD (2015) TAXAMANN. COM 178. THE ASSESSEE HAS ALSO SUBMITTED TO THE THE PR CIT THAT THE SH OW CAUSE NOTICE ISSUED WAS NOTHING BUT CHANGE OF OPINION. HE LASO PLACED RELIANCE IN THE CASE OF PARSHURAM POTTARY WORKS CO. LTD. VS. ITO (160 ITR 01) AND ALSO THE DECISION OF HON BLE S.C. IN THE I.T.A NO. 118/RJT /20 16 A.Y. 2011 - 12 PAGE NO SHRI GIRISHKUM AR R. TANTI VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX 8 CASE OF MALABAR INDUSTRIAL CO. LTD. VS. COMMISSIONER OF I NCOME TAX 243 ITR 83 HON BLE GUJARAT HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. ARVIND JEWELLERS (259 ITR 502). 7. THE LD. PR. COMMISSIONER OF INCOME TAX HAD NOT IMPRESSED WITH THE DETAILED SUBMISSION OF THE ASSESSEE. REGARDING THE 1 ST ISS UE THE LD. PR. COMMISSIONER OF INCOME TAX STATED THE ASSESSEE HAD RECEIVED AN INTEREST OF RS. 10.76 CRORES ON THE DEPOSIT OF RS. 350 CRORES IN THE F.Y. 2009 - 10. HE FURTHER STATED THAT THE SAID DEPOSIT WAS ALSO EXISTED DURING THE PREVIOUS YEAR RELATED TO THE ASSESSMENT YEAR UNDER CONSIDERATION. HE ALSO NOTICED THAT M/S. SANMAN HOLDING PVT. LTD WAS AMALGAMATED WITH M/S. TANTI HOLDING PVT. LTD WITH ALL ITS ASSETS AND LIA BILITIES AND IT WAS ADMITTED BY THE ASSESSEE THAT HE WAS DIRECTOR IN THE AMALGAMATED COM PANY, HOWEVER, NO INTEREST ACCRUED ON THE DEPOSIT HAS BEEN OFFERED TO TAX. HE FURTHER NOTICED THAT O N PERUSAL OF TH E RECORD S SHOW THAT THE ASSESSING OFFICER HAS PASSED THE ORDER WITHOUT MAKING INQUIRY AND VERIFICATION OF THE AFORESAID DEPOSIT. THE DEPOSIT UNDER CONSIDERATION IS AN INTEREST BEARING DEPOSIT. IT WAS NOTICED FROM THE TAX DEPOSIT REPORT IN F ORM NO. 3CD THAT THE ASSESSEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING, THEREFORE, HE IS LIABLE TO PAY TAX ON ANY INCOME WHICH IS ACCRUED AND RECEIVABLE TO H IM. THE LD. PR. COMMISSIONER OF INCOME TAX OBSERVED THAT THE CLAIM OF THE ASSESSEE THAT HE FURNISHED DETAILS OF UNSECURED LOANS AND THE SAME ARE CONSIDERED BY THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS IS NOT CORRECT. IN I.T.A NO. 118/RJT /20 16 A.Y. 2011 - 12 PAGE NO SHRI GIRISHKUM AR R. TANTI VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX 9 THIS CONNECTI ON ON PERUSAL OF THE RECORDS HE FOUND THAT THE ASSESSEE HAS FURNISHED THE DETAILS OF UNSECURED LOAN ACCEPTED BUT NO DETAILS REGARDING LOANS, ADVANCES OR DEPOSIT GIVEN BY THE ASSESSEE WAS NEITHER FURNISHED BY THE ASSESSEE OR INQUIRED OR VERIFIED BY THE ASSE SSING OFFICER. HE ALSO NOTICED THAT RATIO DECIDED IN QUOTED CASES OF COMMISSIONER OF INCOME TAX VS. SHOORJI VALLABHDAS & CO. 46 ITR 144 (SC), COMMISSIONER OF INCOME TAX VS. ARIHANT AVENUES AND CREDIT LTD. (2014) 36 TAXMANN. COM 14 (GUJARAT) ARE NOT APPRE CIABLE TO THE FACTS OF THE PRESENT CASE. IN THE FIRST JUDGMENT, THE ASSESSEE HAD AGREED TO REDUCE ITS COMMISSION AS A PART OF AGREEMENT ENTERED INTO BY THE ASSESSEEE TO SECURE LONG TERM BUSINESS FROM THIRD PARTIES. BUT HERE IN THIS CASE THE ASSESSEE HAS F OREGONE HIS ACCRUED INTEREST RECEIVABLE FROM HIS GROUP COMPANY WITHOUT ANY BUSINESS EXPEDIENCY OR BENEFIT AND NEITHER PRODUCE ANY EVIDENCE THAT HE HAD ENTERED INTO ANY AGREEMENT FOR REDUCTION IN INTEREST NOR CLAIMED THAT THIS ACTION RESULTED INTO SECURING ANY LONG TERM BUSINESS OR BENEFIT . IN THE SECOND CASE, THE H ON BL E HIGH COURT HELD THAT NO ADDITION FOR INTEREST CAN B E MADE WHERE BORROWED MONEY WITHOUT A N INTEREST WAS GIVEN AS INTEREST FREE ADVANCES. WHEREAS I N TH E CASE OF THE A SSESSEE HE HAS GIVEN DEP OSIT IN LIEU OF INTEREST AND HAD HISTORY OF INTEREST REC EI PT BUT NO INTEREST W A S SHOWN AS ACCRUED IN THE YEAR UNDER CONSIDERATION DESPITE THE ASSESSEE HAS BEEN FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THUS, THE ASSESSSEE HAD ACCRUED INTEREST INCOME ON DEPOSIT OF RS. 350 CRORES GIVEN TO M/S. SANMAN HOLDING PVT. LTD. WHICH WAS I.T.A NO. 118/RJT /20 16 A.Y. 2011 - 12 PAGE NO SHRI GIRISHKUM AR R. TANTI VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX 10 NOT VERIFIED OR INQUIRED INTO WHILE FINALIZING THE ASSESSMENT . THEREFORE, THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 8. REG ARDING THE SECOND ISSUE IT WAS STATED BY THE LD. PR. COMMISSIONER OF INCOME TAX THAT UNABSORBED DEPRECIATION AND LO S S OF THE ELIGIBLE UNDERTAKING OF THE ASSESSEE INCURRED IN THE PRECEDING ASSESSMENT YEAR BUT SET OFF AGAINST OTHER SOURCE OF INCOME WAS REQUI RED TO BE CONSIDERED FOR DETERMINATION OF QUANTUM OF DEDUCTION U/S. 80IA(1) OF THE ACT BUT THE ASSESSING OFFICER HAS PASSED THE ORDER ALLOWING DEDUCTION U/S. 80IA OF THE ACT AS CLAIMED BY