Kesoram Industries Ltd., Kolkata V. PCIT, CIR-5, KOLKATA, Kolkata

ITA 1189/KOL/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4263 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-09-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 26-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G MALLIKARJUN
• Assessee Lawyers: D S DAMLE
• Keywords: Unexplained investment; Capital asset; Depreciation; Opportunity of being heard; Principle of natural justice; Earning of tax free income; Question of law; Assessment record; Right to appeal; Revenue expenditure; Capital expenditure
• Section: 143(3); 142(1); 14A; 69; 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.1189/KOL/2016 ASSESSMENT YEAR:2011-12 KESORAM INDUSTRIES LTD. 9/1, R.N.MUKHERJEE ROAD, KOLKTA-700 001 [ PAN NO.AABCK 2471 P ] / V/S . THE PRINCIPAL COMMISSIONER OF INCOME-TAX-2, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-69 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI D.S.DAMLE, FCA /BY RESPONDENT SHRI G.MALLIKARJUN, CIT-DR /DATE OF HEARING 27-09-2016 /DATE OF PRONOUNCEMENT 04-11-2016 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THE ASSESSEE HAS FILED THIS APPEAL DISPUTING THE OR DER OF PRINCIPAL COMMISSIONER OF INCOME TAX-2, KOLKATA VIDE NO. PR.C IT-2/KOL/REVISION/15- 16/263/KESORAM/11-12/9430-32 DATED 29.03.2016 PASSE D U/S 263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) BY WHICH THE LD. CIT SET ASIDE THE ASSESSMENT ORDER DATED 28.03.2014 U/S 143(3) OF THE ACT WITH A DIRECTION TO REDO THE ASSESSMENT IN RESPECT OF THE ISSUE MENTIONED THEREI N. SHRI D.S.DAMLE, LD. AUTHORIZED REPRESENTATIVE APPEA RED ON BEHALF OF ASSESSEE AND SHRI G.M MALLIKRJUN LD. DEPARTMENTAL REPRESENTATIVE APPEARED ON BEHALF OF REVENUE. ITA NO.1189/KOL/2016 A.Y.20 11-12 KESORM INDS. LTD. VS. THE PRINCIPAL COMMISSIONER OF INCOME-TAX-2 KOL PAGE 2 2. SOLITARY ISSUES RAISED BY ASSESSEE IN ITS APPEAL IS THAT LD. CIT ERRED IN TREATING THE ORDER OF ASSESSING OFFICER AS ERRONEOUS IN SO F AR PREJUDICIAL TO THE INTEREST OF REVENUE. 3. BRIEF FACTS ARE THAT ASSESSEE IN THE PRESENT CAS E IS A LIMITED COMPANY AND ENGAGED IN MANUFACTURING OF CEMENT, TYRE, VISCOSE F ILAMENT, RAYON YARN, TRANSPARENT PAPER, CAST IRON SPUN PIPE AND CERTAIN CHEMICALS. T HE ASSESSEE FOR THE YEAR UNDER CONSIDERATION FILED ITS RETURN OF INCOME ON 30.09.2 011 DECLARING TOTAL LOSS OF 369,67,31,212/- UNDER THE NORMAL PROVISION OF THE A CT AND BOOK LOSS OF 960071348/- UNDER THE PROVISION OF MINIMUM ALTERNAT E TAX (MAT FOR SHORT). SUBSEQUENTLY, CASE WAS SELECTED FOR SCRUTINY UNDER THE CASS MODULE. ACCORDINGLY, NOTICE WAS ISSUED U/S 143(2)/142(1) OF THE ACT. THE ASSESSMENT WAS FRAMED U/S. 143(3) OF THE ACT AT A TOTAL LOSS OF 3629585781/- AFTER MAKING SEVERAL DISALLOWANCES / ADDITIONS TO THE TOTAL INCOME OF ASSESSEE. THEREAFT ER ON EXAMINATION OF ASSESSMENT RECORDS, LD. CIT U/S. 263 OF THE ACT OBSERVED CERTA IN DEFECTS IN THE ASSESSMENT ORDER PASSED BY ASSESSING OFFICER U/S. 143(3) OF THE ACT, WHICH ARE ENUMERATED BELOW:- 1) AS PER AUDITED FINANCIAL STATEMENT THERE WAS AN ADDITION OF 534,90,34,744/- IN THE FIXED ASSET SCHEDULE OF ASSESSEE. HOWEVER, AS P ER THE DEPRECIATION SCHEDULE OF TAX AUDIT REPORT TOTAL ADDITION OF FIXED ASSET WAS SHOW N AT 536,00,61,703/-. SO THERE WAS A DIFFERENCE IN THE AMOUNT OF FIXED ASSETS ADDITION TO THE TUNE OF 1,10,26,959/- WHICH IN THE OPINION OF LD. CIT WAS UNEXPLAINED INVESTMEN T U/S 69B OF THE ACT. 2) THERE WAS A DISALLOWANCE OF 2,51,26,736/- U/S 14A OF THE ACT. SUCH DISALLOWANCE WAS WORKED OUT AS PER RULE 8D(2)(II) O F INCOME TAX RULES ON THE BASIS OF NET INTEREST EXPENSE OF 233,49,39,689/- (GROSS INTEREST 239,82,56,794 INT EREST INCOME 6,33,17,105.00). WHEREAS THE ASSESSEE CLAIME D GROSS AMOUNT OF INTEREST FOR RS. 239,82,56,794/-. ACCORDINGLY, LD. CIT OBSERVED THAT LESS DISALLOWANCE HAS BEEN MADE BY AO IN PURSUANCE OF THE PROVISION OF SEC. 14 A OF THE ACT ON ACCOUNT OF TAKING THE NET AMOUNT OF INTEREST EXPENSES. 3) THE ASSESSEE HAS CLAIMED TRADE DISCOUNT OF 25,88,57,364/- BY DEBITING THE PROFIT AND LOSS A/C OF ASSESSEE. THE LD. CIT OBSERV ED THAT THE SALES AMOUNT SHOWN BY ITA NO.1189/KOL/2016 A.Y.20 11-12 KESORM INDS. LTD. VS. THE PRINCIPAL COMMISSIONER OF INCOME-TAX-2 KOL PAGE 3 ASSESSEE IN ITS PROFIT AND LOSS A/C IS NET OF TRADE DISCOUNT. THEREFORE, THE ASSESSEE HAS CLAIMED DOUBLE DEDUCTION OF THE TRADE DISCOUNT IN W ORKING OUT THE TAXABLE PROFIT. 4) THE ASSESSEE IN ITS TAX AUDIT REPORT AS PER CLA USE-13(D) HAS SHOWN GAIN UNDER THE HEAD FOREIGN EXCHANGE AMOUNTING TO 2,17,92,210/- ON ACCOUNT OF BUYERS CREDIT FOR THE IMPORT OF CAPITAL GOODS. LD. CIT OBSERVED T HAT SUCH GAIN HAS NOT BEEN ADJUSTED IN THE WRITTEN DOWN VALUE OF THE RELEVANT BLOCK OF ASSET. THEREFORE, ASSESSEE ON SUCH AMOUNT HAS CLAIMED EXCESSIVE DEPRECIATION FOR 76,27,273/-. IN VIEW OF ABOVE, LD. CIT ISSUED SHOW CAUSE NOTICE VIDE NO. PR.CIT- 2/KOL/REVISION/15-16/263/KESORAM/11-12/9430-32 DATE D 29.03.2016 FOR SEEKING CLARIFICATION OF THE DEFECTS AS OBSERVED HEREINABOV E. 4. THE REPLY OF THE ASSESSEE IN RESPONSE TO THE NOT ICE ISSUED U/S 263 OF THE ACT STAND AS UNDER : 1) THE RECONCILIATION STATEMENT FOR THE DIFFERENCE OF 1,10,26,959/- BETWEEN AUDITED FINANCIAL STATEMENTS AND TAX AUDITED REPORT WAS SUB MITTED AS UNDER : A) RECONCILIATION OF ADDITION TO FIXED ASSETS AMOUNT (INR) ADDITION TO FIXED ASSETS AS PER ANNUAL REPORT (SCHEDULE 5) 5,349,034,744 ADDITION TO FIXED ASSETS AS PER TAX AUDIT REPORT ON ASSETS USED FOR POWER GENERATION 10, 435,307 ON OTHER ASSETS 5,360,061,703 5,370,497,010 21,462,266 UNREALISED GAIN ON FOREIGN EXCHANGE NOT ADJUSTED IN TAX AUDIT REPORT 21,792,210 (AS PER CLAUSE 13(D) OF TAX AUDIT REPORT) __________ DIFFERENCE DUE TO ADDITION TO FREEHOLD LAND & 329,944 LIVESTOCK (NOT INCLUDED IN THE DEPRECIABLE BLOCK OF ASSETS IN TAX AUDIT REPORT) IT WAS FURTHER SUBMITTED THAT THE EFFECT ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION IN RELATION TO CAPITAL GOODS IMPORTED WAS NOT GIVEN IN TAX AUDIT REPORT IN PURSUANCE TO PROVISIONS OF SEC. 