The Himalaya Drug Company , Bangalore V. The Deputy Commissioner of Income Tax Central Circle-1(1), Bangalore

ITA 1227/BANG/2017

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 8080 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 30-05-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: PADAMCHAND KHINCHA
• Keywords: Revision of order; Depreciation; Principle of natural justice; Additional depreciation
• Section: 263; 143(3); 32(1)(iia); 80G; 144C; 264

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA No.1227/Bang/2017 Assessment year : 2010-11 The Principal Commissioner of Income-tax (Central), Bengaluru. Vs. The Himalaya Drug Company, Makali, Tumkur Road, Bengaluru-562123. PAN – AADFT 3025 B REVENUE ASSESSEE Assessee by : Shri Padamchand Khincha, C.A Revenue by : Dr. Manjunath Karkihalli, CIT(DR) Date of hearing : 27.10.2021 Date of Pronouncement : 22.11.2021 O R D E R Per Chandra Poojari, Accountant Member This appeal by the assessee is directed against the order of CIT passed u/s 263 of the Act dated 11/11/2016. The facts of the case are that 2. The CIT(A) after going through the asst. records for the asst. year 2010-11 observed that assessee had carried out extension of factory building after availing a bank loan. ITA No.1227/Bang/2017 Page 2 of 10 3. On perusal of assessment order u/s 144C rws 143(3) dated 29.12.2014 for assessment year 2010-11, the following issues were noticed: (i) For assessment year 2010-11, the assessee had carried out extension of factory building, availing a bank loan. The pre-construction period interest of Rs.2,91,89,882/- on the said loan was capitalized and added back in the assessment order. The claim of additional depreciation @ 20% u/s 32(1)(iia) of the IT Act on this capitalization had been allowed in the assessment order for AY 2010-11. (ii) It is evident from the assessee's submission made during assessment proceedings that Building and Plant & Machinery have been added during the year and the claim of additional depreciation @ 20% was made on the additions of assets u/s 32(1)(iia) of the Act. However, the addition made on assets available for assessment year 2009-10 has been verified as "Factory Building" alone. iii. In view of the above, claim of additional depreciation @ 20% made is not in order as the same ITA No.1227/Bang/2017 Page 3 of 10 is eligible only in respect of "Plant & Machinery". Hence, for assessment year 2010-11, actual allowable depreciation is 10% the quantum of addition to the building as per provisions of Section 32 of Act. Further, on perusal of Fixed Assets schedule, it is noticed that some of the assets such as gardening equipments, office equipments, weighing scale. etc. are not Plant & Machinery and depreciation has been claimed on these fixtures @ 15% as against the eligible claim of depreciation @ 10%. iv. Further, the assessee had claimed deduction u/s 80G amounting to Rs. 10,00,000/- towards contribution made to the Calamity Relief Fund of Karnataka and the same is allowed @ 100% in assessment order dated 29.12.2014. On perusal of records, it is found that deduction u/s 80G amounting to Rs. 10,00,000/- has been allowed by the Assessing Officer, without proper verification. 4. The Assessing Officer had concluded the assessment u/s 144C rws 143(3) after allowing the claim of assessee without making requisite inquiry or without proper ITA No.1227/Bang/2017 Page 4 of 10 verification which is required to be made, rendering it erroneous and prejudicial to the interest of revenue. 5. Accordingly, the CIT issued notice u/s 263 of the Act on 11/11/2016 and proposed to revise the asst. order. After calling for the objection from the assessee, the CIT gave directions to the AO that claim of depreciation @ 20% on interest capitalized to building, is not correct and correct representative depreciation to be applied. The assessee claimed that loan is utilized for both for building and machinery is not borne out by record Further, depreciation of office equipment @ 15% as against 10% allowable is based on an erroneous appreciation of facts by the AO. The AO has allowed the claims on depreciation without proper verification and necessary enquiries. With regard to claim u/s 80G, the assessee has not produced any evidence regarding notification for claim u/s80G on the donation made to the calamity Relief Fund of Karnataka. The failure of the AO to make necessary enquiries in respect of above points renders the assessment orders erroneous in so far as it is prejudicial to the interest of revenue. Accordingly, the CIT directed the AO to withdraw additional depreciation u/s 32(1)(iia) in respect of building and allow depreciation on fixed ITA No.1227/Bang/2017 Page 5 of 10 assets at 10% after verification of the dates when the assets were actually put to use and after causing necessary enquiries in this regard. Further, the AO is directed to withdraw deduction claimed u/s 80G of the Act after giving the sufficient and reasonable opportunity of being heard to the assessee. Against this assessee is in appeal before us. 6. We have heard both the parties and perused the materials on record. In this case, the CIT exercised power u/s 263 of the Act on the reason that AO not caused proper enquiry with regard to granting of additional depreciation of assets and also exemption u/s 80G was granted without examining the evidences with regard to this. Now the contention of the ld.AR is that the CIT is not justified, in exercising power u/s 263 of the Act as