THE ASSSESSEE WITHOUT MAKING NECESSARY INQUIRY AND VERIFICATION IN T HIS REGARD. THE ASSESSEEE CLAIMED DEDUCTION U/S. 80IA OF THE ACT IN THE ASSESSMENT YEAR 2011 - 12 FOR THE FIRST TIME HENCE, LOSSES AND UNABSORBED DEPRECIATION WERE REQUIRED TO BE CONSIDERED WHILE COMPUTING DEDUCTION U/S. 80IA OF THE ACT AS PROVIDED IN SEC. 80IA(5) OF THE ACT. THE LD. PR. COMMISSIONER OF INCOME TAX STATED THAT THE JUDGMENT CITED BY THE ASSESSEE ARE FULLY CONSIDERED, BUT THE RATIOS DECIDED IN THE CITED CASES ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 9. DURING THE COURSE OF APPELL ATE PROCEEDINGS BEFORE US, THE LD. COUNSEL OF THE ASSSESSEE CONTENDED THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS VERIFIED BOTH THE ISSUES. HE STATED THAT THE ASSESSING OFFICER VIDE PARA 13 OF THE NOTICE U/S. 142(1) DATED 19 - 08 - 2013 CALLED FOR THE DETAILS OF I.T.A NO. 118/RJT /20 16 A.Y. 2011 - 12 PAGE NO SHRI GIRISHKUM AR R. TANTI VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX 11 INTEREST RECEIVED AND PAID ALONG WITH COMPLETE LEDGERS AND RATE OF INTEREST RECEIVED AND CHARGED. REGARDING THE SECOND ISSUE HE STATED THAT THE ASSESSING OFFICER VIDE PARA. 9 OF THE NOTICE U/S. 142(1) DATED 19 - 08 - 2013 HAD CALLED FOR DETAIL OF DEDUCTION CLAIMED U/S. 80IA WITH AUDIT REPORT IN FORM 10CCB. HE HAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER AFTER MAKING INQUIRY AND CONSIDERING THE ASSESSE SUBMISSION HAS TAKEN A VIEW AND ALLOWED THE DEDUCTION. HE CONTENDED TH AT T HE ASSESSING OFFICER HAS TAKEN ONE POSSIBLE VIEW AND SECTION 263 WILL NOT BE APPL IED ONLY BECAUSE THE LD. PR. COMMISSIONER OF INCOME TAX HOLDS ANOTHER POSSIBLE VIEW. THE SUBMISSION OF THE COUNSEL OF THE ASSESSEE IS REPRODUCED AS UNDER: - 1. AS REGAR DS ID. PR. CIT'S HOLDING THAT THE ASSESSMENT IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE IS CONCERNED, THE APPELLANT SUBMITS THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS THE AO HAS VERIFIED BOTH THE ISSUES LISTED BELOW: SL. NO. PARTICULARS RE MARKS 1 NOT CHARGING OF INTEREST ON THE CLOSING BALANCE OF DEPOSITS OF RS. 278.67 LACS AS ON 31.03.2011 WITH M/S SANMAN HOLDING PVT. LTD [IN FACT THE ABOVE BALANCE IS AT 31.03.2012. THE BALANCE AS ON 31.03.2011 IS RS. 350 CRORES]. THE AO VIDE PARA 13 OF THE NOTICE U/S 142(1) DATED 19.08.2013 CALLED FOR THE DETAILS OF INTEREST RECEIVED AND PAID ALONG WITH COMPLETE LEDGERS AND RATE OF INTEREST RECEIVED AND CHARGED. THE APPELLANT VIDE REPLY FURNISHED WITH AO ON 10.12.2013 VIDE PARA 13 PAGE 195 TO 200 HAS FUR NISHED THE DETAILS CALLED FOR. FOR READY REFERENCE COPY OF THE NOTICE, ITS REPLY AND ASSESSMENT ORDER ARE ATTACHED AT PAGE 6 TO 12. 2 CLAIM OF THE AO VIDE PARA 9 OF THE NOTICE I.T.A NO. 118/RJT /20 16 A.Y. 2011 - 12 PAGE NO SHRI GIRISHKUM AR R. TANTI VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX 12 DEDUCTION U/S 80IA(5) OF THE ACT. U/S 142(1) DATED 19.08.2013 HAD C ALLED FOR DETAILS OF DEDUCTION CLAIMED U/S 80IA WITH AUDIT REPORT IN FORM 10 CCB. THE APPELLANT HAD FURNISHED THE SAME VIDE PARA 9 OF REPLY DATED 10.12.2013 STATED ABOVE. 2. FROM THE FACTS ON RECORD AS STATED ABOVE IT IS CLEAR THAT THE AO HAS, AFTER MAK ING INQUIRY AND CONSIDERING THE ASSESSEE'S SUBMISSION TAKEN A VIEW AND ALLOWED THE DEDUCTION. AS HELD IN VARIOUS DECISIONS WHICH SPELL OUT THE PARAMETERS AND LIMITATIONS OF SECTION 263, THE LD. PR. CIT WAS NOT JUSTIFIED CANCELLING THE ASSESSMENT U/S 263 AN D DIRECTING TO PASS A FRESH ASSESSMENT ORDER. THE AO HAS TAKEN ONE POSSIBLE VIEW AND SECTION 263 WILL NOT APPLY ONLY BECAUSE THE LD. PR. CIT HOLDS ANOTHER POSSIBLE VIEW. HON'BLE HIGH COURT OF GUJARAT HAS IN THE CASE OF CIT VS. ARVIND JEWELLERS, 259 ITR 502 (GUJ.), ANALYZED IN GREAT DETAIL AND IN GREAT DEPTH THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD., VS. CIT 243 ITR 83 (SC), AND HELD THAT; FROM THE ABOVE OBSERVATIONS MADE BY THE SUPREME COURT, IT IS CLEAR THAT THE PROV ISIONS OF S. 263 CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED AND INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. THE SUPREME COURT HAS ALSO MADE IT CLEAR THAT THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE' HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER AND THAT EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IT WAS FURTHER EMPHATICALLY STATED THAT WHEN AN ITO ADOPTS ONE OF THE COURSES PERMISSIBLE IN LAW AND IT H AS 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, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ITO IS UNS USTAINABLE IN LAW.' 3.0 RELIANCE IS ALSO PLACED ON THE DECISIONS OF HON'BLE; A. SUPREME COURT IN THE CASE OF CIT VS. MAX INDIA LTD. - 295 ITR 282(SC), I.T.A NO. 118/RJT /20 16 A.Y. 2011 - 12 PAGE NO SHRI GIRISHKUM AR R. TANTI VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX 13 B. - HIGH COURT OF DELHI IN THE CASE OF CIT VS. JAGSON INTERNATIONAL LIMITED - 214 CTR (DEL) 227. . C. HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. R.K. CONSTRUCTION CO. 313 ITR65(GUJ)' D. HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. BUDHILAL HIRALAL RANA 186 CTR (GUJ.) 647. 