43A OF THE ACT. THE DIFFERENCE W AS ALSO ARISING ON ACCOUNT OF ITA NO.1189/KOL/2016 A.Y.20 11-12 KESORM INDS. LTD. VS. THE PRINCIPAL COMMISSIONER OF INCOME-TAX-2 KOL PAGE 4 FREEHOLD LAND AND LIVESTOCK OF RS. 3,29,944.00 WHIC H WAS SHOWN IN THE AUDITED FINANCIAL STATEMENT BUT THE SAME WAS NOT SHOWN IN T HE DEPRECIATION SCHEDULE ATTACHED ALONG WITH THE TAX AUDIT REPORT AS THESE ITEMS WERE NON DEPRECIABLE ASSETS. B) THE ASSESSEE SUBMITTED THAT IT HAS ALREADY DISAL LOWED A SUM OF 1,16,731/- SUO MOTO UNDER THE PROVISION OF SEC. 14A OF THE ACT. THE INV ESTMENT WAS NOT MADE OUT OF THE BORROWED FUND, THEREFORE, THERE IS NO QUESTION FOR MAKING THE DISALLOWANCE ON ACCOUNT OF INTEREST EXPENSE CLAIMED IN PROFIT AND L OSS A/C OF ASSESSEE. C) THE ASSESSEE SUBMITTED THAT IT HAS BEEN PROVIDIN G CERTAIN DISCOUNT TO ITS CUSTOMERS SUCH AS UP-FRONT DISCOUNT, CONDITIONAL DI SCOUNT ETC. THE UPFRONT DISCOUNT IS GENERALLY KNOWN AS TRADE DISCOUNT AND WHICH IS GIVE N AT THE TIME OF BOOKING OF SALE. THEREFORE, SUCH DISCOUNT IS REDUCED FROM THE AMOUNT OF SALE IN THE FINANCIAL RECORDS AND ONLY NET AMOUNT OF SALE IS RECORDED IN THE BOOK S OF ACCOUNT. THEREFORE, THERE IS NO QUESTION OF CLAIMING DOUBLE DEDUCTION FOR THE TRADE DISCOUNT. D) THE ASSESSEE SUBMITTED THAT UNRELIED FOREIGN EXC HANGE GAIN HAS NOT BEEN ADJUSTED WITH THE WRITTEN DOWN VALUE OF ASSETS IN T ERMS OF PROVISION OF SEC. 43A OF THE ACT. AS PER THE PROVISION OF SEC. 43A OF THE ACT AN Y INCREASE OR REDUCTION IN THE VALUE OF LIABILITY IN FOREIGN CURRENCY ON ACCOUNT OF CURR ENCY FLUCTUATION PERTAINING TO CAPITAL ASSETS IS TO BE ADJUSTED WITH THE CORRESPONDING COS T OF THE ASSET AT THE TIME OF ACTUAL PAYMENT OF SUCH LOAN LIABILITY. THEREFORE AS SUCH N O EXCESS DEPRECIATION HAS BEEN CLAIMED BY THE ASSESSEE. 5. IN ADDITION TO ABOVE, THE ASSESSEE ALSO SUBMITTE D THAT THE ORDER PASSED UNDER SECTION 143(3) IS ALSO NOT ERRONEOUS AND PREJUDICIA L TO THE INTEREST OF REVENUE EVEN ON THE TECHNICAL GROUNDS. IN THE INSTANT CASE THE AO H AS CONDUCTED NECESSARY ENQUIRIES, FACTS OF THE CASE AND SUBMISSION OF THE ASSESSEE BE FORE FRAMING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT. THE ASSESSEE HAS RELIED IN THE FOLLOWING ORDER : I) MALABAR INDUSTRIAL CO. LTD. VS. CIT 243 ITR 83,87 II) CIT VS. GABRIEL INDIA LIMITED 203 ITR 108, 115 III) NABHA INVESTMENT PVT. LTD. VS. UOI 246 ITR 41 IV) HARI IRON TRADING VS. CIT 263 ITR 437 V) G.N. SHAW (WINE) PVT. LTD. VS ITO 260 ITR 513 ITA NO.1189/KOL/2016 A.Y.20 11-12 KESORM INDS. LTD. VS. THE PRINCIPAL COMMISSIONER OF INCOME-TAX-2 KOL PAGE 5 VI) CIT VS. ARVIND JEWELLERS 259 ITR 502 VII) CIT VS. ARVIND JEWELLERS 266 ITR (ST.) 101 6. HOWEVER, LD. CIT DISREGARDED THE CLAIM OF ASSESS EE BY HOLDING THE ASSESSMENT ORDER PASSED BY AO AS ERRONEOUS IN SO FAR AS PREJUD ICIAL TO THE INTEREST OF REVENUE BY OBSERVING AS UNDER:- 7. AS REGARD THE MATTER RELATING TO ADDITION TO FI XED ASSETS AND MATTER RELATING NON ADJUSTMENT OF UNREALIZED GAIN ON FOREIGN EXCHANGE W ITH COST OF ASSETS. IT WAS VEHEMENTLY ARGUED THAT THE TWO WERE CONNECTED. THE ARS ALSO BROUGHT TO MY NOTICE THE RELEVANT EXTRACTS OF THE ACCOUNTS. THEY ARGUED THAT THE UNREALIZED FOREIGN EXCHANGES COULD NOT HAVE BEEN BOOKED AS PER SECTION 43A OF THE ACT. HOWEVER, I AM OF THE CONSIDERED OPINION THAT THE A/RS HAVE COME U P WITH THE SAID EXPLANATION NOW, WHICH HAD NEITHER BEEN EXAMINED NOR CONSIDERED DURI NG THE ASSESSMENT PROCEEDINGS BY THE AO. 8. I FIND THAT THE FIGURES OF FIXED ASSETS (AS SHOW N AT SCHEDULE-5) AS PER BOOKS OF ACCOUNT WAS RS.5,34,90,34,744/-. BUT, IT WAS SEEN F ROM THE DEPRECIATION SCHEDULE (AS SHOWN AT APPENDIX-III) OF TAR THAT THE TOTAL ADDITI ON OF FIXED ASSET DURING THE YEAR WAS TAKEN AT RS.5,36,00,61,703/-. THUS IN ANY CASE, IT IS EVIDENT THAT THE ASSESSEE HAD NOT DISCLOSED THE ADDITION OF FIXED ASSETS OF RS.1, 10,26,959/-, THE DIFFERENCE BETWEEN THE TWO ABOVE, IN THE BOOKS OF ACCOUNT. THIS APPEAR S TO BE NOT EXPLAINED EVEN BEFORE ME NOW. THE A/RS HAVE COME UP WITH A PLEA THAT THE DIFFERENCE WAS DUE TO THE UNREALIZED GAIN ON FOREIGN EXCHANGE (RS.2,17,92,210 ) AND ADDITIONS TO FREEHOLD LAND & LIVESTOCK (RS.3,29,944) AND THAT ADDITIONS TO FREEHOLD LAND AND LIVESTOCK HAVE NOT BEEN CONSIDERED IN THE SCHEDULE OF ASSETS AS PER THE TAX AUDIT REPORT SINCE THE SAME IS NOT ELIGIBLE FOR DEPRECIAT ION UNDER THE ACT . IT IS ONLY OBVIOUS THAT THE FIGURES OF THE A/RS DO NOT MATCH W ITH THE FIGURES POINTED OUT IN MY NOTICE TAKEN FROM THEIR ACCOUNTS. THEIR ARGUMENTS A RE NOT CONVINCING ALONG WITH THIS, THE A/RS CLUBBED ANOTHER PART OF MY QUESTIONING IN MY NOTICE WITH REGARD TO MATTER RELATING NON-ADJUSTMENT OF UNREALIZED GAIN ON FOREI GN EXCHANGE WITH COT OF ASSETS. THEY COULD QUANTIFY THE AMOUNT AT RS.2,17,92,210. B UT NOW, HAVE CLAIMED BEFORE ME THAT BEING UNREALIZED FOREIGN EXCHANGE GAIN THE SAM E WAS NOT ADJUSTED WITH THE WDV OF ASSETS IN VIEW OF THE EXPRESS PROVISIONS OF SECT ION 43A ITSELF WHICH STATE THAT ANY INCREASE OR REDUCTION IN THE VALUE OF LIABILITY AT THE TIME OF PAYMENT IS TO BE ADJUSTED WITH THE CORRESPONDING COST OF ASSES. THEY HAVE NOT GIVEN ME THE DATE AS TO WHEN THE SAME WAS ACTUALLY REALIZED AND HOW THE SAM E WAS TREATED IN THE ACCOUNTS AND HOW THE REVENUE HAD, IF AT ALL, RESPONDED TO TH E SAME. NOTHING WAS EXAMINED BY THE AO AND MORE IMPORTANTLY, THIS ISSUE HAD NEVER B EEN RAISED ONLY BY THE AO. 9. THE OTHER ISSUE WAS THE COMPUTATION OF DISALLOWA NCE U/S. 14A. IT WAS SEEN THAT THE AO HAD CONSIDERED NET INTEREST EXPENSES AFTER REDUC ING AN AMOUNT OF RS.6,33,17,105 BEING INTEREST EARNED BY THE ASSESSEE DURING THE RE LEVANT FINANCIAL YEAR. THE ASSESSEE HAD EARNED THE SAID FIGURE AS INTEREST INCOME. BUT IT HAD SPENT R.239.82 CORE AS INTEREST AND HAD EARNED A DIVIDEND OF RS.5.32 CORE OF DIVIDEND. IT HAD DISALLOWED AN AMOUNT OF RS.116,731 (BUT AS PER THE AO AT PAGE 11O F HIS ORDER RS.1,20,000) AS AN AMOUNT DISALLOWABLE US. 14A. ON THE OTHER HAND, THE AO HAD NETTED OFF THE INTEREST PAID AND EARNED AND CONSIDERED THE DIFFERENTIAL AMO UNT FOR COMPUTATION UNDER RULE 