the AO has taken one possible view, which cannot be disputed by the CIT. In our opinion, The Assessing Officer has been entrusted the role of an investigator, prosecutor as well as adjudicator under the scheme of the Income-tax Act. If he commits an error while discharging the aforesaid roles and consequently passes an erroneous order causing prejudice either to the assessee or to the State Exchequer or to both, the order so passed by him is ITA No.1227/Bang/2017 Page 6 of 10 liable to be corrected. As mentioned earlier, the assessee can have the prejudice caused to him corrected by filing an appeal; as also by filing a revision application under Section 264. But the State Exchequer has no right of appeal against the orders of the Assessing Officer. Section 263 has therefore been enacted to empower the Commissioner to correct an erroneous order-passed by the Assessing Officer which he considers to be prejudicial to the interest of the revenue. The Commissioner has also been empowered to invoke his revisional jurisdiction under Section 264 at the instance of the assessee also. The line of difference between Sections 263 and 264 is that while the former can be invoked to remove the prejudice caused to the State the later can be invoked to remove the prejudice caused to the assessee. The provisions of Section 263 would lose significance if they were to be interpreted in a manner that prevented the Commissioner from revising the erroneous order passed by the Assessing Officer, which was prejudicial to the interest of the revenue. In fact, such a course would be counter productive as it would have the effect of promoting arbitrariness in the decisions of the Assessing Officers and thus destroy the very fabric of sound tax discipline. If erroneous orders, which are prejudicial to ITA No.1227/Bang/2017 Page 7 of 10 the interest of the revenue, are allowed to stand, the consequences would be disastrous in that the honest tax payers would be required to pay more than others to compensate for the loss caused by such erroneous orders. For this reason also, this court is of the view that the orders passed on an incorrect assumption of facts or incorrect application of law or without applying the principles of natural justice or without application of mind or without making requisite inquiries will satisfy the requirement of the order being erroneous and prejudicial to the interest of the revenue within the meaning of Section 263. 7. Adverting to the facts of the present case, there is no enquiry by the Assessing Officer whatsoever on the issues in dispute. The ld.AO just accepted the claim of assessee in the assessment year under consideration. Being so, the CIT assumed jurisdiction u/s. 263 of the Act. The argument of the assessee's counsel is that there are decisions in favour of the assessee. Therefore, the view adopted by the Assessing Officer is one of the possible views. The general law on the question of revisional jurisdiction is that an order passed by the Assessing Officer cannot be held to be erroneous, if the Assessing ITA No.1227/Bang/2017 Page 8 of 10 Officer has followed one of the possible views on the subject. But this principle by and large applies to questions of fact. When it comes to question of law, the law laid down by the competent authority has to be invariably followed. The arguments of the ld.CIT.DR is that as there was no discussion of whatsoever by the Assessing Officer in the impugned issues assessment order. In our opinion the Assessing Officer passed the assessment order without an iota of discussion on the issue of whatsoever as such the CIT exercised his powers u/s. 263 of the Act and direct the AO reexamine the issues in dispute after giving an opportunity of hearing to the assessee. On this finding of the CIT(A), we do not find any infirmity and we at this stage refrain from going into the merit of the issues raised by the assessee since the CIT(A) only remitted the matter to AO for fresh consideration. 8. In the result, the appeal of the assessee is dismissed. Order pronounced in court on 22 nd Nov, 2021. Sd/- Sd/- (N.V VASUDEVAN) ( CHANDRA POOJARI) Vice President Accountant Member Bangalore, Dated, 22 nd Nov, 2021 / vms / ITA No.1227/Bang/2017 Page 9 of 10 Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore. ITA No.1227/Bang/2017 Page 10 of 10 1. Date of Dictation .......................................... 2. Date on which the typed draft is placed before the dictating Member ......................... 3. Date on which the approved draft comes to Sr.P.S ................................... 4. Date on which the fair order is placed before the dictating Member .................... 5. Date on which the fair order comes back to the Sr. P.S. ....................... 6. Date of uploading the order on website................................... 7. If not uploaded, furnish the reason for doing so ................................ 8. Date on which the file goes to the Bench Clerk ....................... 9. Date on which order goes for Xerox & endorsement.......................................... 10. Date on which the file goes to the Head Clerk ......................... 11. The date on which the file goes to the Assistant Registrar for signature on the order ..................................... 12. The date on which the file goes to dispatch section for dispatch of the Tribunal Order ............................... 13. Date of Despatch of Order. .....................................................