4.0. AS REGARDS THE MERIT OF THE ISSUE, APPELLANT SUBMI TS AS UNDER: 1) NOT CHARGING OF INTEREST ON DEPOSITS: I) THE ISSUE HAS BEEN CONSIDERED BY THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE APPELLANT VIDE PARA 3 OF LETTER DATED 10.12.2013 FURNISHED THE DETAILS OF NON INTEREST BEARING LOANS OF MO RE THAN RS. 525 CRORES AS ON 01.04.2010 AND RS. 543 CRORES AS ON 31.03.2011 COUPLED WITH OWN CAPITAL OF MORE THAN 25 CRORES WHICH IS NOT IN DISPUTE. SINCE THE NON INTEREST BEARING DEPOSITS ARE MORE THAN THE AMOUNT ADVANCED, THE AO DID NOT MAKE ANY VARIATIO N TO THE RETURNED INCOME ON THIS ASPECT. II) AS REGARDS TAXING NOTIONAL INCOME, APPELLANT SUBMITS THAT UNDER THE INCOME TAX ACT, 1961 THERE IS NO SUCH PROVISION TO CHARGE INCOME HYPOTHETICAL OR NOTIONALLY. THE THEORY OF ONLY REAL INCOME IS TO BE TAXED IS A SETTLED LAW. III) AS REGARDS THE ID. PR. CIT'S APPREHENSION THAT THE APPELLANT HAD TO PAY THE TAX ON ACCRUED INTEREST AND NOT ON THE NOTIONAL INTEREST. THE CONTENTION OF THE ID. PR. CIT SEEMS INCORRECT BECAUSE AN INCOME BECOME ACCRUED ONLY WHEN THE SAME IS RECEIVABLE AND CREDITED TO PROFIT AND LOSS ACCOUNT. SINCE THE DEPOSITS WITH M/S SANMAN HOLDING PVT. LTD BECAME A PART AND PARCEL OF M/S TANTI HOLDING PVT. LTD W.E.F. 01.04.2010 WHERE IN THE APPELLANT IS A DIRECTOR, IT BECOME BUSINESS EXPEDIENCY AND NOT INTEREST BEARING DEPOSIT. AS SUCH THE SAME HAS NOT BEEN ACCOUNTED FOR AS DONE IN PAST. NEEDLESS TO SUBMIT THAT EACH ASSESSMENT YEAR IS DIFFERENT UNIT AND HENCE THE QUESTION TO FOLLOW THE PAST PRACTICE DOES NOT ARISE. RELIANCE IS PLACED ON FOLLOWING: HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. ARIHANT AVENUE & CREDIT LTD, [2014] 36 TAXMANN.COM 14 (GUJARAT) HAS HELD THAT NO ADDITION ON ACCOUNT OF NOTIONAL INTEREST INCOME IS WARRANTED. HON'BLE SUPREME COURT OF INDIA IN THE CASE OF UCO BANK VS. CIT 237 ITR 889; HON'BLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. SHOORJI VALLABHDAS & CO. 46 ITR 144; HON'BLE HIGH COURT OF CALCUTTA IN THE CASE OF ANZ GRINDLAYS BANK LTD. VS. CIT 250 ITR 125; I.T.A NO. 118/RJT /20 16 A.Y. 2011 - 12 PAGE NO SHRI GIRISHKUM AR R. TANTI VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX 14 HON'BLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. VASISTH CHAY VYAPAR LTD [201 1] 330 ITR 440 (DELHI). 2) DEDUCTION U/S 80IA(5) I) AS STATED ABOVE THE AO HAS VERIFIED THE CLAIM IN DETAIL. HOWEVER, IN ORDER TO APPRECIATE THE FACTS IN PROPER PERSPECTIVE THE RELEVANT PROV ISIONS ARE REPRODUCED BELOW: (2) THE DEDUCTION SPECIFIED IN SUB - SECTION (1) MAY, AT THE OPTION OF THE ASSESSEE, BE CLAIMED BV HIM FOR ANV TEN CONSECUTIVE ASSESSMENT VEARS OUT OF FIFTEEN YEARS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRI SE DEVELOPS AND BEGINS TO OPERATE ANY INFRASTRUCTURE FACILITY OR STARTS PROVIDING TELECOMMUNICATION SERVICE OR DEVELOPS AN INDUSTRIAL PARK [OR DEVELOPS A SPECIAL ECONOMIC ZONE REFERRED TO IN CLAUSE (HI) OF SUB - SECTION (4)] OR GENERATES POWER OR COMMENCES T RANSMISSION OR DISTRIBUTION OF POWER [OR UNDERTAKES SUBSTANTIAL RENOVATION AND MODERNIZATION OF THE EXISTING TRANSMISSION OR DISTRIBUTION LINES [OR LAYS AND BEGINS TO OPERATE A CROSS COUNTRY NATURAL GAS DISTRIBUTION NETWORK]]] : [EMPHASIS PROVIDED] II) THE AO HAS VERIFIED THE FACTS THAT THE ENTERPRISES ENGAGED IN ELIGIBLE BUSINESS STARTED TO OPERATE THE ELIGIBLE BUSINESS FROM 12.03.2007 RELEVANT TO AY 2007 - 08. THE DEPARTMENTAL RECORDS AND THE RETURNS FILED FROM AY 2007 - 08 CLEARLY SHOWS THAT THE APPELLANT HA S NOT CLAIMED ANY DEDUCTION U/S 80IA OF THE ACT TILL AY 201 0 - 11 AS HE HAS SUFFICIENT TIME OUT OF FIFTEEN YEARS TO OPT FOR THE CONSEQUENT TEN YEARS FOR CLAIMING DEDUCTION U/S 80IA. THUS, THE AY 2011 - 12 IS THE FIRST YEAR OF CLAIM OF DEDUCTION U/S 80IA. UNDE R THE CIRCUMSTANCES, THE PROVISIONS OF SECTION 80IA(5) BECAME APPLICABLE FROM AY 2011 - 12 BEING THE INITIAL ASSESSMENT YEAR. THEREFORE, THE CARRY FORWARD OF UNABSORBED DEPRECIATION AND LOSS OF THE ELIGIBLE