8D. ITA NO.1189/KOL/2016 A.Y.20 11-12 KESORM INDS. LTD. VS. THE PRINCIPAL COMMISSIONER OF INCOME-TAX-2 KOL PAGE 6 10. BEFORE ME, THE A/RS HAVE CONTENDED THAT WHERE T HE ENTIRE INTEREST EXPENSE HAS BEEN NULLIFIED BY A HIGHER INTEREST RECEIPT, NO DIS ALLOWANCE U/S. 14A WAS WARRANTED, WHICH THEREFORE IMPLIES THAT THE ASSESSEE IS ENTITL ED TO BENEFIT OF INTEREST CREDITED TO PROFIT & LOSS ACCOUNT BEING REDUCED FROM THE GROSS INTEREST DEBITED TO PROFIT & LOSS ACCOUNT. SUCH CONTENTIONS HAS BEEN UPHELD BY THE JU RIDICTIONAL KOLKATA TRIBUNAL IN DCIT VS. M/S TRADE APARTMENT LTD. ( ITA NO.1277/KOL/2011 ENCLOSED AS ANNEXURE C). SIMILAR VIEWS HAVE BEEN UPHELD BY THE AHMEDABAD TRIBUNAL IN KARNAVATI PETROCHEM PVT. LTD ( ITA NO. 2228/A/2012 ) AS WELL AS THE HYDERABAD TRIBUNAL IN SPANDANASPHOORTY FINANCIAL LIMITED ( ITA NO. 1653/HYD/2012 ). HOWEVER, I FIND THAT THE LINE OF ARGUMENT TAKEN BY THE A/RS AND THEIR RE LIANCE UPON THE JUDICIAL DECISION IN THE CASE OF TRADE APARTMENT ( ITA NO.1277/KOL/2011 ). THE ISSUE REMAINS THAT THE ASSESSEE HAD NOT EXPLAINED AS TO HOW THE AMOUNT IT HAD DISALLOWED SUO MOTU U/S. 14A. SIMILARLY, THE AO WHILE RESORTING TO HIS COMPUTATIO N UNDER RULE 8D HAD ALSO SNOT TAKEN THE GROSS AMOUNT OF INTEREST SPENT. THUS, THE POINT WHICH WAS TO BE EXPLAINED TO ME NOW AS TO HOW MUCH EXACTLY WAS TO BE HELD AS ATT RIBUTABLE TO THE EARNING OF THE EXEMPTED DIVIDED. THE A/.RS FURNISHED NOTHING. THEY MERELY RELIED ON THE AFORE- MENTIONED JUDGMENT WHICH DOES NOT SPEAK OF AN OBLIG ATION TO NET OFF THE INTEREST SPENT. ESPECIALLY, IN A CASE LIKE THIS, WHERE IT IS OBVIOUS THAT RS.239.82 CRORE OF INTEREST HAD BEEN SPENT AGAINST AN INTEREST EARNING OF RS.6.33 CRORE ONLY. THE FIGURES ARE NOT PROPORTIONATE EVEN TO IMAGINE THAT AMOUNT B ORROWED HAD BEEN INVESTED IN THE AMOUNT ADVANCED AS LOAN AND HENCE AS THOUGH THEY HA D DESERVED TO BE NETTED OFF. THEREFORE, THE LOGIC OF THE A/RS BEFORE ME FAILS. T HEY SHALL HAVE TO EXPLAIN AND SHOW IT BY THEIR CASH FLOW STATEMENT TO SHOW NOW THE INVEST MENTS HAD BEEN MADE WITH WHICH FUND FROM THE INTEREST BEARING BORROWED FUND OR FRO M ITS AVAILABLE FUND AND ALSO HOW THE ENTIRE INTEREST SPENT WAS NOT ATTRIBUTABLE TO T HE SAID DIVIDED EARNING INVESTMENTS. 11. THERE IS ANOTHER ISSUE WITH REGARD TO THE DISCO UNT. THE ASSESSEE COMPANY HAD DEBITED DISCOUNT TO THE PROFIT & LOSS ACCOUNT EVEN THOUGH SALES HAVE BEEN RECOGNIZED NET OF DISCOUNT AND ACCORDINGLY DISCOUNT SEPARATELY DEBITED TO THE PROFIT & LOSS ACCOUNT. IT WAS PRIME FACIE NOT ALLOWABLE. NOW BEFO RE ME THE A/RS HAVE COME UP WITH A PLEA THAT THERE HAD BEEN VARIOUS OTHER KINDS OF D ISCOUNTS WHICH THE ASSESSEE WAS OBLIGED TO DO. I AM CONVINCED THAT THIS ASPECT HAD NEITHER BEEN QUESTIONED NOR EXAMINED. THEREFORE, I RESTORE THE MATTER TO THE AO WHO SHALL EXAMINE IN DETAIL THIS NEW CLAIM PRESENTED. 12. BESIDES, THE A/RS HAVE RAISED THE TECHNICAL ISS UES REGARDING THE COMPETENCY OF THE UNDERSIGNED TO INITIATE THE PRESENT 263 PROCEEDINGS . I HAVE VERY CAREFULLY CONSIDERED THEIR ARGUMENTS AND THE CASE LAWS THAT THEY HAVE RE LIED ON. I MUST MENTION HERE THAT, THE A/RS HAVE NOT ESTABLISHED THAT THE AO HAD QUEST IONED ALL THE ISSUES THAT HAVE BEEN RAISED NOW. SECONDLY, THEY THEMSELVES ARE HOLDING N OW THAT THE ASSESSING OFFICER'S COMPUTATION OF THE DISALLOWANCE US. 14A IS NOT JUDI CIALLY ACCEPTABLE. MOREOVER, THEY HAVE CONCEDED ON THE ISSUE OF CLAIM OF UNPAID LEAVE ENCASHMENT EXPENSES AND DO NOT WISH TO LITIGATE FURTHER. THIS MEANS THE AMOUNT HAD ESCAPED TAXATION. THE ADDITION TO FIXED ASSETS ARE CLAIMED NOW TO BE RELATED TO THE U NREALIZED FOREIGN EXCHANGE GAIN AND ALSO RELATED TO NON-DEPRECIABLE ASSETS, WHICH H AD NOT BEEN EXAMINED. THE DISCOUNT ISSUE ALSO HAD REMAINED UNEXAMINED AND UNE XPLAINED. THUS, HOW WAS THE ORDER OF THE AO NOT ERRONEOUS? HOW THE SAME WAS NOT PREJUDICIAL TO THE INTEREST OF THE REVENUE WHEN HUGE AMOUNTS HAD GONE UNDER ASSESS EE AND ALL OF THEM HAVE HUGE TAX IMPACT? I HOLD WITHOUT ANY FURTHER ARGUMENT THA T THE ASSESSING OFFICER'S SAID ORDER AS ERRONEOUS AND ALSO IS PREJUDICIAL TO THE I NTEREST OF REVENUE. ITA NO.1189/KOL/2016 A.Y.20 11-12 KESORM INDS. LTD. VS. THE PRINCIPAL COMMISSIONER OF INCOME-TAX-2 KOL PAGE 7 13. BUT, IN THE INTEREST OF NATURAL JUSTICE, SINCE THE A/RS PRESENT CLAIMS ARE FRESH AND HAVE MEND FOR CONSIDERATION AFRESH SET-ASIDE THE IM PUGNED ASSESSMENT ORDER OF THE AO AND DIRECT THE AO TO REDO THE ASSESSMENT ON THES E LIMITED ISSUES ONLY AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE COMPANY. BEING AGGRIEVED BY THIS ORDER OF LD. CIT ASSESSEE C AME IN APPEAL BEFORE US. 7. BEFORE US LD. AR OF ASSESSEE FILED TWO PAPER BOO KS WHICH ARE RUNNING PAGES FROM 1 TO 140 AND 1 TO 149 AND BROUGHT OUT ELABORA TELY SUBMISSION BEFORE BENCH AS UNDER:- I) THE LD. CIT IN ITS SHOW CAUSE NOTICE DATED 17.02 .2016 ISSUED U/S 263 OF THE ACT SOUGHT CLARIFICATION ON THE AMOUNT OF DIFFERENC E TO THE ADDITION OF FIXED ASSETS BETWEEN AUDITED ACCOUNTS AND TAX AUDIT REPORT. ACCO RDINGLY, ASSESSEE CLARIFIED THE DIFFERENCE IN RESPONSE TO NOTICE ISSUED U/S 263 OF THE ACT BUT LD. CIT CHANGED THE TACK AND HELD THE ORDER OF AO AS ERRONEOUS AND PREJUDICI AL TO THE INTEREST OF REVENUE ON ACCOUNT OF NON-VERIFICATION OF THE FACTS BY THE AO . THE LD. CIT DID NOT CONSIDER AT ALL THE SUBMISSION MADE BY ASSESSEE IN THE FORM OF RECO NCILIATION STATEMENT WHICH IS PLACED ON PAGE 43 OF THE PAPER BOOK. LD. AR FURTHER ON MERIT SUBMITTED THAT AS PER ACCOUNTING STANDARD-11 (THE EFFECT OF CHANGES IN FO REIGN EXCHANGE RATE) IS TO BE APPLIED IN THE PREPARATION OF FINANCIAL STATEMENT O N THE DATE OF THE BALANCE SHEET. ACCORDINGLY, THE EFFECT WAS GIVEN IN THE BOOKS OF A CCOUNT BUT SUCH EFFECT WAS NOT GIVEN IN THE TAX AUDIT REPORT BY VIRTUE OF PROVISIO N OF SEC. 43A OF THE ACT WHICH REQUIRES TO RECOGNISE THE FLUCTUATION IN FOREIGN CU RRENCY WITH RESPECT TO CAPITAL ASSETS AT THE TIME OF ACTUAL PAYMENT. THEREFORE, SUCH DIFF ERENCE WAS FOUND BUT THERE IS NO ERROR CAUSING PREJUDICIAL TO THE INTEREST OF REVENU E. THE LD. AR ALSO DREW OUR ATTENTION