BUSINESS [IF ANY] WAS FIRST TO BE DEDUCTED FOR QUAN TIFYING THE QUANTUM OF DEDUCTION FROM THE ASSESSMENT YEAR 2011 - 12. THE RECORD CLEARLY SHOWS THAT THERE WAS NO CARRY FORWARD OF UNABSORBED DEPRECIATION OR LOSS FROM THE ELIGIBLE BUSINESS AS ON 01.04.2010 AND HENCE THE ASSESSEE HAS RIGHTLY CLAIMED AND ALLOWE D THE DEDUCTION U/S 80 IA OF THE ACT. III) THE APPELLANT IN THIS REGARD RELIED ON THE DECISION OF THE HON'BLE HIGH COURT OF MADRAS IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT [2012] 21 TAXMANN. COM 95 (MAD) WHEREIN IT WAS HELD THAT: LOSS IN YEAR EARLIER TO INITIAL ASSESSMENT YEAR ALREADY ABSORBED AGAINST PROFIT OF OTHER BUSINESS CANNOT BE NOTIONALLY BROUGHT FORWARD AND SET OFF AGAINST PROFITS OF ELIGIBLE BUSINESS AS NO I.T.A NO. 118/RJT /20 16 A.Y. 2011 - 12 PAGE NO SHRI GIRISHKUM AR R. TANTI VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX 15 SUCH MANDATE IS GIVEN IN SECTION 80 IA(5). HOWEVER, ID. PR. CIT DID NOT ACCEPT THE SAME ON THE GROUND THAT THE SAME HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND APPEAL TO THE SUPREME COURT IS PENDING. ANYHOW AS ON THIS DATE THE SAID DECISION PREVAIL AND BINDING TO ALL THE LOWER AUTHORITIES. IV) THE ID. PR. CIT'S RELIED O N THE DECISION OF HYDERABAD CHEMICALS SUPPLIES LTD. VS. ACIT [2011] 137 TTJ 732 AND PIDILITE INDUSTRIES HOWEVER DID NOT CONSIDER THE PUBLIC CIRCULAR NO. 1 OF 2016 DATED 15.02.2016 ISSUED BY THE CBDT WHILE PASSING ORDER U/S 263 OF THE ACT. IN FACT VIDE THIS CIRCULAR THE CBDT HAS LAID TO REST THE ISSUE OF SET OFF OF NOTIONAL BROUGHT FORWARD LOSS OF ELIGIBLE BUSINESS. FOR READY REFERENCE THE CBDT'S CIRCULAR IS REPRODUCED BELOW: CLARIFICATION OF THE TERM 'INITIAL ASSESSMENT YEAR' IN SECTION 80IA (5) OF THE INCO ME - TAX ACT, 1961 'SUB SECTION 5 OF SECTION 801 A PRESCRIBES THE MANNER OF DETERMINING THE QUANTUM OF DEDUCTION, WHEREIN A REFERENCE HAS BEEN MADE TO THE TERM 'INITIAL ASSESSMENT YEAR'. IT HAS BEEN OBSERVED THAT SOME ASSESSING OFFICERS ARE INTERPRETING THE TERM 'INITIAL ASSESSMENT YEAR' AS THE YEAR IN WHICH THE ELIGIBLE BUSINESS/MANUFACTURING ACTIVITY HAD COMMENCED AND ARE CONSIDERING SUCH FIRST YEAR OF COMMENCEMENT/OPERATION ETC. ITSELF AS THE FIRST YEAR FOR GRANTING DEDUCTION, IGNORING THE CLEAR MANDATE PR OVIDED UNDER SUB SECTION (2) WHICH ALLOWS A CHOICE TO THE ASSESSEE FOR DECIDING THE YEAR FROM WHICH IT DESIRES TO CLAIM DEDUCTION OUT OF THE APPLICABLE SLAB OF FIFTEEN (OR TWENTY) YEARS.' THIS MATTER HAS BEEN EXAMINED BY THE BOARD. IT IS ABUNDANTLY CLEAR T HAT FROM SUB SECTION 2 THAT AN ASSESSEE WHO IS ELIGIBLE TO CLAIM DEDUCTION U/S 80IA HAS THE OPTION TO CHOOSE THE INITIAL/ FIRST YEAR FROM WHICH IT MAY DESIRE THE CLAIM OF DEDUCTION FOR TEN CONSECUTIVE YEARS, OUT OF SLAB OF FIFTEEN (OR TWENTY) YEARS, AS PRE SCRIBED UNDER THAT SUB SECTION. HOWEVER, ONCE SUCH INITIAL ASSESSMENT YEAR HAS BEEN OPTED FOR BY AN ASSESSEE, HE, SHALL BE ENTITLED TO CLAIM DEDUCTION U/S 80IA FOR TEN CONSECUTIVE YEARS BEGINNING FROM THE YEAR IN RESPECT OF WHICH HE HAS EXERCISED SUCH OPTI ON SUBJECT TO THE FULFILLMENT OF CONDITIONS PRESCRIBED IN THE RELEVANT SECTION. HENCE, THE TERM INITIAL ASSESSMENT YEAR WOULD MEAN THE FIRST YEAR OPTED FOR BY THE ASSESSEE FOR CLAIMING DEDUCTION U/S 80IA. HOWEVER, THE TOTAL NUMBER OF YEARS FOR CLAIMING D EDUCTION SHOULD NOT TRANSGRESS THE PRESCRIBED SLAB OF FIFTEEN I.T.A NO. 118/RJT /20 16 A.Y. 2011 - 12 PAGE NO SHRI GIRISHKUM AR R. TANTI VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX 16 OR TWENTY YEARS, AS THE CASE MAY BE AND THE PERIOD OF CLAIM SHO ULD BE AVAILED IN CONTINUITY. 5.0 THUS, FROM THE PLAIN READING OF CIRCULAR, IT IS AMPLY CLEAR THAT IT IS ON THE ASSESSEE TO DECIDE THE FIRST YEAR FROM WHICH IT WANTS TO CLAIM DEDUCTION UNDER SECTION 80IA(5). IT IS AT LIBERTY TO DECIDE THE FIRST YEAR FROM WHICH THE BENEFIT OF DEDUCTION IT WILL CLAIM. 6.0 THE APPELLANT ONCE AGAIN REITERATES THAT WHETHER TO CLAIM DEDUCTION F ROM THE YEAR IN. WHICH THE OPERATION HAS STARTED OR FROM ANY OTHER YEAR IS THE SOLE DISCRETION OF THE ASSESSEE AND THE AO HAS NO POWER WHATSOEVER TO INTERFERE IN THIS MATTER AS THIS SPECIFIC POWER, TO CHOOSE ANY YEAR AS THE INITIAL YEAR FOR CLAIMING DEDUCT ION U/S 80IA (5), HAS BEEN CONFERRED ON THE ASSESSEE BY THE ACT ITSELF AS ALSO THE CLARIFICATORY CIRCULAR NO. 1 OF 2016 DATED 15.02.2016 MENTIONED ABOVE. SINCE THE AO HAS NOT .AUTHORITY TO DISTURB THE ABOVE POSITION AS LAID DOWN BY CBDT, ID. CIT ALSO DO NO T HAVE SUCH POWERS U/S 263 OF THE ACT AS WELL. 7.0 HENCE, IT WOULD BE AGAINST THE PROVISIONS OF LAW TO SET OFF THE NOTIONAL LOSSES OF THE YEARS IN WHICH THE ASSESSEE HAS NOT CLAIMED DEDUCTION U/S 80IA (5) FIRSTLY AGAINST THE INCOME OF THAT YEAR AND T HEN AGAIN AGAINST THE INCOME OF THE YEAR IN WHICH THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IA (5). IF SUCH POLICIES WILL BE FOLLOWED, THE PROVISIONS OF SECTION 80IA(5) WOULD BECOME IN FRUCTUOUS, AS THE PROFITS WOULD GET CONVERTED INTO THE LOSSES DUE TO BRO UGHT FORWARD LOSSES OF THE YEARS, IN WHICH THE DEDUCTION IS NOT CLAIMED U/S 80IA(5). 