ON PAGE 10 OF THE PB WHERE THE POLICY OF THE ASSESS EE WAS MENTIONED FOR RECOGNIZING THE FOREIGN CURRENCY TRANSACTION IN THE FINANCIAL S TATEMENT. II) THE AO HAS RAISED A SPECIFIC QUERY IN THE NOT ICE ISSUED UNDER SECTION 142(1) OF THE ACT FOR INVOKING THE PROVISIONS OF SECTION 14A OF T HE ACT. WITH REGARD TO THE DISALLOWANCE OF INTEREST AS PER RULE 8D(2)(II) OF I NCOME TAX RULES, THE AO HAS TAKEN ONE OF THE POSSIBLE VIEW. THEREFORE THE ORDER OF TH E AO CANNOT BE HELD ERRONEOUS. THE REPLY OF THE ASSESSEE IS PLACED ON PAGE 99 TO 101 A ND THE AO PASSED THE ORDER AFTER ITA NO.1189/KOL/2016 A.Y.20 11-12 KESORM INDS. LTD. VS. THE PRINCIPAL COMMISSIONER OF INCOME-TAX-2 KOL PAGE 8 CONDUCTING THE DETAILED ENQUIRY AS EVIDENT FROM THE ORDER OF THE AO WHICH IS PLACED ON PAGES 134 TO 140 OF THE PAPER BOOK. III) THE LD. CIT DID NOT POINT OUT ANY DEFECT IN TH E EXPLANATION FURNISHED BY THE ASSESSEE. THE LD. CIT FAILED TO BRING ANY ADVERSE F INDING FOR HOLDING THAT CLAIM OF DISCOUNT IS RENDERING THE ORDER OF AO AS ERRONEOUS. IV) IN THIS CASE ALSO THE LD. CIT FAILED TO BRING R EASONS FOR HOLDING THE ORDER OF THE AO AS ERRONEOUS & PREJUDICIAL TO THE INTEREST OF REVEN UE. ON THE OTHER HAND, THE ARGUMENT OF LD. DR STANDS AS UNDER : 1) IT WAS SUBMITTED THAT NO DETAILS WERE FURNISHED BY ASSESSEE ABOUT THE ASSETS PURCHASED FROM OUTSIDE INDIA OUT OF THE BORROWED FU ND IN FOREIGN CURRENCY. THEREFORE, LD. CIT DIRECTED THE AO TO VERIFY THE NE CESSARY DETAILS AS IT WAS NOT VERIFIED AT THE TIME OF ASSESSMENT PROCEEDINGS. LD. DR FURTHER SUBMITTED THAT AO ISSUED NOTICE U/S 142(1) OF THE ACT WHICH IS PLA CED ON PAGE 88 OF THE PAPER BOOK FOR FURNISHING THE ADDITION OF THE FIXED ASSET S ALONG WITH THE PROOF OF FUNDS FOR THE PURCHASE OF NEW ASSETS BUT SUCH DETAI LS WERE NOT FURNISHED BY ASSESSEE AT THE TIME OF ASSESSMENT. THEREFORE LD. C IT DIRECTED THE AO FOR VERIFICATION OF SUCH DETAILS. 2) IT WAS SUBMITTED THAT THERE ARE CONFLICTING ORDE RS PASSED BY VARIOUS COURTS FOR CONSIDERING THE GROSS AMOUNT OF INTEREST FOR DISALL OWING THE INTEREST EXPENSE U/S. 14A OF THE ACT. THE ORDER OF AO IS ALSO SILENT WHY NET INTEREST EXPENSE HAS BEEN TAKEN INTO CONSIDERATION FOR MAKING DISALLOWAN CE U/S. 14A OF THE ACT. 3) IT WAS SUBMITTED THAT ORDER OF AO IS SILENT ABOU T THE TRADE DISCOUNT CLAIMED BY ASSESSEE IN ITS PROFIT AND LOSS A/C VIS--VIS IT WA S REDUCED FROM THE SALE AMOUNT OF ASSESSEE. 4) LD. DR FOR THE EXCESS CLAIM OF DEPRECIATION AGRE ED WITH THE VIEW OF LD. CIT. THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE LD . CIT PASSED UNDER SECTION 263 OF THE ACT. IN REJOINDER LD. AR SUBMITTED THAT LD. CIT SOUGHT CLARIFICATION IN ITS SHOW ITA NO.1189/KOL/2016 A.Y.20 11-12 KESORM INDS. LTD. VS. THE PRINCIPAL COMMISSIONER OF INCOME-TAX-2 KOL PAGE 9 CAUSE NOTICE ISSUED U/S. 263 OF THE ACT ABOUT THE D IFFERENCE IN THE AMOUNT OF ADDITION BETWEEN AUDITED ACCOUNTS AND TAX AUDIT REPORT BUT I N ITS ORDER SET ASIDE THE ISSUE BEFORE AO FOR FURTHER VERIFICATION WITHOUT GIVING ANY COMM ENT REGARDING THE SUBMISSION OF ASSESSEE. LD. CIT, IN THE INSTANT CASE RAISED ONE I SSUE IN ITS SHOW CAUSE NOTICE BUT SET ASIDE THE ORDER OF AO ON SOME OTHER GROUNDS WHICH W AS NOT CASE AS PER THE NOTICE. 8. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ORDER UNDER SECTION 143(3) OF THE ACT HAS BEEN HELD AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E ON ACCOUNT REASONS AS DISCUSSED ABOVE. OUR ORDER ON ALL THE ISSUES STAND AS UNDER : A) WITH REGARD TO THE DIFFERENCE IN ADDITION OF FIX ED ASSETS FOR RS. 1,10,26,959.00 AS OBSERVED BY THE LD. CIT, WE FIND THAT THE NOTICE UNDER SECTION 263 OF THE ACT WAS ISSUED TO CLARIFY THE DIFFERENCE. THE ASSESSEE ACCO RDINGLY CLARIFIED THE SAID DIFFERENCE BY MAKING A WRITTEN SUBMISSION ALONG WITH THE RECON CILIATION STATEMENT WHICH ARE PLACED ON PAGES 33, 34 & 43 OF THE PAPER BOOK. BUT THE LD. CIT INSTEAD OF CONSIDERING THE REPLY AS SUBMITTED BY THE ASSEESSEE HAS CHANGED THE DISPUTE BY HOLDING THAT THE ISSUE HAS NOT BEEN VERIFIED BY THE AO AT THE TIME O F ASSESSMENT. THE RELEVANT EXTRACT OF THE NOTICE ISSUED BY THE LD. CIT UNDER SECTION 2 63 OF THE ACT IS REPRODUCED BELOW: A . TOTAL ADDITION OF YOUR FIXED ASSETS (SHOWN AT SCH EDULE-5) AS PER BOOKS OF ACCOUNT WAS RS.5,34,90,34,744/-. IT WAS SEEN FROM THE DEPRE CIATION SCHEDULE (AS SHOWN AT APPENDIX-III) OF TAR THAT TOTAL ADDITION OF FIXED A SSET DURING THE YEAR WAS TAKEN AS RS.5,36,00,61,703/-. HOWEVER, YOU HAVE NOT DISCLOSE D THE ADDITION OF FIXED ASSETS OF RS.1,10,26,959/- IN THE BOOKS OF ACCOUNT. SO, THE D IFFERENCE OF RS.1,10,26,959/- SHOULD HAVE BEEN TREATED AS UNEXPLAINED INVESTMENT U/S. 69 B AND SHOULD HAVE BEEN ADDED BACK TO YOUR TOTAL INCOME. SIMILARLY THE RELEVANT EXTRACT OF THE ORDER OF THE LD. CIT PASSED U/S 263 OF THE ACT IS REPRODUCED BELOW : THEY HAVE NOT GIVEN ME THE DATE AS TO WHEN THE SAM E WAS ACTUALLY REALIZED AND HOW THE SAME WAS TREATED IN THE ACCOUNTS AND HO W THE REVENUE HAD, IF AT ALL, RESPONDED TO THE SAME. NOTHING WAS EXAMINED BY THE AO AND MORE IMPORTANTLY, THIS ISSUE HAD NEVER BEEN RAISED ONLY BY THE AO. ITA NO.1189/KOL/2016 A.Y.20 11-12 KESORM INDS. LTD. VS. THE PRINCIPAL COMMISSIONER OF INCOME-TAX-2 KOL PAGE 10 FROM THE ABOVE, WE CLEARLY FIND THAT THE ISSUE RAIS ED BY THE LD. CIT IN THE NOTICE ISSUED U/S 263 OF THE ACT WAS MATERIALLY DIFFERENT WITH GR OUNDS ON WHICH THE REVISION ORDER WAS PASSED. IT IS THUS CLEAR THAT THE GROUND TAKEN IN THE SHOW-CAUSE NOTICE THAT THERE WAS UNEXPLAINED INVESTMENT UNDER SECTION 69B OF THE ACT FOR RS. 1,10,26,959/-. BUT UPON TAKING INTO ACCOUNT THE SUBMISSION MADE BY THE ASSESSEE, THE LD. CIT HIMSELF CHANGED THE STAND. THE LD. CIT INSTEAD OF TAKING TH E DECISION ON MERITS BASED ON THE SHOW-CAUSE NOTICE HAS MERELY REFERRED THE MATTER TO THE ASSESSING OFFICER FOR VERIFICATION OF CERTAIN ASPECTS. IT IS THUS CLEAR T HAT THERE WAS A SHIFT IN THE STAND OF THE LD. CIT AS TO WHETHER IT WAS A CASE FOR REVISION ON THE GROUND OF UNEXPLAINED INVESTMENT UNDER SECTION 69B OF THE ACT OR NON-VERI FICATION OF CERTAIN