8.0 THE APPELLANT ALSO SUBMITS THAT ENTIRE ISSUE TO INITIATE ACTION U/S 263 HAS BEEN HAS BEEN CROPPED UP DUE TO AUDIT OBJECTION RAISED BY THE AUDIT PARTY WHICH IS VE RIFIABLE FROM THE RECORDS. HON'BLE SUPREME COURT OF INDIA HAS, I N THE CASE OF CI T VS. LUCAS T.V.S. LTD. 249 ITR 306 (SC) HAS HELD THAT; 'AN AUDIT OPINION IN REGARD TO THE APPLICATION OR INTERPRETATION OF LAW CANNOT BE TREATED AS INFORMATION FOR REOPENING T HE ASSESSMENT UNDER S. 147(B)'. ONCE THE AUDIT OBJECTION IS NOT ELIGIBLE TO INVOKE ACTION U/S 147, NATURALLY IT WOULD NOT INVOKE ACTION U/S 263 OF THE ACT AS WELL. 10. THE LD. D.R. HAS ALSO FURNISHED THE WRITTEN SUBMISSION WHICH IS REPRODUCED AS UNDER: - I.T.A NO. 118/RJT /20 16 A.Y. 2011 - 12 PAGE NO SHRI GIRISHKUM AR R. TANTI VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX 17 1. THE ASSESSECE DID NOT OFFER THE INTEREST INCOME ON THE LOAN OF RS 350 CRORE. ADVANCED TO SANMAN HOLDING PVT . LTD, WHICH HAD ACTUALLY ACCRUED ON THE BASIS OF SIMILAR ACCRUAL IN THE PRECEDING ASSES SMENT YEAR 2010 - 11. ASSESSING OFFICE R DID NOT MAKE ANY EN QUIRY ON THIS ISSUE DURING THE ASSESSMENT PROCEEDINGS NOR WAS ANY EVIDENCE PLACED BEFORE PR . C IT DURING 263 PROCEEDINGS IN THE FORM OF AN AGREEMENT BETWEEN ASSESSEE AND SANMAN HOLDING PVT . LTD OR THE RESOLUTION OF THE BOARD OF THE COMPANY, THAT FOR ANY VA LID REASON, SUCH INTEREST WAS NOT TO BE CHARGED FOR THE ASSESSM ENT YEAR UNDER CONSIDERATION, I.E. ASSESSMENT YEAR 2011 - 12. THUS, THERE IS NO MATERIAL TO SUPPORT THE CLAIM OF THE ASSESSEE THAT THE INTEREST WHICH HAD ACCRUED IN THE EARLIER YEAR ON THE SAME A DVANCE COULD NOT ACCRUE FOR THE YEAR UNDER I CONSIDERATION. ASSESSING OFFICER ACCEPTED THIS OMISSION BY THE APPELLANT IN THE ABSENCE OF ANY SUPPORTING MATERIAL AND WITHOUT MAKING ANY INQUIRY. ON THESE FACTS, THE CO NCLUSION THAT THE ORDER OF THE A O WAS ERRO NEOUS IS VALID. THE EXERCISE OF THE JURISDICTION BY THE COMMISSIONER UNDER SECTION 263(1) IS JUSTIFIED. I RELY ON THE JUDGMENT OF HON'BLE SUPREME COURT IN CASE OF MALABAR INDUSTRIAL CO. LTD. V. CIT (|2000| 109 TAXMAN 66 (SC), WHERE IN PARA 10 OF THIS JUDGM ENT HON'BLE SUPREME COURT HAS HELD AS UNDER: 10. IN THE INSTANT CASE, THE COMMISSIONER NOTED THA T THE ITO PASSED THE ORDER OF NIL ASSESSMENT WITHOUT APPLICATION OF MIND. INDEED, THE HIGH COURT RECORDED THE FINDING THAT THE ITO FAILED TO APPLY HIS MIND TO THE CASE IN ALL PERSPECTIVE AND THE ORDER PASSED BY HIM W AS ERRONEOUS. IT APPEARS THAT T H E 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 APPEL LANT THAT T HE SAID AMOUNT REPRESENTED COMPENSATION FOR LOS S 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 ITO 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 UNDER SECTION 261(1) WAS JUSTIFIED. 2. IN RESPECT OF TH E CLAIM OF DEDUCTION U/S 80IA ON ACCOUNT OF PROFIT FROM WIND MILL, THE ASSESSEE HAS RELIED ON THE DECISION OF MADRAS HIGH COURT IN CASE OF VE LAYUDHASWAMY SPINNING MILLS (P) LTD VS ACIT [2 012) 21 TAXMANN.COM 95(MAD). PR.CIT HAS MENTIONED IN HIS ORDER U/S 26 3 THAT THIS ORDER OF MADRAS HIGH COURT HAS NOT BEEN I.T.A NO. 118/RJT /20 16 A.Y. 2011 - 12 PAGE NO SHRI GIRISHKUM AR R. TANTI VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX 18 ACCEPTED BY THE DEPARTMENT APPEAL HAS BEEN FILED AGAINST THIS ORDER IN SUPREME COURT. H ON'BLE GUJARAT HIGH COURT HAS HELD IN CASE OF CIT VS M. M. KHAMBHATWALA (198 ITR 144(GUJ)), THAT THE COMMISSIONER C AN EXERCISE THE POWER UNDER SECTION 263 EVEN IN A CASE WHERE THE ISSUE IS DEBATABLE. RE VISIONAL POWER UNDER SECTION 263 IS NOT COMPARABLE WITH THE POWER OF RECTIFICATION OF MISTAKE UNDER SECTION 154 OF THE ACT. IN CASE OF CIT VS G. M. MITTAL STAINLESS STE EL P. LTD, 263 ITR 255(SC), HON'BLE SUPREME C OURT APPROVED THE JUDGMENT OF H ON'BLE MADRAS HIGH COURT IN THE CASE OF CIT V. SESHASAYEE PAPER BOARDS LTD. [1996)2 17 ITR 358. IN THIS JUDGMENT, HON'BLE MADRAS HIGH COURT HELD THAT WHEN THE ORDER RELIED UPON BY T HE ASSESSING OFFICER WAS ITSELF THE SUBJECT - MATTER OF AN APPEAL BEFORE THE SUPREME