ASPECTS. THE REASON GIVEN IN THE SHOW-CAUSE NOTICE IS DIFFERENT FOR WHICH REVISION POWERS ARE FINALLY EXERCISED IN THE IMPUGNED ORDER. NOW THE IS SUE BEFORE US ARISES SO AS TO WHETHER SUCH AN EXERCISE OF REVISION POWERS, ON THE GROUND OTHER THAN THE GROUNDS MENTIONED IN THE SHOW-CAUSE NOTICE, COULD BE HELD T O BE SUSTAINABLE IN LAW. WE FIND SUPPORT AND GUIDANCE FROM THE CASE VESUVIUS INDIA LIMITED VS CIT 54 SOT 172, WHERE THE JURIDICTIONAL COORDINATE BENCH OF TRIBUNA L HAS HELD AS UNDER : 6. WE FIND THAT THE IMPUGNED REVISION ORDER IS IND EED NOT SUSTAINABLE IN LAW FOR THE VERY ELEMENTARY REASON THAT THE GROUNDS ON WHICH OR DER WAS SUBJECTED TO REVISION ARE DIFFERENT, VIS-A-VIS THE GROUNDS ON WHICH REVISION PROCEEDINGS WERE ACTUALLY INITIATED. A PLAIN READING OF THE IMPUGNED REVISION ORDER CLEA RLY SHOWS THAT THE CONCLUSIONS DRAWN IN THE REVISION PROCEEDINGS, WHICH ARE EXTRAC TED EARLIER IN THIS ORDER, ARE MATERIALLY DIFFERENT THAN THE REASONS FOR WHICH REV ISION PROCEEDINGS WERE INITIATED. WHILE IN THE SHOW-CAUSE NOTICE, LEARNED COMMISSIONE R STATES THAT 'THE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDIC IAL TO THE INTEREST OF REVENUE BECAUSE THE ASSESSING OFFICER DID NOT ASSESS THE AM OUNT OF RS.55 LAKHS RECEIVED BY VESUVIUS INDIA LTD. (THE ASSESSEE) AS REPAIRS OF MA CHINERY CHARGES AND HE DID NOT ASSESS A SUM OF RS.2,41,81,436/- BEING CONTRACT REC EIPTS FOR A.Y. 2002-03', IN THE REVISION ORDER, LEARNED COMMISSIONER ABUNDANCE THIS STAND AND MERELY DIRECTS THE ASSESSING OFFICER 'TO CALL FOR THE ORIGINAL VOUCHER S AS WELL AS THE ORIGINAL LEDGER CONTAINING THE SALES ACCOUNT AS WELL OTHER SUB-ACCO UNTS IN WHICH THE ASSESSEE CLAIMS TO HAVE MADE ENTRIES REGARDING SUCH INCOME', AND TH AT 'HE IS DIRECTED TO VERIFY WHETHER INVOICES RELATING TO INCOME FROM REPAIRS OF RS.55 LAKHS AND SERVICE INCOME OF RS.2,41,81,436/- ARE REFLECTED IN THE SALES ACCOUNT AS CLAIMED BY THE ASSESSEE'. IT IS THUS CLEAR THAT THE STAND TAKEN IN THE SHOW-CAUSE N OTICE THAT ON MERITS THAT INCOMES FROM REPAIRS AND SERVICES INCOME, AGGREGATING TORS. 55,00,000/- AND RS.2,41,81,436/- WERE INCLUDIBLE IN THE TAXABLE INCOME BUT WERE NOT ACTUALLY ASSESSED, BUT UPON TAKING INTO ACCOUNT THE SUBMISSION MADE BY THE ASSESSEE, T HE LEARNED COMMISSIONER HIMSELF WAS NOT SURE WHETHER IT IS A CORRECT STAND. IT WAS FOR THIS REASON THAT AS AGAINST DECISION ON MERITS, WHICH WAS INDICATED IN THE SHOW -CAUSE NOTICE, IN THE REVISION ORDER THE LEARNED COMMISSIONER MERELY REFERRED THE MATTER TO THE ASSESSING OFFICER ITA NO.1189/KOL/2016 A.Y.20 11-12 KESORM INDS. LTD. VS. THE PRINCIPAL COMMISSIONER OF INCOME-TAX-2 KOL PAGE 11 FOR VERIFICATION OF CERTAIN ASPECTS. IT IS THUS CLE AR THAT THERE WAS A SHIFT IN THE STAND OF THE COMMISSIONER AS TO WHETHER IT WAS A CASE FOR RE VISION ON THE GROUND THAT INCOME ON ACCOUNT OF REPAIRS OF MACHINERY AND CONTRACT REC EIPTS WAS REQUIRED TO BE ADDED TO THE INCOME ASSESSED IN THE HANDS OF THE ASSESSEE OR WHETHER IT WAS A CASE FOR REVISION ON THE GROUND THAT THE ASSESSING OFFICER DID NOT MA KE NECESSARY VERIFICATION ABOUT THE RELATED TRANSACTIONS. THE REASON GIVEN IN THE SHOW- CAUSE NOTICE IS FORMER, WHILE THE REASON FOR WHICH REVISION POWERS ARE FINALLY EXERCI SED IN THE IMPUGNED ORDER IS LATTER. AS TO WHETHER SUCH AN EXERCISE OF REVISION POWERS, ON THE GROUND OTHER THAN THE GROUNDS ON REVISION, HAS SET OUT IN THE SHOW-CAUSE NOTICE, COULD BE HELD TO BE SUSTAINABLE IN LAW. WE FIND GUIDANCE FROM THE DECIS ION OF COORDINATE BENCH OF TRIBUNAL IN THE CASE OF MAX INVESTMENTS LIMITED -VS .- ACIT [13 SOT 67], WHEREIN HON'BLE VICE-PRESIDENT R.V. EASWAR, AS THE THEN WAS , SPEAKING FOR THE BENCH, OBSERVED AS FOLLOWS :- '.IN CIT V. G.K. KABRA (1995)211 ITR 336THE ANDH RA PRADESH HIGH COURT WAS DEALING WITH AN APPLICATION SEEKING REFERENCE UNDER SECTION 256(2), INTER ALIA, OF THE FOLLOWING QUESTION : 'WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE INCOME-TAX APPELLATE TRIBUNAL WAS CORRECT IN HOLDING THAT THE COMMISSION ER OF INCOME-TAX LACKS INITIAL JURISDICTION, PARTICULARLY WHEN THE CONCLUSION MADE BY THE COMMISSIONER OF INCOME- TAX IN THE ORDER UNDER SECTION 263 WAS ON THE BASIS OF THE INFORMATION FURNISHED IN RESPONSE TO THE INITIAL NOTICE?' WHILE DECLINING TO REFER THE ABOVE QUESTION, THE HI GH COURT HELD AS UNDER (PAGES 339- 340) : ' THE NECESSARY IMPLICATION IN THE EXPRESSION ' AFTER GIVING OPPORTUNITY OF BEING HEARD' RELATES TO THE POINT ON WHICH THE COMMISSION ER CONSIDERS THE ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. IN OTHER WORDS, IT IS NECESSARY FOR THE COMMISSION TO POINT OUT THE EXACT ERROR IN THE ORDER WHICH HE PROPOSES TO REVISE SO THAT THE ASSESSEE WOULD HAVE AN ADEQUATE OPPORTUNITY OF MEETING THE ERROR BEFORE THE FINAL ORDER IS MADE.' [EMPHASIS SUPPLIED] IN THE CASE BEFORE THE HIGH COURT, THE SHOW-CAUSE N OTICE REFERRED TO TWO ISSUES TO WHICH THE ASSESSEE HAD GIVEN SATISFACTORY REPLIES. NO ACTION WAS TAKEN UNDER SECTION 263 IN RESPECT OF THESE TWO ISSUES. HOWEVER, IN THE SAID ORDER THE CIT MENTIONED THE HIRE CHARGES AS THE GROUND FOR REVISING THE ASSESSM ENT. THIS POINT HAD NOT BEEN MENTIONED AS A GROUND IN THE SHOW-CAUSE NOTICE. THE HIGH COURT HELD THAT 'INASMUCH AS THE COMMISSIONER HAD NOT CHOSEN TO SHOW THESE TW O POINTS AS THE ERRORS IN MAKING THE FINAL ORDER AND THE FINAL ORDER UNDER SECTION 2 63 REFERS ONLY TO THE INFERENCE OF HIRE CHARGES BEING EXIGIBLE TO TAX WHICH WAS NOT ME NTIONED AT ALL IN THE SHOW CAUSE, OBVIOUSLY THE ASSESSEE HAD NO OPPORTUNITY TO MEET T HAT POINT.' [EMPHASIS SUPPLIED] IN OUR CONSIDERED VIEW THE RATIO OF THE ABOVE DECIS ION IS THAT IF A GROUND OF REVISION IS NOT MENTIONED IN THE SHOW-CAUSE NOTICE ISSUED UNDER SECTION 263, THAT GROUND CANNOT BE MADE THE BASIS OF THE ORDER PASSED UNDER THE SEC TION, FOR THE SIMPLE REASON THAT THE ASSESSEE WOULD HAVE HAD NO OPPORTUNITY TO MEET THE POINT. ITA NO.1189/KOL/2016 A.Y.20 11-12 KESORM INDS. LTD. VS. THE PRINCIPAL COMMISSIONER OF INCOME-TAX-2 KOL PAGE 12 WE ALSO FIND SUPPORT FROM THE JUDGMENT OF THE HONB LE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT V. JAGADHRI ELECTRIC SUPPL Y AND INDUSTRIAL CO. LTD. (1983) 140 ITR 490. THE NATURE OF THE JURISDICTION OF THE CIT UNDER SEC TION 263 AND THE POWERS OF THE TRIBUNAL WHILE DEALING WITH AN APPEAL AGAINS T THE ORDER PASSED UNDER THAT SECTION WERE EXPLAINED IN THAT DECISION. THE CIT HA D FOUND THE ORDER OF THE ASSESSING OFFICER ALLOWING CONTINUATION OF REGISTRATION TO TH E ASSESSEE-FIRM TO BE ERRONEOUS ON THE GROUND THAT THE ACTUAL DISTRIBUTION OF THE PROF ITS WAS DIFFERENT FROM THE RATIO MENTIONED IN THE DEED OF PARTNERSHIP. THE TRIBUNAL SET ASIDE THE ORDER OF THE CIT BUT WHILE DOING SO OBSERVED THAT THERE WAS A CHANGE IN THE NUMBER OF PARTNERS FROM 10 TO 11 WHICH FACT HAD NOT BEEN TAKEN INTO ACCOUNT BY TH E ASSESSING OFFICER WHEN HE GRANTED REGISTRATION FOR THE FIRM FOR THE ASSESSMEN T YEAR 1966-67 AND THUS THE GRANT OF REGISTRATION WAS ERRONEOUS. ON THE BASIS OF THIS OB SERVATION IT WAS ARGUED BEFORE THE HIGH COURT ON BEHALF OF THE REVENUE THAT THE TRIBUN AL OUGHT TO HAVE SUSTAINED THE ORDER OF THE CIT ON THAT GROUND. REPELLING THE CONT ENTION, IT WAS HELD BY THE HIGH COURT AS UNDER (PAGES 502-3) : 'THE JURISDICTION VESTED IN THE COMMISSIONER UNDER SECTION 263(1) OF THE ACT IS OF A SPECIAL NATURE OR, IN OTHER WORDS, THE COMMISSIONER HAS THE EXCLUSIVE JURISDICTION UNDER THE ACT TO REVISE THE ORDER OF THE ITO IF HE CONSIDERS THAT ANY ORDER PASSED BY HIM WAS ERRONEOUS INSOFAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. BEFORE GOING SO, HE IS ALSO REQUIRED TO GIVE AN OPPORTUNIT Y OF BEING HEARD TO THE ASSESSEE. IF AFTER HEARING THE ASSESSEE IN PURSUANCE OF THE NOTI CE ISSUED BY HIM UNDER SECTION 263(1) OF THE ACT, HE IS NOT SATISFIED, HE MAY PASS THE NECESSARY ORDERS. OF COURSE, THE ORDER THUS PASSED WILL CONTAIN THE GROUNDS FOR HOLD ING THE ORDER OF THE ITO TO BE ERRONEOUS, AS CONTEMPLATED UNDER SECTION 263(1) OF THE ACT. . . . THE TRIBUNAL CANNOT UPHOLD THE ORDER OF THE COMMISSIONER ON ANY OTHER G ROUND WHICH, IN ITS OPINION, WAS AVAILABLE TO THE COMMISSIONER AS WELL. IF THE TRIBU NAL IS ALLOWED TO FIND OUT THE GROUND AVAILABLE TO THE COMMISSIONER TO PASS AN ORD ER UNDER SECTION 263(1) OF THE ACT, THEN IT WILL AMOUNT TO A SHARING OF THE EXCLUS IVE JURISDICTION VESTED IN THE COMMISSIONER, WHICH IS NOT WARRANTED UNDER THE ACT. IT IS ALL THE MORE SO, BECAUSE THE REVENUE HAS NOT BEEN GIVEN ANY RIGHT OF APPEAL UNDE R THE ACT AGAINST AN ORDER OF THE COMMISSIONER UNDER SECTION 263(1) OF THE ACT. . . . UNDER SECTION 263 OF THE ACT IT IS ONLY THE COMMISSIONER WHO HAS BEEN AUTHORIZED TO PR OCEED IN THE MATTER AND, THEREFORE, IT IS HIS SATISFACTION ACCORDING TO WHIC H HE MAY PASS NECESSARY ORDERS THEREUNDER IN ACCORDANCE WITH LAW. IF THE GROUNDS W HICH WERE AVAILABLE TO HIM AT THE TIME OF THE PASSING OF THE ORDER DO NOT FIND A MENT ION IN HIS ORDER APPEALED AGAINST, THEN IT WILL BE DEEMED THAT HE REJECTED THOSE GROUN DS FOR THE PURPOSE OF ANY ACTION UNDER SECTION 263(1) OF THE ACT. IN THIS SITUATION, THE TRIBUNAL, WHILE HEARING AN APPEAL FILED BY THE ASSESSEE, CANNOT SUBSTITUTE THE GROUNDS WHICH THE COMMISSIONER HIMSELF DID NOT THINK PROPER TO FORM THE BASIS OF H IS ORDER.' ITA NO.1189/KOL/2016 A.Y.20 11-12 KESORM INDS. LTD. VS. THE PRINCIPAL COMMISSIONER OF INCOME-TAX-2 KOL PAGE 13 9. WE RESPECTFULLY UNDERSTAND THIS JUDGMENT AS HOLDING, B Y NECESSARY IMPLICATION, THAT IF THE CIT HAS NOT MENTIONED THE GROUND ON WHI CH ACTION IS PROPOSED TO BE TAKEN UNDER SECTION 263 IN THE SHOW-CAUSE NOTICE, IT IS D EEMED THAT HE WAS NOT SATISFIED THAT IT WAS A FIT GROUND FOR TAKING ACTION UNDER THE SEC TION. THEREFORE THE FINAL ORDER AS BASED ON THE GROUND WHICH HE HAD EARLIER CONSIDERED NOT FIT FOR TAKING ACTION UNDER THE SECTION, WILL HAVE TO BE SET ASIDE AS NOT BASED ON ANY GROUND WHICH MAY JUSTIFY HIS BELIEF THAT THE ORDER PASSED BY THE ASSESSING OFFIC ER WAS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IT IS THUS CLEAR THAT IN A SITUATION IN WHICH THE REVISION ORDER IS PASSED ON THE GROUND OTHER TH AN THE GROUNDS FOR WHICH REVISION PROCEEDINGS ARE INITIATED, THE SAME CANNOT BE SUSTA INABLE IN LAW. THAT APART, IN THE IMPUGNED ORDER WE HAVE ALSO NOTICED THAT THE LEARNE D COMMISSIONER HAS NOT FAULTED THE EXPLANATION GIVEN BY THE ASSESSEE AND HAS MEREL Y REMITTED THE MATTER TO THE FILE OF ASSESSING OFFICER FOR VERIFICATION OF FACTUAL ELEME NTS EMBEDDED IN EXPLANATION AS GIVEN BY THE ASSESSEE. THIS APPROACH IS ALSO NOT SU STAINABLE IN LAW IN VIEW OF THE LAW LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN THE C ASE OF CIT -VS.- GABRIEL INDIA LIMITED [203 ITR 108], WHEREIN THEIR LORDSHIPS HAVE , INTER ALIA, OBSERVED AS FOLLOW :- 'IN THE INSTANT CASE, THE COMMISSIONER HIMSELF, E VEN AFTER INITIATING PROCEEDINGS FOR REVISION AND HEARING THE ASSESSEE, COULD NOT SA Y THAT THE ALLOWANCE OF THE CLAIM OF THE ASSESSEE WAS ERRONEOUS AND THAT THE EXPENDITURE WAS NOT REVENUE EXPENDITURE BUT AN EXPENDITURE OF CAPITAL NATURE. HE SIMPLY ASKED T HE ITO TO RE-EXAMINE THE MATTER THAT, IN OUR OPINION, IS NOT PERMISSIBLE. FURTHER I NQUIRY AND/OR FRESH DETERMINATION CAN BE DIRECTED BY THE COMMISSIONER ONLY AFTER COMI NG TO THE CONCLUSION THAT THE EARLIER FINDING OF THE ITO WAS ERRONEOUS AND PREJUD ICIAL TO THE INTERESTS OF THE REVENUE. WITHOUT DOING SO, HE DOES NOT GET THE POWE R TO SET ASIDE THE ASSESSMENT'. AFTER ANALYSING THE ABOVE FACTS & CASE LAWS WE ARE OF THE VIEW THAT UNLESS LD. CIT POINTS OUT ERRORS IN THE ORDER OF ASSESSING OFFICER , WHICH HAS NOT BEEN POINTED OUT BEFORE US, HE CANNOT INVOKE HIS POWERS UNDER SECTIO N 263. HAVING SAID SO, WE MAY ALSO MAKE IT CLEAR THAT IN VIEW OF THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT -VS.