COURT THEN THE COMMISSIONER COULD HAVE INITIATED PROCEEDINGS UNDER SECTION 263. THE DECISION OF HON'BLE SUPREME COURT IN CASE OF MALABAR INDUSTRIAL CO. LTD. V. CIT(SUPRA) D OES NOT CONTRADICT THIS VIEW. IN THIS JUDGMENT HON'BLE SUPREME COURT HELD THAT - ' WHEN AN ITO ADOPTED ONE OF THE COURSES PERMISSIBLE IN L AW AND IT HAS RESULTED IN LOSS OF REVENUE OR WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS T AKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS /AC V IEW TAKEN BY THE ITO AS UNSUSTAINABLE IN LAW. ' IN PRESENT CONTEXT, TILL THE ISSUE RELATING TO THE SET OFF OF BROUGHT FORWARD LOSSES OF THE ELIGIBL E UNIT U/S 80IA IS DECIDED BY HON'BLE SUPREME COURT IN THE APPEAL FILED BY THE DEPAR TMENT AGAINST THE JUDGMENT OF HON'BLE MAD RAS HIGH COURT IN THE CASE OF VE LAYUDHASWAMY SPINNING MILLS (P) LTD VS ACIT(SUPRA), THE VIEW TAKEN BY THE ASS ESSING OFFICER OR THE ASSESSEE CANNOT BE SAID TO BE SUSTAINABLE IN LAW. THEREFORE, IN ALL SUCH CASES WHERE SLP HAS BEEN FILED BY THE DEPARTMENT AGAINST A CERTAIN VIEW OF ANY HIGH COURT BEFORE THE SUPREME COURT, SUCH VIEWS CANNOT BE SAID TO HAVE BECOME LAW AND WOULD BE UNSUSTAINABLE IN LAW IF THE SUPREME COURT REVERSES THE DECISION OF THE HIGH COURT. THEREFORE, RELYING UPON THE JUDGMENT OF HON'BLE GUJARAT HIGH COURT IN CASE OF CIT VS M. M. KHAMBHATWALA(SUPRA) AND THE JUDGMENT OF HON'BLE MADRAS HIGH COURT IN CASE OF CIT V. SESHASAYEE PAPER HOARD S LTD. (SUPRA) AS APPROVED BY HONBLE SUPREME COURT IN CASE OF CIT VS G. M. MITTAL STAINLESS STEEL P. I.T.A NO. 118/RJT /20 16 A.Y. 2011 - 12 PAGE NO SHRI GIRISHKUM AR R. TANTI VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX 19 LTD(SUPRA) , I SUBMIT THAT THE PR . CIT HAS CORRECTLY EXERCISED HIS JURISDICTION U/S 263. MOREOVER. ASSESSING OFFICER H AS PASSED THE ASSESSMENT ORDER WITHOUT APPLYING HIS MIND ON THE QUANTUM OF DEDUCTION CLAIMED BY THE ASSESSEE U/S 80IA RWS 80IA(5). AS PER CLAUSE (A) OF 1 EXPLANATION - 2 OF SECTION 263(1), AN ORDER PASSED BY THE ASSESSING OFFICER WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE, IS AN ERRONEOUS ORDER. 11. WE HAVE HEARD BOTH THE SIDES AND WE HAVE PERUSED THE MATERIAL ON RECORD CAREFULLY. WE HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER PASSED BY THE A.O. U/S. 143(3) WHICH IS REPRODUCED AS UNDER: - THE RETURN OF INCOME HAS BEEN FILED THROUGH E - FILING ON 29 - 09 - 2011 VIDE ACKNOWLEDGEMENT NUMBER 296488851290911 DECLARING INCOME AT RS. 17,34,260/ - . SUBSEQUENTLY, THE RETURN WAS SELECTED FOR SCRUTINY; NOTICE U/S. 143(2) & 142(1) WERE ISSUED ON 1 8/09/2012 AND DULY SER VED UPON THE ASSESSEE BY RPAD. A FURTHER NOTICE U/S. 142(1) ALONG WITH A QUESTIONNAIRE WAS ISSUED TO THE ASSESSEE ON 19/08/2013 AND DULY SERVED UPON THE ASSESSEE BY RPAD. 2. IN RESPONSE TO THE SAID NOTICES, SHRI MEHUL RANPURA, CA FROM J.C.RANPURA & CO. ATTENDED ON THE BEHALF OF THE ASSESSEE AND FURNISHED THE DETAILS CALLED FOR. THE CASE WAS DISCUSSED WITH HIM. THE BOOKS OF ACCOUNTS WERE CALLED FOR AND VERIFIED ON TEST CHECK BASIS. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF GENERATIO N OF ELECTRICITY. 4. ON VERIFICATION OF PROFIT & LOSS ACCOUNT, IT IS SEEN THAT THE ASSESSEE HAS SHOWN INTEREST ON IT REFUND AT RS.1,20,320/ - WHEREAS AS PER THIS OFFICE RECORDS, THE SAME IS AT RS.1,41,013/ - . THEREFORE, THE ASSESSEE WAS VIDE THIS OFFICE LETT ER DT. 14/03/20]'.' ASKED TO SHOW CAUSE AS TO WHY THE DIFFERENCE OF RS.20,693/ - SHOULD NOT BE ADDED TO TOTAL INCOME. THE ASSESSEE HAS VIDE LETTER DT. 2 7/03/2014 SUBMITTED THE REPLY WHICH IS NOT CONVINCING. THEREFORE, THE DIFFERENCE OF RS.20,693/ - IS HEREBY ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. SUBJECT TO ABOVE REMARKS AND THE DATA AVAILABLE ON RECORD, THE TAXABLE INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2011 - 12 RELEVANT TO THE PREVIOUS YEAR 2010 - 11 IS BEING COMPUTED AS FOLLOWS: I.T.A NO. 118/RJT /20 16 A.Y. 2011 - 12 PAGE NO SHRI GIRISHKUM AR R. TANTI VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX 20 IN RS TOTA L INCOME AS PER COMPUTATION 17, 34,2601 - ADD: AS DISCUSSED IN PARA - 4 ABOVE 20, 693/ - TOTAL TAXABLE INCOME 17,5 4,953/ - TOTAL TAXABLE INCOME RS.17,54,950/ - AGRICULTURE INCOME FOR RATE PURPOSE RS. 16,1597 - ASSESSED U/S 143(3) OF THE ACT. GIVE CREDIT FOR PREPAID TAXES AFTER DUE VERIFICATION. CHARGE INTEREST U/S 234 B AND 234C OF THE I.T. ACT, 196 1. ISSUE DEMAND NOTICE AND CHAL LAN ACCORDINGLY. 