-VEE GEE ENTERPRISES [99 ITR 375],A N ASSESSMENT ORDER IS RENDERED ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E IN A SITUATION IN WHICH ASSESSING OFFICER REMAINS PASSIVE IN THE FACE OF A RETURN WHI CH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER ENQUIRY. HOWEVER, THE FACTS OF THE PRES ENT CASE ARE DISTINCT FROM THIS JUDICIAL PRECEDENCE ON TWO MATERIAL COUNTS. FIRSTLY , IN THE PRESENT CASE, PROCEEDINGS ITA NO.1189/KOL/2016 A.Y.20 11-12 KESORM INDS. LTD. VS. THE PRINCIPAL COMMISSIONER OF INCOME-TAX-2 KOL PAGE 14 WERE NOT INITIATED ON THE GROUNDS THAT ADEQUATE ENQ UIRIES WERE NOT CARRIED OUT. THE COMMISSIONER HAS NOT ALLEGED IN THE SHOW CAUSE NOTI CE THAT ADEQUATE ENQUIRIES WERE NOT CARRIED OUT, AND AGAIN, IT IS ELEMENTARY THAT N O PERSON CAN BE CONDEMNED UNHEARD, AND THEREFORE, THE ASSESSEE NOT HAVING BEEN HEARD O N THE QUESTION WHETHER OR NOT ADEQUATE ENQUIRIES WERE CARRIED OUT, LEARNED COMMIS SIONER COULD NOT HAVE SUBJECTED THE ASSESSMENT ORDER TO REVISION PROCEEDINGS ON THE GROUND THAT ADEQUATE ENQUIRIES WERE NOT CARRIED OUT. SECONDLY, THERE IS NOTHING ON RECORD TO PROVOKE AN ENQUIRY, WHICH HAS NOT BEEN CARRIED OUT IN THE INSTANT CASE. LEARNED COMMISSIONER HAS NOT POINTED OUT ANY REASON AS TO WHY THE ASSESSING OFFI CER SHOULD HAVE MADE FURTHER ENQUIRY, WHICH WAS APPARENTLY LEFT OUT. IN VIEW OF THIS DISCUSSION AND ENTIRETY OF THE CASE, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND Q UASH THE IMPUGNED REVISION ORDER. WE ALSO FIND THAT THE AO HAS CONDUCTED THE ENQUIRY ABOUT THE ADDITION OF THE FIXED ASSETS AS APPEARING FROM THE NOTICE ISSUED UNDER SE CTION 142(1) OF THE ACT. THE RELEVANT EXTRACT OF THE NOTICE IS REPRODUCED BELOW : 17. FURNISH THE DETAILS OF ADDITION TO FIXED ASSET S AND PRODUCE THE COPY OF BILLS FOR AMOUNTS EXCEEDING RS.1 LAKHS. ALSO FURNIS H THE PROOF OF FUNDS FOR THE PURCHASE OF NEW ASSETS AND THE DETAILS OF INTERESTS PAID THEREON. ALSO FURNISH THE INFORMATION AS PER FORMAT SPECIFIED BELOW: ADDITION TO FIXED ASSETS (DEPRECIATION) F.Y 2010-11(A.Y 2011-12) NAME OF BLOCK % DESCRIPTION OF ASSET PURCHASED ON (DATE) PUT TO USE AMOUNT DESCRIPTION CLAIMED THE REPLY OF THE ASSESSEE IN RESPONSE TO THE ABOVE QUESTION OF THE AO STAND AS UNDER:- 17. DETAILS OF ADDITION TO FIXED ASSETS [QUERY NO. 17] A STATEMENT SHOWING DETAILS OF ADDITION TO FIXED AS SETS IS ENCLOSED FOR YOUR REFERENCE AND MARKED AS ANNEXURE F. FROM THE ABOVE, IT IS CLEAR THAT THE AO HAS NOT DIS REGARDED THE SUBMISSION OF THE ASSESSEE FOR THE ADDITION OF THE FIXED ASSETS. THE AO HAS APPLIED HIS MIND. IT IS THUS CLEAR THAT THAT THE NECESSARY ENQUIRY FOR THE ADDIT ION OF THE FIXED ASSETS HAS BEEN ITA NO.1189/KOL/2016 A.Y.20 11-12 KESORM INDS. LTD. VS. THE PRINCIPAL COMMISSIONER OF INCOME-TAX-2 KOL PAGE 15 CONDUCTED BY THE AO AT THE TIME OF ASSESSMENT. IN S UCH SITUATION THE ORDER PASSED BY THE AO CANNOT BE HELD AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. IN HOLDING SO WE FIND SUPPORT FROM THE JUDGMENT OF HON BLE ALLAHABAD HIGH COURT IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME TAX VS. M/S ASHOK HANDLOOM FACTORY PVT. LTD. IN ITA NO. 19 OF 2016 DATED 01.02.2016 WHEREIN THE HONBLE HIGH COURT HA S HELD THAT IT IS SETTLED LAW THAT THE COMMISSIONER O F INCOME TAX CAN EXERCISE HIS JURISDICTION U/S 263 OF THE ACT ONLY IN CASES WHERE NO ENQUIRY IS MADE BY THE ASSESSING OFFICER. IN THE INSTANT CASE, IT IS ADMIT TED BY THE INCOME TAX DEPARTMENT THAT THE ASSESSING OFFICER HAD MADE SOME ENQUIRIES THOUGH ACCORDING TO THEM IT WAS NOT A PROPER ENQUIRY. IN VIEW OF THE ABOVE FACTS TH AT SOME ENQUIRY WAS MADE IS SUFFICIENT TO DEBAR THE AUTHORITIES FROM EXERCISING THE POWERS U/S 263 OF THE ACT. THE TRIBUNAL WAS ACCORDINGLY JUSTIFIED IN SETTING ASIDE THE ORDER PASSED U/S 263 OF THE ACT. 10. WE DO NOT FIND ANY SUBSTANTIAL QUESTION OF LAW ARISING FOR CONSIDERATION AND SO THE APPEAL IS ACCORDINGLY DISMISSED. IN THE CASE ON E HAND, THE AO HAS MADE AN ADDITION BY DISALLOWING THE COMMISSION EXPENSES AFT ER MAKING THE NECESSARY ENQUIRY. THE INSTANT CASE IS DULY COVERED WITH THE DECISION OF HONBLE ALLAHABAD HIGH COURT M/S ASHOK HANDLOOM FACTORY PVT. LTD. (SUPRA) AS DISCUSSED ABOVE, THEREFORE RELYING ON THE SAME, WE REVERSE THE ORDER OF LD. CIT FOR U/ S 263 OF THE ACT. WE ARE ALSO PUTTING OUR RELIANCE IN THE DECISION OF HONBLE DEL HI HIGH COURT IN THE CASE OF CIT V. SUNBEAM AUTO LTD. 332 ITR 167 AND CIT V. ANIL KUMAR SHARMA 335 ITR 83 (DEL) HELD THAT THE FACT AS TO WHETHER THE AO HAS APPLIED HIS MIND OR NOT NEED NOT NECESSARILY BE DETERMINED FROM WHAT HAS BEEN STATED IN THE ASSESSMENT ORDER ALONE, IT HAS TO BE EXAMINED AS TO WHETHER ANY INQUIRY WAS AT ALL CONDUCTED BY THE AO. THERE EXISTS A DIFFERENCE BETWEEN LACK OF INQUIRY AND INA DEQUATE INQUIRY. IF THERE WERE ANY INQUIRY, EVEN INADEQUATE THAT WOULD NOT GIVE AN OCC ASION TO EXERCISE JURISDICTION U/S 263 OF THE SAID ACT. IN THE INSTANT CASE BOTH AUDIT ED FINANCIAL STATEMENTS AND TAX AUDIT REPORTS WERE AVAILABLE BEFORE THE AO AT THE TIME OF ASSESSMENT WHICH ARE PLACED PAGES 12,21,22 AND 5 OF THE PAPER BOOK. THEREFORE IN OUR CONSIDERED VIEW THE AO HAS CONDUCTED ENQUIRIES AND APPLIED HIS MIND AT THE TIM E OF ASSESSMENT. ACCORDINGLY, ITA NO.1189/KOL/2016 A.Y.20 11-12 KESORM INDS. LTD. VS. THE PRINCIPAL COMMISSIONER OF INCOME-TAX-2 KOL PAGE 16 ORDER PASSED BY LD. CIT U/S 263 OF THE ACT IS REVER SED HENCE, GROUND RAISED BY ASSESSEE IS ALLOWED. B) WITH REGARD TO THE DISALLOWANCE U/S 14A R.W.R. 8 D(2)(II) FOR RS. 2,51,26,736.00, WE FIND THAT THE AO HAS NETTED OFF THE INTEREST PAI D WITH THE INTEREST INCOME FOR WORKING OUT THE DISALLOWANCE UNDER RULE 8D OF INCOM E TAX RULES, 1962. IN OUR CONSIDERED VIEW THE AO BEFORE TAKING THE DECISION H AS APPLIED HIS MIND ON THE ISSUE OF DISALLOWANCE OF INTEREST UNDER THE PROVISIONS OF SECTION 14A OF THE ACT. THE RELEVANT EXTRACT OF THE NOTICE ISSUED BY THE AO UND ER SECTION 142(1) OF THE ACT IS REPRODUCED BELOW:- 19. FURNISH SCRIPWISE DETAILS OF INVESTMENTS AND D IVIDENDS RELATED TO THE SAME IF ANY AND OTHER EXEMPT INCOMES AND EXPLAIN AS TO WHY THE EXPENSES RELATING TO THE SAME SHOULD NOT BE DISALLOWED IN ACCORDANCE TO THE PROVI SIONS OF SECTION 14A OF THE IT ACT R.W. RULE 8D OF THE IT RULES, 1962. RULE 14A SEPARA TELY ASKED FOR & REPLIED. THE REPLY OF THE ASSESSEE IN RESPONSE TO THE NOTICE U/S 142(1) OF THE ACT IS ENCLOSED ON PAGE 99 OF THE PAPER BOOK. SIMILARLY THE AO HAS APP LIED HIS MIND BY INVOKING THE PROVISIONS OF SECTION 14A R.W.R. 8D FOR MAKING THE DISALLOWANCE IN THE ORDER PASSED UNDER SECTION 143(3) OF THE ACT AS EVIDENT FROM THE ASSESSMENT ORDER PLACED ON PAGE 139 OF THE PAPER BOOK. ON MERIT ALSO WE FIND THAT THE HONBLE TRIBUNALS IN SIMILAR FACTS & CIRCUMSTANCES HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE IN THE CASE OF DCIT VS. TRADE APARTMENTS LIMITED 1277/KOL/2011 DATED 31.03.2012 ITAT KOLKATA BENCH AS DETAILED BELOW: 4. AS LEARNED CIT(A) HAS RIGHTLY OBSERVED, ONCE TH ERE IS NO NET INTEREST EXPENDITURE, AS IS THE CASE BEFORE US - UPON SETTING OFF INTERES T CREDITED TO PROFIT AND LOSS ACCOUNT, NO PART OF INTEREST DEBITED CAN BE DISALLOWED AS AT TRIBUTABLE TO EARNING TAX FREE DIVIDEND. THE CIT(A) WAS THUS QUITE JUSTIFIED IN DE LETING THE INTEREST DISALLOWANCE. WE HAVE ALSO NOTED THAT ENTIRE EXPENSES INCURRED BY TH E ASSESSEE HAVE BEEN OFFERED FOR DISALLOWANCE, AND ONCE THAT HAPPEN, NOTHING REMAINS FOR FURTHER DISALLOWANCE U/S. 14A. THE DISALLOWANCE UNDER SECTION 14A CAN COME INTO PLAY ONLY OUT OF EXPENSES CLAIMED FOR DEDUCTION AND EXPENSES HAVE BEEN CLAIME D FOR DEDUCTION, THERE CANNOT BE ANY DISALLOWANCE EITHER. THE CONCLUSIONS ARRIVED AT BY THE CIT(A) ARE, THEREFORE, CORRECT AND ADMIT NO INTERFERENCE BY US. WE, APPROV E AND CONFIRM THE ORDER OF THE CIT(A). SIMILARLY WE ALSO FIND THAT HONBLE GUJRAT HIGH COU RT IN THE CASE OF CIT VS. DEEP INDUSTRIES LIMITED 238 TAXMAN 198 HAS HELD AS UNDER : ITA NO.1189/KOL/2016 A.Y.20 11-12 KESORM INDS. LTD. VS. THE PRINCIPAL COMMISSIONER OF INCOME-TAX-2 KOL PAGE 17 THUS, THE ASSESSING OFFICER AFTER EXAMINING THE IS SUE AND CALLING FOR THE EXPLANATION OF THE ASSESSEE WAS NOT SATISFIED WITH THE EXPLANAT ION OF THE ASSESSEE AND COMPUTED THE INTEREST EXPENDITURE IN TERMS OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES. THE COMMISSIONER OF INCOME TAX IS OF THE OPI NION THAT HE WOULD HAVE ASSESSED THE INTEREST EXPENDITURE AT A HIGHER FIGURE. THEREF ORE, MERELY BECAUSE ANOTHER VIEW IS POSSIBLE IS NOT SUFFICIENT TO INVOKE POWERS UNDER S ECTION 263 OF THE ACT. THE VIEW ADOPTED BY THE ASSESSING OFFICER, BEING A PLAUSIBLE VIEW, IT CANNOT BE SAID THAT THE ASSESSMENT ORDER IS ERRONEOUS SO AS TO WARRANT EXER CISE OF POWERS UNDER SECTION 263 OF THE ACT. IN LIGHT OF THE ABOVE DISCUSSION, HIGH COURT DOES NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER PASSED BY THE TRIBUNAL SO AS TO GIVE RISE TO ANY QUESTION OF LAW, MUCH LESS, A SUBSTANTIAL QUESTION OF LAW WARRANTING INTERFERENCE. THE APPEAL, THEREFORE, FAILS AND IS ACCORDINGLY DISMISSED. MERE LY BECAUSE ANOTHER VIEW WAS POSSIBLE, SAME WAS NOT SUFFICIENT TO INVOKE POWERS U/S 263 AND ONCE VIEW ADOPTED BY AO WAS A PLAUSIBLE VIEW, IT COULD NOT BE SAID THAT ASSESSMENT ORDER WAS ERRONEOUS SO AS TO WARRANT EXERCISE OF POWERS U/S 263. IN THE INSTANT CASE THE AO HAS TAKEN THE POSSIBLE V IEW FOR MAKING THE DISALLOWANCE UNDER SECTION 14A OF THE ACT. THUS IN OUR CONSIDERE D VIEW THE AO HAS TAKEN A POSSIBLE VIEW AND THEREFORE THE ORDER OF THE AO CAN NOT BE HELD ERRONEOUS & PREJUDICIAL TO THE INTEREST OF REVENUE. ACCORDINGLY THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. C) WITH REGARD TO THE ISSUE OF TRADE DISCOUNT, WE FIND THAT THE LD. CIT UNDER SECTION 263 ISSUED NOTICE FOR ADDITION OF TRADE DIS COUNT ON THE GROUND THAT THE ASSESSEE CLAIM FOR TRADE DISCOUNT WAS NOT IN ORDER. THE ASSE SSEE HAS SHOWN THE AMOUNT OF SALES NET OFF THE TRADE DISCOUNT AND SIMULTANEOUSLY CLAIM ED THE DEDUCTION IN THE PROFIT & LOSS ACCOUNT. THE LD. CIT PROPOSED TO MAKE THE ADDI TION OF THE TRADE DISCOUNT IN THE SHOW CAUSE NOTICE ISSUED UNDER SECTION 263 OF THE A CT BUT CONCLUDED THE ORDER BY DIRECTING THE FOR FRESH EXAMINATION. THE ORDER OF T HE LD. CIT IS SILENT ABOUT THE SUBMISSION OF THE ASSESSEE. FROM THE SUBMISSION OF THE LD. AR WE FIND THAT DETAILS OF THE TRADE DISCOUNT WERE DULY FURNISHED TO THE AO AT THE TIME OF ASSESSMENT UNDER SECTION 143(3) OF THE ACT. THE DETAILS OF SUCH DISC OUNT IS PLACED ON PAGE 47 & 48 OF THE PAPER BOOK. FROM THE FACTS WE FIND THAT THE LD. CIT HAS CHANGED ITS STAND AS INITIATED IN THE NOTICE AND AT THE TIME OF PASSING THE ORDER UNDER SECTION 263 OF THE ACT. IN SIMILAR FACTS & CIRCUMSTANCES WE HAVE ALREADY HE LD IN PARA 8(A) OF THIS ORDER THAT THE ORDER OF THE AO IS NOT ERRONEOUS AND PREJUDICIA L TO THE INTEREST OF REVENUE. FOLLOWING THE SAME WE REVERSE THE ORDER OF LD. CIT AND THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. ITA NO.1189/KOL/2016 A.Y.20 11-12 KESORM INDS. LTD. VS. THE PRINCIPAL COMMISSIONER OF INCOME-TAX-2 KOL PAGE 18 D) WITH REGARD TO THE ISSUE OF EXCESS DEPRECIATION CLAIMED BY THE ASSESSEE WE FIND THAT THE LD. CIT HAS RAISED THE ISSUE IN THE NOTICE UNDER SECTION 263 OF THE ACT FOR THE EXCESS DEPRECIATION BUT CONCLUDED IN HIS ORDER HOLD ING THE ORDER OF THE AO ON THE GROUND OF LACK OF ENQUIRIES. ACCORDINGLY THE ORDER OF THE AO WAS HELD AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. HOWEVER WE DO NOT AGREE WITH THE VIEW OF THE LD. CIT AS THERE IS CHANGE IN HIS STAND WITH RE GARD TO THE NOTICE AND IN THE REVISION ORDER. IN SIMILAR FACTS & CIRCUMSTANCES WE HAVE ALR EADY HELD IN PARA 8(A) OF THIS ORDER THAT THE ORDER OF THE AO IS NOT ERRONEOUS AND PREJU DICIAL TO THE INTEREST OF REVENUE. FOLLOWING THE SAME WE REVERSE THE ORDER OF LD. CIT AND THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. THE ASSESSEE GETS THE RELIEF, ACCORDINGLY. 11. IN THE RESULT, THE APPEAL OF ASSESSEE APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 04/11/2016 SD/- SD/- (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP SR.P.S ! - 04 /11/2016 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-KESORM INDUSTRIES LTD. 9/1 R.N.MUKHERJEE RD., KOL-01 2. /RESPONDENT-THE PRINCIPAL COMMISSIONER OF INCOME-TA X-2, AAYAKAR BHAWAN, P-7, C HOWRINGHEE SQUARE, KOLKTA-69 3. '# % / CONCERNED CIT 4. % - / CIT (A) 5. &'( ))'# , '# / DR, ITAT, KOLKATA 6. (*+ / GUARD FILE. BY ORDER/ , /TRUE COPY/ / '#,