12. AT THE OUTSET WE COME TO THE FIRST ISSUE, WE HAVE NOTICED THAT IN THE PRECEDING ASSESSMENT YEAR 20 10 - 11, THE ASSESSEE HAD MADE ADVANCE OF RS. 350 CRORES TO SANMAN HOLDING PVT. LTD AND RECEIVED A N INTEREST OF RS. 10.76 CRORES AND THE SAME WAS OFFERED TO TAX BY THE ASSESSEE, HOWEVER NO INTEREST WAS OFFERED TO TAX BY THE ASSES SEE DURING THIS A.Y. 2011 - 12 IN SPITE OF THE FACT THA T THE SAME ADVANCE MADE BY THE ASSESS EE STILL EXIST AS OUTSTANDING. WITH REFERENCE TO THE PRECEDING YEAR IT IS APPARENT THAT THIS ADVANCE MADE BY THE ASSESSEE IS A N INTEREST BEARING DEPOSIT. WE HAVE ALSO GONE THROUGH THE SUBMISSIO N OF TH E ASSESSE CLAIMING THAT THE ASSESSING OFFICER VIDE PARA 13 OF THE NOTICE U/S. 142(1) DA TED 19 - 08 - 2013 CALLED FOR DETAIL OF INTEREST RECEIVED AND PAID, AND ASSESSEE S CONTENTION THAT HE HAD FURNISHED TO THE A SSESSING O FFICER DETAILS CALLED FOR VIDE PARA 13 PAGE 195 TO 200. IN THIS CONNECTION, WE HAVE PERUSED T HE NOTICE U/S. 142(1) OF THE AC T ISSUED BY THE ASSESSING OFFICER ON 19 - 08 - 2013 CONTAINING 20 I.T.A NO. 118/RJT /20 16 A.Y. 2011 - 12 PAGE NO SHRI GIRISHKUM AR R. TANTI VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX 21 GENERAL QUESTION AND NOTICED THAT THE SERIAL NO. 13 RELATE TO GENERAL QUESTION TO FURNISH THE DETAIL S OF INTEREST RECEIVED AND INTEREST PAID. WE HAVE ALSO GONE THROUGH THE ASSESSEE S CLAIM THAT ON 10 - 12 - 2013 VIDE PARA 13 PAGE 195 TO 200 THE DETAILS WERE FURNISHED TO THE ASSESSING OFFICER. IN THIS CONNECTION, WE HAVE NOTICED THAT VIDE LETTER DATED 10/12 /2013 AS PER SERIAL NO. 13 THE ASSESSEE HAD FURNISHED THE DETAILS OF ONLY THE FOLLOWING INTEREST INCOME: - 1. INTEREST ON I.T. REFUND RS. 1,20,320/ - 2. INTEREST ON MIS RS. 24,000/ - 3. INTEREST ON POST OFFICE SAVING A/C RS.1453/ - 4. INTEREST ON PPF RS. 64089/ - 5. INTEREST ON FD RS. 64637/ - 6. INTEREST ON BANKS RS. 4,51,478/ - 13. WE HAVE SEEN THAT DETAILS REGARDING LOANS, ADVANCES OR DEPOSIT WAS NEVER FURNISHED BY THE ASSESSEE NOR INQUIRED OR VERIFIED BY THE ASSESSING OFFICER. THE ASSESSEE HAS FURNISHED THE DE TAILS OF UNSECURED LOANS ACCEPTED AND REPAID DURING THE RELEVANT PERIOD BUT NO DETAILS REGARDING ADVANCES OR DEPOSIT PROVIDED BY THE ASSESSEE WAS FURNISHED . WE NOTICED THAT I N THIS CASE THERE IS A HISTORY OF INTEREST RECEIPT OF RS. 10.78 CRORES WHICH IS A HUGE AMOUNT IN THE PRECEDING YEAR ON THE SIMILAR ADVANCES MADE BY THE ASSESSEE AND INSPITE OF THIS THE ASSESSING OFFICER HAD NOT MADE ANY INQUIRY AND VERIFICATION THAT NO SUCH INTEREST WAS SHOWN AS ACCRUED IN THE YEAR I.T.A NO. 118/RJT /20 16 A.Y. 2011 - 12 PAGE NO SHRI GIRISHKUM AR R. TANTI VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX 22 UNDER CONSIDERATION IN SPITE OF THE F ACT THAT T HE ADVANCE IS STILL REMAINED OUTSTANDING DURING THIS ASSESSMENT YEAR . THE ASSESSING OFFICER HAS NOT MADE ANY ENQUIRY ON THIS ISSUE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND EVEN DURING THE COURSE OF PROCEEDINGS U/S. 263 THE ASSESSEE FAILED TO FURNISH ANY RELEVANT SUPPORTIVE EVIDENCES AND AGREEMENT TO JUSTIFY THAT SUCH INTEREST WAS NOT BE CHARGED DURING THE YEAR UNDER CONSIDERATION. WE HAVE ALSO CONSIDERED THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE LD. COUNSEL AND NO TICED THAT FACTS OF THESE CASES ARE DIFFERENT FROM THE FACT OF THE CASE OF THE ASSESSEE ON THIS ISSUE. THE JUDGMENT OF THE HON BLE SC IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SHOORJI VALLABHDAS & CO. 461 ITR 144 (SC) PERTAIN TO FACTS WHERE THE ASSESS EE HAD AGREED TO REDUCE ITS COMMISSION AS PER AGREEMENT TO SECURE LONG TERM BUSINESS FROM THIRD PARTIES. THE CASE OF HON BLE GUJARAT HIGH COURT IN THE CASE OF IN THE CASE OF COMMISSIONER OF INCOME TAX VS. ARIHANT AVENUES & CREDIT LTD (2014) 36 TAXMANN.COM RELATE TO THE FACTS WHERE BORROWED MONEY WITHOUT INTEREST WAS GIVEN AS INTEREST FREE ADVANCE. IN VIEW OF THE ABOVE FACTS AND FINDINGS , THE RATIO OF THE JUDGMENTS QUOTED ARE NOT APPLICABLE TO THE FACTS OF THE ASSESSEE S CASE. WE CONSIDERED THAT THE ASSES SING OFFICER HAS PASSED THE ORDER WITHOUT MAKING INQUIRY AND VERIFICATION AS TO WHY NO INTEREST HAS BEEN OFFERED TO TAX ON ACCRUAL YEARS. 14. NOW, WE CONSIDERED THE SECOND ISSUE REGARDING CLAIM OF DEDUCTION U/S. 80IA OF THE ACT .WE HAVE HEARD BOTH THE SID E S ON THIS ISSUE AND PERUSAL THE MATERIAL ON RECORD. WE OBSERVED THAT THE I.T.A NO. 118/RJT /20 16 A.Y. 2011 - 12 PAGE NO SHRI GIRISHKUM AR R. TANTI VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX 23 ASSESSEE HAS STARTED TO OPERATE ITS ELIGIBLE BUSINESS FROM 1 2 - 03 - 2007 AND HE OPTED NOT TO CLAIM DEDUCTION U/S. 80IA OF THE ACT TILL ASSESSMENT YEAR 2010 - 11. HE HAS STARTED CLAIMI NG DEDUCTION W.E.F. 2011 - 12 AS THE FIRST YEAR AND CLAIMED THAT UNDER THESE CIRCUMSTANCES THE PROVISIONS OF SEC. 80IA(5) WOULD BE APPLICABLE FROM ASSESSMENT YEAR 2010 - 11 BEING THE INITIAL ASSESSMENT YEAR FOR CLAIM OF DEDUCTION U/S. 80IA OF THE ACT. WE FIND THAT THERE WAS NO BROUGHT FORWARD OF LOSS OR UNABSORBED DEPRECATION AS ON 01 - 04 - 2010 BECAUSE OF ASSESSMENT YEAR 2011 - 12 BEING THE INITIAL ASSESSMENT YEAR FOR CLAIM OF DEDUCTION U/S. 80IA OF THE ACT. THE CBDT HAS ALSO ISSUED CIRCULAR ON. 1 OF 2016 DATED 1 5 - 02 - 2016 WHICH PROVIDE LIBERTY TO THE ASSESSEE TO DECIDE THE FIRST YEAR FROM WHICH IT WANTS TO CLAIM DEDUCTION UNDER SECTION 80IA(5) OF THE ACT. THE CBDT S CIRCULAR IS REPRODUCED AS UNDER: - CLARIFICATION OF THE TERM 'INITIAL ASSESSMENT YEAR' IN SECTION 80IA (5) OF THE INCOME - TAX ACT, 1961 'SUB SECTION 5 OF SECTION 801 A PRESCRIBES THE MANNER OF DETERMINING THE QUANTUM OF DEDUCTION, WHEREIN A REFERENCE HAS BEEN MADE TO THE TERM 'INITIAL ASSESSMENT YEAR'. IT HAS BEEN OBSERVED THAT SOME ASSESSING OFFICERS A RE INTERPRETING THE TERM 'INITIAL ASSESSMENT YEAR' AS THE YEAR IN WHICH THE ELIGIBLE BUSINESS/MANUFACTURING ACTIVITY HAD COMMENCED AND ARE CONSIDERING SUCH FIRST YEAR OF COMMENCEMENT/OPERATION ETC. ITSELF AS THE FIRST YEAR FOR GRANTING DEDUCTION, IGNORING THE CLEAR MANDATE PROVIDED UNDER SUB SECTION (2) WHICH ALLOWS A CHOICE TO THE ASSESSEE FOR DECIDING THE YEAR FROM WHICH IT DESIRES TO CLAIM DEDUCTION OUT OF THE APPLICABLE SLAB OF FIFTEEN (OR TWENTY) YEARS.' THIS MATTER HAS BEEN EXAMINED BY THE BOARD. IT IS ABUNDANTLY CLEAR THAT FROM SUB SECTION 2 THAT AN ASSESSEE WHO IS ELIGIBLE TO CLAIM DEDUCTION U/S 80IA HAS THE OPTION TO CHOOSE THE INITIAL/ FIRST YEAR FROM WHICH IT MAY DESIRE THE CLAIM OF DEDUCTION FOR TEN CONSECUTIVE YEARS, OUT OF SLAB OF FIFTEEN (OR TWENTY) YEARS, AS PRESCRIBED UNDER THAT SUB I.T.A NO. 118/RJT /20 16 A.Y. 2011 - 12 PAGE NO SHRI GIRISHKUM AR R. TANTI VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX 24 SECTION. HOWEVER, ONCE SUCH INITIAL ASSESSMENT YEAR HAS BE EN OPTED FOR BY AN ASSESSEE, HE, SHALL BE ENTITLED TO CLAIM DEDUCTION U/S 80IA FOR TEN CONSECUTIVE YEARS BEGINNING FROM THE YEAR IN RESPECT OF WHICH HE HA S EXERCISED SUCH OPTION SUBJECT TO THE FULFILLMENT OF CONDITIONS PRESCRIBED IN THE RELEVANT SECTION. HENCE, THE TERM ' INITIAL ASSESSMENT YEAR WOULD MEAN THE FIRST YEAR OPTED FOR BY THE ASSESSEE FOR CLAIMING DEDUCTION U/S 80IA. HOWEVER, THE TOTAL NUMBER O F YEARS FOR CLAIMING DEDUCTION SHOULD NOT TRANSGRESS THE PRESCRIBED SLAB OF FIFTEEN OR TWENTY YEARS, AS THE CASE MAY BE AND THE PERIOD OF CLAIM SHOULD BE A VAILED IN CONTINUITY. 15. WE FIND THAT ASSESSEE HAS STARTED TO OPERATE THE ELIGIBLE BUSINESS FROM 12 - 03 - 2007 RELEVANT TO ASSESSMENT YEAR 2007 - 08 AND ASSESSEE HAS NOT CLAIMED ANY DEDUCTION U/S. 80IA OF THE ACT BEFORE A.Y. 2010 - 11 WHEN HE HAS OPTED CONSEQUENT TEN YEARS OUT OF FIFTEEN YEARS FOR CLAIM OF DEDUCTION U/S. 80IA. THESE INFORMATIONS AND FACTS AR E AVAILABLE IN THE ASSESSMENT RECORD OF THE ASSESSEE. IN VIEW OF THE ABOVE STATED FACTS AND CIRCUMSTANCES, WE ARE NOT INCLINED TO UPHOLD THE ORDER OF THE LD. PR. COMMISSIONER OF INCOME TAX ON THE SECOND ISSUE REGARDING DEDUCTION U/S 80IA(5) OF THE ACT . 16 . WE THEREFORE HOLD THAT TO THE EXTENT OF THE 1 ST ISSUE PERTAINING TO CHARGING OF INTEREST ON DEPOSIT OF RS. 350 CRORES GIVEN TO M/S. SANMAN HOLDING PVT. LTD. ON WHICH THE ASSESSEE HAD RECEIVED AN INTEREST OF RS. 10.76 CRORES IN THE F.Y. 2009 - 10. , WHICH W AS NOT VERIFIED OR INQUIRED INTO, WHILE FINALIZING THE ASSESSMENT, THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND THE ASSESSING OFFICER IS DIRECTED TO COMPLETE THE ASSESSMENT AFTER EXAMINATION OF T HIS ISSUE AS PER THE I.T.A NO. 118/RJT /20 16 A.Y. 2011 - 12 PAGE NO SHRI GIRISHKUM AR R. TANTI VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX 25 PROVISION OF LAW. IT IS CLEAR FROM THE FACTS AND FINDINGS THAT THERE IS NO DISCUSSION OR ANY QUERY AND CERTAINLY IT IS AN ISSUE FOR WHICH THE ASSESSMENT ORDER CAN BE SAID TO BE ERRONEOUS TO THE EXTENT OF FIRST ISSUE AS DISCUSSED SUPRA IN THIS ORDER. WE THEREFORE UPHOLD THE ORDER OF THE LD. PR. COMMISSIONER OF INCOME TAX TO THE EXTENT OF FIRST ISSUE ONLY. 17. IN THE RESULT, ASSESSEE S APPEAL IS PARTLY ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OUR T ON 11 - 11 - 201 6 SD/ - SD/ - (S.S. GODARA ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 11 /11 /2016 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, RAJKOT